NAB tips $6b boom in farm deposits

The West Australian
General Manager of NAB Agribusiness, Khan Horne.
Camera IconGeneral Manager of NAB Agribusiness, Khan Horne.

National Australia Bank is predicting Farm Management Deposits will smash the record set last year, as producers better manage their finances in good years to prepare for the more challenging ones.

FMDs allow eligible producers to set aside pre-tax income in good years, up to a total limit of $800,000, which is then available to draw on in future years when they need it.

In June 2016, FMDs hit a record $5.06 billion, dropping to $4.29 billion in May 2017 as producers utilised their reserves.

NAB Agribusiness general manager Khan Horne said the end of the tax year saw a spike in deposits, and there was every chance the national FMD balance would break $6 billion next month, setting a new record.

“Many producers have had a couple of strong years, with record wheat crops and high cattle prices, along with gen-erally good seasonal conditions in most areas,” Mr Horne said.

“Agriculture is seen by some as having a ‘golden age’ at the moment, and a lot more producers are now taking advantage of FMDs to put aside cash when they have it.”

Mr Horne says FMDs were also providing producers with greater flexibility to manage their cashflow and navigate some of the market-driven cycles that were part of agriculture.

“There’s a lot of grain still sitting in silos and on-farm, particularly in Western Australia, given prices aren’t as high as many would like,” he said.

“Growers with FMDs to draw on have more options to hold on to their grain until the market rises, and still have cashflow to manage their business and plant this year’s crop.

“While FMD levels haven’t been as high in the dairy sector, some of our customers who have them are also coping much better with the drop in farm gate prices,” Mr Horne said.

Get the latest news from in your inbox.

Sign up for our emails