PART A · QUESTION 1
A dairy farm produces 300,000 kilograms of milk solids a season. Its processor pays one price for the whole season's milk, and in midseason cuts its forecast of that price by US$0.70 a kilogram.
// EXAM HALL24 QUESTIONS · 30 MINUTES
Agribusiness Manager Practice Test
Lent against land and repaid in milk: a farm's breakeven, a family's succession, and what one season does to the sums.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
An agribusiness manager practice test asks whether you can judge a farm over a cycle and not a year, and talk to a farmer as someone who has been on a farm. This paper has three parts: the payout and the seasons; one dairy farm's breakeven, debt and succession plan, set on an exhibit; and calls on bad seasons, stock counts, family trusts and the kitchen-table conversation. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// HOW TO SIT IT
Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.
PART A
The season
The payout, the cycle and what one price does to a farm. Work the sums before you look at the options.
PART A · QUESTION 2
Milk prices have jumped on overseas demand. A farmer wants to buy the neighbour's land at a record price, and the budget uses this season's payout for all ten years.
What do you ask first?
PART A · QUESTION 3
A dairy farmer wants to buy the next farm. On your sums the new breakeven is above the price in four of the last five seasons. There is no spare security, and the answer to a poor season is: 'It will come right.'
What makes you walk away?
PART A · QUESTION 4
An exporter sells a commodity priced in US dollars and pays its costs in its home currency. The home currency has strengthened 20% against the dollar.
What happens to its margin?
PART A · QUESTION 5
A winery owns its vineyards, land worth more than the loan, but its earnings swing with each vintage and with export prices. It wants a ten-year loan repaid in equal instalments.
Your view?
PART A · QUESTION 6
The bank asks a farmer for quarterly accounts. She replies: 'My year has one harvest. Quarterly numbers will make me look broke three times a year.'
What is she telling you?
PART B
The farm file
One family, nine questions: the season's cash, the debt and the succession plan.
EXHIBIT AI · THE FARM FILE
A family dairy farm: 650 cows and 240,000 kilograms of milk solids a season. The parents are in their sixties. Their son has worked on the farm for nine years, and their daughter works in town.
They want a new US$1.5m loan so that the son can buy in and the parents can retire. It would add US$144,000 a year of interest and repayments.
| US$000 | |
|---|---|
| Milk income | 1,560 |
| Farm working expenses, net of stock sales | 840 |
| Interest | 378 |
| Drawings and tax | 120 |
| Capital maintenance | 60 |
| Principal | 90 |
| Left over | 72 |
| 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|
| 7.10 | 5.40 | 6.30 | 7.60 | 6.90 |
| US$000 | |
|---|---|
| Land and buildings, valued 18 months ago | 12,000 |
| Term debt | 5,400 |
| Seasonal overdraft limit | 300 |
The overdraft reached its limit two months earlier than in any recent season. About a quarter of production depends on irrigation under a water permit that expires in 18 months.
PART B · QUESTION 7
From Exhibit AI.
What is term debt per kilogram of milk solids today?
PART B · QUESTION 8
From Exhibit AI.
What price per kilogram does the farm need to cover everything in a season?
PART B · QUESTION 9
From Exhibit AI: take the lowest of the last five seasons' prices.
What is the season's shortfall?
PART B · QUESTION 10
Exhibit AI's loan to value is 45% today, and the land is most of the security. A colleague calls it 'as safe as houses'.
Why is it less comfortable than it sounds?
PART B · QUESTION 11
Exhibit AI's overdraft has reached its limit two months earlier than in any recent season.
What do you ask?
PART B · QUESTION 12
Exhibit AI's parents ask: 'Can the bank fund our son's buy-in?' You have not yet talked it through with them.
Where do you start?
PART B · QUESTION 13
At the kitchen table in Exhibit AI, the father says the daughter 'will be looked after later'. The son looks at the floor. The father asks you: 'What would you do, if it were your family?'
What do you say?
PART B · QUESTION 14
From Exhibit AI, with the new loan for the son's buy-in.
What does the breakeven price become?
PART B · QUESTION 15
Exhibit AI's water permit expires in 18 months. The family says it has 'always been renewed'.
Signal or noise?
PART C
The calls
On the road, in the shed and at the kitchen table.
PART C · QUESTION 16
A sheep and beef farm with 20 years of clean history has used its working capital in one drought. It asks for US$150,000 for a season, with a plan to sell stock, priced at drought levels, that you have walked through. Your head of credit says: 'No more to farmers this year.'
What do you do?
PART C · QUESTION 17
A new analyst flags a dairy client: 'No revenue at all for two months, and the overdraft climbs throughout.' The same thing has happened in each of the last eight winters, and the cows are dry.
Signal or noise?
PART C · QUESTION 18
On your first visit, a farmer who has banked elsewhere for thirty years says: 'You lot only turn up when you want something.'
What do you do?
PART C · QUESTION 19
On a midseason visit you count about 420 cows in milk. The schedule of stock in the bank's security says 520. The farmer says: 'We sold a few culls.'
Signal or noise?
PART C · QUESTION 20
The processor cuts its forecast in midseason. You have 60 dairy farms on your book, and most are within budget so far.
What do you do this week?
PART C · QUESTION 21
A farm company applies for a loan. The land it farms is owned by a family trust, which has not been mentioned until now.
What do you ask first?
PART C · QUESTION 22
A 67-year-old farmer is happy to guarantee her son's new loan with the family farm. She has her pen out, and says she does not need a lawyer.
What do you do?
PART C · QUESTION 23
Over lunch, one of your clients asks about a competitor that is also your client: 'I hear they're struggling. Are they?'
Your answer?
PART C · QUESTION 24
A family company's founder, who holds every major customer relationship, has begun handing meetings to the next generation. The accounts are unchanged.
Signal or noise?
0 OF 24 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE
// THE REST OF THE ROUND
Every question here is original; none is any bank's real test. Written for: Agribusiness manager.
- Agribusiness manager: the interview questions, against a two-minute clock.
- Situational judgement, for any seat.
- The assessment centre: a whole case in forty-five minutes.
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