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Agriculture credit opportunities supported by attractive market conditions and limited competition

The Agriculture Credit Fund invests in loans which are secured against agricultural assets across a range of market subsectors. Recent highlights in some of our investment markets include:

Grain – Wheat markets are being supported by strong international demand, low stocks in key export markets and a large feed grain deficit. The outlook is positive but may be tempered by local stocks and new crop opportunities.

Dairy – Slow domestic milk production to date should improve due to good supply of feed, while record milk prices being set this year should ensure profitability in the sector is very strong after a number of challenging years.

Beef – The benchmark Eastern Young Cattle Indicator (EYCI) has reached a record high of 1,000c/kg (+31.9%yoy), supported by strong consumer demand and competition from retailers for the limited available supply.

Cotton/Wool – Cotton and wool demand has benefited from a strong rebound in clothing retailing and The Eastern Market Indicator (EMI) has rallied 66% from the September 2020 lows.

Strong rainfall in most parts of southern Australia has resulted in average to above average soil moisture levels in our key productive agriculture regions. This is a good indicator for crops and pastures heading into spring, and conditions for rainfall over coming months are also favourable.

These various market and weather factors ensure that agriculture land values, which provide the collateral for our loans, are well supported. Combined with conservative loan-to-valuation ratios and limited competition in the agricultural lending market, the Fund will continue to achieve attractive risk adjusted returns.

 

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