This week, U.S.-China trade tensions intensified, with new tariffs and countermeasures making headlines. With over 70% of Australian agricultural products exported and approximately 90% of New Zealand’s (ABARES, Stats NZ), we expect our agricultural borrowers to be largely net winners from any escalating trade barriers.
We have also been tracking the progress and likely path of Cyclone Alfred along the southeast Queensland coast and do not expect any meaningful asset damage to our Queensland-based borrowers. Both events underscore the importance of having loan portfolios meaningfully diversified across geographies, borrowers and commodity outputs.
Key Sector Snapshots:
Almonds
China’s newly imposed 10-15% tariffs on U.S. agricultural imports, including almonds, will shift global trade flows. Australia is expected to benefit from strong trade agreements with China and India, and stands to capture a larger share of this demand. This trade realignment supports price growth for Australian almond producers. Our funds currently have exposure to one Riverina-based almond producer, with two additional new loan opportunities in due diligence, totalling $150m.
Livestock
U.S. cattle herds are at their lowest levels in 64 years (USDA), creating a supply gap that has boosted Australian beef prices. While this presents an export opportunity, potential U.S. tariffs on Australian beef could introduce headwinds. Meanwhile, New Zealand’s pivot towards beef and dairy production is expected to support long-term growth in Australian lamb prices. Merricks Capital Agriculture Credit Fund currently holds an 18% allocation to grazing sector loans which are diversified across seven investments.
Navigating Climate Risk
While Cyclone Alfred is tracking along the southeast Queensland coast, our exposure remains limited and we do not expect material impacts on our portfolio assets. Managing climate risk is always a priority, and our active loan management approach has proven effective in previous events. Following Cyclone Gabrielle’s severe impact on New Zealand’s Hawke’s Bay apple orchards in 2023, we restructured a borrower’s loan to provide a 12-month extension and worked with unsecured creditors to enable an orderly asset sale at a 30–40% premium to immediate post-cyclone levels.
With over $1bn in loan repayments expected across our funds in 2025, we remain focused on selectively deploying capital into sectors where we see strong fundamentals and resilient cash flows. Agriculture remains a key area of opportunity and over the coming year, we expect to materially increase our exposure, with the Merricks Capital Partners Fund targeting 20–25% allocation by year-end and the Merricks Capital Agriculture Credit Fund planning to deploy $300–500m into new senior secured opportunities.
