Agribusiness

Agribusiness: FMDs likely to continue breaking records

Sheep Central, July 31, 2015

FMD 1

FARM Management Deposits are expected to continue breaking records as primary producers embrace an increase in account limits amid good seasons and prices in many regions, according to National Australia Bank Agribusiness.

Speaking at the Rural Marketing Agents Association conference in Cairns today, NAB Agribusiness general manager Khan Horne said that FMDs are part of the long term solution to increase the resilience of the farming sector and reduce reliance on drought loans.

“I fully support the recent changes announced in the Federal Government’s Agricultural Competitiveness White Paper to double the threshold of FMDs to $800,000 from July 2016, and increase farmers’ capacity to save,” Mr Horne said.

“It’s not the only solution to boost drought preparedness but it’s part of it.”

FMDs rose to an all-time high of $4.6 billion in June 2015, an increase of 11 percent or $465 million on the same time last year. NAB expects to see FMDs continue to grow in volume over the long term, but it is important to note that there is always a reduction after 1 July due to the cyclical nature of FMDs.

Both Victoria and New South Wales broke the $1 billion mark in deposits for the first time.

FMD 2

The grain and mixed farming (grain/beef/sheep) sectors led the way, contributing nearly 70pc of the new volume in 2015.  Horticulture, other crops, beef and sheep-beef sectors added more than $25 million per sector to their savings.

“The numbers show that farmers are also using their FMDs to manage cash flow. We can see that $600 million has been withdrawn between 1 July 2014 to the March quarter 2015, and $1.1 billion was then deposited in the June quarter,” Mr Horne said.

Since 1999 FMDs have grown from 1pc to 6pc, as a proportion of farm debt, meaning that farmers’ ability to manage cashflow in tough times has significantly improved, he said.

 

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