The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.7%* in February and 10.1%* on an annualised basis since inception. The Fund paid a 4.0% distribution in mid-February.
The outlook for Australian agriculture remains positive. Almond prices are strengthening due to Californian droughts, while Australian milk prices are expected to remain elevated through 2025 as farm conversions limit supply. Trump’s presidency could also further fuel global trade tensions, potentially creating upside for Australian primary producers, as seen when past U.S.-China tariffs drove record-high almond prices. We have been tracking Cyclone Alfred’s path along the southeast Queensland coast and do not expect any significant asset damage to our Queensland-based borrowers; this event underscores the importance of maintaining a well-diversified loan portfolio across geographies, borrowers, and commodity outputs.
The Fund settled one new loan in February, expanding its exposure to dairy. A 6.6% allocation was provided to a repeat borrower financing working capital for a multi-property aggregation. Secured across seven properties in Tasmania, the loan carries an initial LVR of 60%, which is expected to reduce to 45% by April 2025, with repayment underpinned by contracted property sales. The facility is projected to deliver a net IRR of 10% (after fees and costs) to investors.
The Fund has a substantial pipeline for 1H 2025, with compelling opportunities across horticulture, grazing, and mixed-farming. Due diligence is well advanced on a significant new agricultural loan of approximately $102m, secured by Queensland horticultural properties. This loan, which is expected to settle in four to six weeks, features a modest forecast LVR (50%) and a forecast investor net IRR of 11% (after fees and costs).
*These returns are stated net of fees and costs
