NAB: States diverge on Farm Management Deposit system as climatic conditions hit agriculture

Drought in NSW has prompted state farmers to draw down on Farm Management Deposits during the past year while a good harvest in Western Australia has had the opposite effect.

Drought in NSW has prompted farmers to stack less money away in Farm Management Deposits than a year ago.

NSW farmers have drawn down their Farm Management Deposits at a high levels in the past year in stark contrast to their counterparts in other states.

National Australia Bank said the national balance of FMDs had been drawn down to $5.6 billion in March from an all-time high of $6.75 billion last June, with data showing significant divergence between states during the past few months on deposits and withdrawals.

Data from NAB and the Department of Agriculture showed that between March 2019 and March this year, there were significantly higher rate of withdrawal in drought-impacted states.

NAB agribusiness customer executive Khan Horne said the state differences were a result of fluctuating seasonal conditions across the country.

The value of NSW deposits in March this year at $1.28 billion was $83 million less than for the same period in 2019.

In Western Australia, the value of farmer deposits in March this year was $894 million, or $147 million higher than March 2019.

“FMDs are designed to allow producers to set aside pre-tax income in the good years, which is then available as a cash flow management tool for lower production years,” Mr Horne said.

“The continued drawdown and generally flat deposits in NSW reflect the prolonged periods of drought there, while a marginal winter cropping season in WA allowed continued deposits by producers,” he said.

“This is the first time since 2014 that we’ve seen states break away from the national trend, with New South Wales trending to lower net deposits from December 2019 to March 2020, while WA and Victoria trended towards increased net deposits over the same period.”

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