The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.8%* in August and 10.3%* on an annualised basis since inception. A 4.0% distribution was paid during the month.
The Bureau of Meteorology’s (BOM) long-range forecast for October to December 2024 indicates a slightly higher chance of above-average rainfall across much of eastern Australia, while central and western regions are expected to experience typical seasonal rainfall. Sea surface temperatures (SSTs) in the central equatorial Pacific are El Niño-Southern Oscillation (ENSO) neutral, having cooled from earlier 2024 predictions when the possibility of La Niña developing was 70%. Global SSTs have been exceptionally warm, setting records for several months in 2023 and 2024 which complicates the prediction of climate patterns based on past ENSO events and increases the risk of unforeseen weather events.
Livestock production and prices, which weighed down agricultural performance in 2023/24, are expected to rebound, contributing significantly to an anticipated $2.9 billion increase in total agricultural output in 2024/25 (ABARES). Additionally, crop production, particularly wheat in Queensland and New South Wales, is forecast to add nearly $1 billion in value year-on-year (ABARES ). However, there remains concern over the potential decline in commodity prices if demand from China weakens, which could negatively impact the overall outlook.
During the month, the Fund received full repayment on a horticultural loan (0.2% allocation). The business, which owns apple orchards in Hawkes Bay, New Zealand, settled a commercial sale to an institutional equity fund in line with 2022 valuations—an excellent outcome for the borrower after the regional impact of Cyclone Gabrielle in February 2023. Also during the month, receivers were appointed on one of the Fund’s farming loans in Bundaberg, QLD (3.7% allocation). The borrower has been unable to operate the farms due to working capital constraints, and a structured sales process was assessed as the best way to return investor capital.
We are actively focused on increasing our exposure to mixed-farming, horticulture and downstream supply chain sectors, which are positioned to deliver strong risk-adjusted returns. New term sheets of $155m were issued during the month, primarily to fund property acquisitions for horticultural and mixed-farming businesses.
*These returns are stated net of fees and costs
