NAB expects Australia’s agribusiness sector to invest more in Farm Management Deposits (FMDs) to manage risk and build business resilience amid rising farm input costs and interest rate movements.

NAB Executive Regional and Agribusiness Julie Rynksi.

Data released in NAB’s Regional and Agribusiness Horizons Report shows agribusinesses deposited 20.6 percent more into transactional accounts year-on-year from March 2021 to March 2022.

NAB Executive Regional and Agribusiness, Julie Rynski, said the high levels of business deposit growth shows that farmers are now making big decisions about how best to invest.

“Over the last two years we’ve seen FMDs trend downwards as producers have drawn down on them to re-invest in on-farm infrastructure, in stock to rebuild their herds and flocks, and in new or replacement equipment following the last drought, which is the whole purpose of the FMD Scheme,” Ms Rynski said.

“However, with plenty of cash on hand and on the back of two years of excellent conditions and high commodity prices, we expect investment in FMDs to increase as producers look to manage risk and build resilience into their business.

“Producers are also now in an ideal position to utilise FMDs as the end of financial year approaches.

“FMDs typically spike in the June quarter due to tax planning and it’s generally advisable to speak with tax planners, financial advisers, and bankers in the lead up to 30 June about the appropriate debt, cash and cashflow planning and management.”

The FMD Scheme allows eligible primary producers to set aside pre-tax income which they can draw on in lower production years when they need it.

Latest March quarter data from the Department of Agriculture, Water and the Environment shows there were total holdings in the FMD Scheme of around $5.28 billion as at 31 March, 2022.

The use of FMDs to build agribusiness resilience is the focus of a new NAB Agri View podcast.

NAB Senior Agribusiness Economist, Phin Ziebell, is joined by NAB National Agribusiness Strategy Executive, Bel Quince, and accountant and Mazars Managing Partner, John Kotzur, to discuss the value of FMDs to agribusinesses.

Listen to the podcast here.

To read NAB’s Regional and Agribusiness Horizons Report, click here.

Source: NAB