Australia’s agricultural industries make the country a world leader. However, more than half of Australian farmers have no major loan facility, while six in 10 are under some form of financial difficulty at least once during the year.
The Farm Management Deposits Scheme (FMD) was introduced in the 2003-2004 financial year, with funding of $110 million over four years. The scheme was created to assist farmers by depositing money into an interest-bearing account, which would supplement their cash flow at various times during the year, not forgetting agriculture as the main farm work in Australia.
It was found that nearly half of Australia’s farmers didn’t have a formal financial management strategy for planned saving or investing for their retirement. With that in mind, the FMD has provided a valuable safety net for many farmers, especially concerning long-term security such as their retirement.
Financial assistance for every farmer in Australia.
The FMD was created to assist farmers during a drought when many were desperate for help. However, it has been found that the FMD has offered financial assistance for almost every farmer. The FMD program offers a 50% deposit match, up to a maximum of $200 000 per deposit account, during years that profits are low due to bad weather or global market conditions.
Funding is allocated according to criteria set by the government.
The FMD has allocated funds according to a change in circumstance analysis, which provides a detailed breakdown of the financial situation of a farmer based on many different variables. This is determined according to receipts and output, market prices, and the costs associated with producing food for the Australian market.
Member farmers are provided with agricultural advice.
The government’s commitment to rural communities provides member farmers with agricultural advice from highly qualified and experienced professionals. The best technical expertise can be found in agronomy, animal science, finance and accounting, irrigation management, soil fertility, and genetics.
Farming is not affected by changes in global markets or weather conditions.
The FMD was established to provide support during times of drought. During drought, the value of a farmer’s catchments and water supplies decreases dramatically. It has been found that farming is not influenced by changes in global markets or weather conditions because the price received for a product is not a measure of profit.
Repayments are made without penalty or charges.
The government provides farmers with an interest-free loan when they experience low profits due to bad weather, economic hardship, or market uncertainty. Any repayments due may be made at any time, with no penalty and no fees required until the account is closed.
Funds are repaid to the government according to a set schedule.
Farmers pay back most of their deposits over a fixed period (usually five years). This allows farmers to plan to repay funds and minimize their financial difficulties in the short term.
The scheme encourages farmers to improve their productivity.
The FMD requires farmers who receive funds through the program to create a written management plan that outlines how they intend on spending the money and why it’s needed. Most plans include a detailed list of specific actions, such as purchasing property, investing in new equipment, or making improvements to animal stock that will be put into action to maximize production efficiency and output.
Farmers can pursue a lot more options with their investments.
Funds from the FMD can be used for a whole range of products and services, including property investment, farm machinery, financing for an agricultural business, or in-kind payments for use on the farm.
The program helps farmers to plan for the long term.
Once the FMD is used up, farmers must seek alternative funds from sources such as a bank or insurance product. However, because many don’t have access to these products during times of financial difficulty, they often turn to the FMD when needed most.
In conclusion, the FMD has provided nearly every farmer with a safety net for their financial security during times of drought or economic hardship. The FMD program effectively encourages farmers to take long-term planning and financial control into their own hands rather than leaving it up to an outside agency.
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought-after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.