The Merricks Capital Agriculture Credit Fund (the Fund) returned 0.8%* in October and 10.2%* on an annualised basis since inception.
Livestock prices experienced a slight month-on-month decline, with the Eastern States Young Cattle Indicator (EYCI) dropping 2.8% to $6.35 per kilogram of carcass weight. However, this remains above the 12-month average of $6.14 per kilogram. The outlook for livestock prices continues to be positive, with expectations of rising prices over the next 12 months due to demand outstripping supply. We are closely monitoring the sector, assessing new lending opportunities as potential borrowers seek capital for land acquisitions and existing borrowers repay via refinances or property sales.
Water storage levels in the southern Murray-Darling Basin remain robust, with current storage volumes at 17,130 gigalitres (GL) or 77% of total capacity. Existing loan facilities with borrower exposure to temporary water allocations along the eastern seaboard, such as almonds in the Riverina or wine grapes in Mildura, are expected to benefit from the sustained water availability.
The Fund was repaid on two loans during the month. The first, an agricultural loan facility (3.7% allocation for the Fund), was secured against a portfolio of grazing properties in New South Wales. The borrower repaid the loan after selling the largest property to an institutional equity buyer who conducted due diligence on the carbon and biodiversity income potential of the asset. The second, was a mature agricultural loan in New Zealand (7.8% allocation). The loan was repaid as part of providing funding to a purchasing party which was the highest bidder in an on-market process to acquire the business’ cherry orchards. The maturing loan delivered a 9.5% net IRR and the new borrower will continue the orchard development with a much stronger balance sheet and is forecast to deliver a 10.5% net IRR for the Fund.
We continue to focus on increasing our exposure to mixed-farming , horticulture, and downstream supply chain sectors, which are positioned to deliver strong risk-adjusted returns. One new mixed-farming loan entered due diligence, reflecting farmland and permanent water security in a region where the Government is actively buying back water, potentially creating short term exit paths with the appropriate credit structure.
