Risk & operations
What a drought would do to our strategy
The season is the biggest single variable in any agricultural investment, and nobody controls it. Rather than wait to be asked, here is how our strategy is built to behave when the rain doesn’t come.
Mark Lowrey , Chief Operating Officer 31 August 2026 3 min read
Ask the manager of any agricultural fund about drought and you will usually get an answer built on long-run averages. Averages are comfortable, and they are also beside the point. The question a serious investor is really asking is a different one: what does a bad year actually look like in this strategy? It deserves a direct answer, so here it is; traced through the three places a season can hurt us: before capital is deployed, inside a cycle, and between cycles.
The decisions made before a single animal is bought
Our first line of defence is not a reaction to drought at all; it is the way each program is set up. Every property in our program is fully irrigated, which materially reduces our dependence on seasonal rainfall. On top of that, stocking decisions are made against rainfall profiles and measured pasture condition, not hope. If the feed base is not there to support a full program, we run a smaller one, or none that season.
That last sentence matters more than it may appear. Because our capital cycles run roughly 100 days rather than years, no deployment decision reaches far beyond the conditions in which it was made. We are never locked into a multi-year exposure that was decided in better times.
“A drought year for this strategy should look like lower deployment and thinner program volume, not stranded assets or forced selling.”
When the season turns mid-cycle
Inside a cycle, the discipline is about seeing stress early enough for it to be a management decision rather than a season-end surprise. Water-point telemetry and daily weighing surface trouble as it develops: falling gain rates and water constraints trigger defined escalation pathways. Our own cropping programs, oats, for example; offset feed costs when pasture tightens.
And if the right answer is to end a cycle early, the strategy’s structure changes what that decision means. Because sale pathways are pre-committed, turning stock off early is an economic calculation against a known price, not a distressed sale into a falling market.
What insurance does, and what it honestly doesn’t
Livestock are insured for mortality, transit and theft; specified events. Insurance does not cover slow weight gain, higher feed costs or thinner margins. Those are performance risks, and they are ours to manage. We would rather say that plainly than let an insurance line imply more protection than it provides.
The honest bottom line
Drought cannot be eliminated from an agricultural strategy. It is a core risk of this fund and returns in a failed season would be materially affected. What discipline changes is the shape of the downside: measured early, capped by short cycles, cushioned by transparent pricing and never compounded by land-price exposure or long lock-ins.
This article is general information only, prepared without regard to your objectives, financial situation or needs. It is not financial product, legal or tax advice. Ferguson Hyams Investment Management Pty Ltd, AFSL 490023.