February 10, 2023

Merricks Capital Agriculture Credit Fund Portfolio and Market Update January 2023


The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.8% in January and 9.4% on an annualised basis since inception.

There were no new loans settled in January. A focus for portfolio management during January was monitoring repayment strategies for loans with upcoming expiries and identifying target sectors for capital redeployment based on market conditions. These target sectors include horticulture (wine, apples, stone fruit, etc), mixed farming property acquisitions and supply chain assets. The Fund finished the month with higher cash holdings than optimal (19%) but expected capital deployments in February will bring cash <10%. During the month we also assessed the risks associated with the Fund’s New Zealand exposure after the significant rain events in Auckland. The Fund has only a 14% investment allocation to New Zealand across two loans and direct dialogue with borrowers has reported no material impacts on assets from the heavy rains.

We expect commodity prices in 2023 to ease from 2022 record levels but remain above long-term averages. Most global agricultural inventories remain tight although the end of the La Nina weather system should bring more stable conditions back to the northern hemisphere agricultural regions. Inflation and the higher cost of farm inputs are expected to underpin broadacre crop prices. We see little change to Australian milk or cattle prices where a multi-year cyclical low in supply is set to keep the market supported all year.

The Fund has approximately 22% exposure to businesses that produce or export grain, with three loans across New South Wales and South Australia at an average weighted LVR of 57%. This includes a $17m senior secured loan to a transhipment grain port on the Eyre Peninsula which Australian g

Due diligence progressed in January on $130m of new opportunities under term sheet across five loans and preliminary assessment of $330m in our pipeline.

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