Merricks Capital Agriculture Credit Fund Portfolio and Market Update December 2022
The Merricks Capital Agriculture Credit Fund returned 0.9% in December and 9.3% for the 2022 calendar year. The Fund declared a 4.0% distribution for the six months to 31 December 2022.
2022 was another strong year for agricultural producers in Australia and New Zealand with tailwinds from La Niña rains and global commodity shortages elevating farmgate prices. Commodity prices received in 2021/22 were 13% higher year-on-year (ABARES). This contributed to 2021/22 real net farm cash income in Australia increasing 18% compared to 2020/21 and 83% higher than 2019/20. Over the past 6 months we have seen significant equity creation for many of our borrowers across commodities and the supply chain.
Our diversified approach to lending across geographic regions, borrowers and commodities ensured limited exposure to the east coast flooding events and no material impact on our investments. Global commodity prices will likely remain above the historical average, albeit with above average volatility. In some key markets we expect prices to soften, for example, beef, cotton and canola. Further, the climate outlook is for drier conditions for the latter half of the year.
No new loans settled in December. Two existing loans were restructured to lower LVRs, improve forecast investor returns and align timing of loan expiries with exit strategies. One loan amendment deployed $11m of new capital to a large-scale dairy farm in the north-west of Tasmania at a 55% LVR and forecast investor return of 11.3% (net of fees). One loan was repaid during the month, a total loan facility of $82m funding a mixed-farming enterprise in the Riverina region of NSW, the Merricks Capital Agriculture Credit Fund’s allocation was $23m. Two years of high-yielding cotton crops and strong commodity prices for cotton and beef allowed the borrower to refinance 12 months ahead of loan maturity to a bank. The investor IRR for this loan was 11.3% (net of fees).
We commence 2023 with $180m of new opportunities under term sheet in agriculture across five loans and $625m in our pipeline.
The year that was and the year ahead!
The Merricks Capital Agriculture Credit Fund returned 0.9% in December and 9.3% for the 2022 calendar year. The Fund declared a 4.0% distribution for the six months to 31 December…