FMD scheme balance hits record $6.76 billion

The scheme designed to help farmers save for the next downturn is increasing in popularity, with a record balance at June this year.

Amid declarations of a third consecutive La Nina event and following years of high commodity prices, farmers lodged a record $6.76 billion in farm management deposits in June.

The amount just eclipsed the previous record, set in June 2019 when $6.75 billion was deposited.

Farm management deposits are a way for farmers to defer income earned in good seasons to subsequent tax years to balance out the volatility in commodity prices and climatic conditions.

The money can then be withdrawn in lower income years, which usually coincide with drought.

Farmers generally reassess their income before June to decide whether to deposit money in FMDs before the end of the financial year.

Mixed grains and livestock farmers were the biggest users of the FMD scheme as of July this year.

The record deposits this June were however quickly drawn down in July, with new figures from the Department of Agriculture showing the amount of money in the savings scheme drop to $6.11 billion by July 31 and 2083 accounts close.

Grain growers are usually the biggest users of the scheme, which is often used as a barometer of the performance of the farming sector as a whole as well as specific agricultural industries.

Grain Growers chair Brett Hosking said the drawdown on FMDs in July was likely due to growers needing the money to cover their expenses in preparation for harvest following one of the most expensive seasons on record.

“Fuel prices are 170 per cent of what they typically are, fertiliser prices have tripled, glyphosate prices have doubled, so all of these expenses are compounding, and often growers are looking for a bit more cash in preparation for harvest,” Mr Hosking said.

“The industry is built on booms and bust, and the FMD scheme has been a really effective tool in enabling us to do that.”

Mixed pastoral and grains operators were the biggest users of the scheme, with $1.39 billion in deposits at June 30, the data showed.

This was followed by sole grain farmers, who had $1.29 billion deposited.

Horticultural producers have been drawing down their June FMD deposits over the past three years, with $738 million lodged in 2022, down from a recent peak of $754 million in June 2020.

Meanwhile beef farmers have been steadily increasing their deposits held in the scheme over the past three years by $274 million, from $1 billion in June 2019 to $1.28 billion this year.

The Department of Agriculture conducted an internal review – its fourth – into the operation of the 22-year-old FMD scheme last year.

It was found that in general, FMD holders “successfully manage their primary production business in an environment where, by global standards, few subsides are provided”.

The scheme is believed to have reduced the need for in-drought support from governments in 2019-20.

The average amount of an FMD held by an individual is about $131,801, 10 per cent of FMD accounts are above $400,000 while more than two in every five eligible farmers participate in the scheme.