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Merricks Capital Agriculture Credit Fund Portfolio and Market Update July 2022

The Merricks Capital Agriculture Credit Fund returned 0.86% in July and 9.00% on an annualised basis since inception.

Merricks Capital’s Agriculture Credit Fund is a diversified portfolio of 20 agricultural investments across seven major agricultural sectors, cropping, dairy, horticulture, meat & livestock, industrial, mixed farming and infrastructure. These first mortgage/senior-secured investments are geographically diverse, spread across all states and territories of Australia and New Zealand.

We are now focusing on investments across both upstream and downstream of the farmgate supply chain. These opportunities are being identified as funding gaps in the market and have emerged due to pressure on a broad range of agrifood supply chains. For example, two consecutive record years of production for the broadacre cropping industry in combination with post-covid logistics challenges, have exacerbated insufficient grain infrastructure in the domestic market.

Favourable climate conditions and higher commodity prices have improved operating conditions for many agricultural producers, pushing sector revenue to record levels in recent years. Similarly, recent borrower reporting indicates average to above-average crop yield coupled with strong commodity prices.

The impact of these record crops on domestic grain infrastructure has delayed the processing of crops following harvest resulting in delayed crop payments that are estimated to be up to 3-4 months. These circumstances don’t appear to be causing business distress, however cashflow management continues to be a priority. Our crop-producing borrowers operate with some level of income diversification, including livestock and horticulture, which facilitates their ongoing cashflow management and reduces commodity risk.

The Merricks Capital Agriculture Credit Fund has three investments in post-farmgate assets, including a grain export port in South Australia. We are assessing a further opportunity in this sector which is vertically integrated. This opportunity is an agricultural asset backed loan with exposure from farm gate to logistics, processing and trading.

We continue to see increased funding opportunities in New Zealand, as reflected by our pipeline which contains over $150m in opportunities. No new loans settled in July and there are $219m of loans currently in Due Diligence.

 

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