Permanent Crops Edge Higher as NCREIF Expands Farmland Index in the Second Quarter
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released the second quarter 2019 results of the NCREIF Farmland Index. The total return for the second quarter was 0.73%, up from 0.70% the previous quarter, but down from 1.13% in the second quarter of 2018. The quarterly total return was comprised of a 0.60% income return and appreciation of 0.13%.
Second quarter income return for the Total Farmland Index was 5 basis points lower than last year when the second quarter income return was 0.65%. Farmland values continued a marginally positive trend in the second quarter, posting appreciation of 0.13% after registering appreciation of 0.16% in Q1. The trailing 4-quarter total farmland return was 5.67% through second quarter 2019, compared to 6.55% for the 4-quarters ending in the second quarter 2018. The annual total return was comprised of a 4.45% income return and 1.18% appreciation.
Rolling 4-Quarter Total Returns
NCREIF is pleased to announce that beginning with this quarter’s index release, a new data contributing firm, Farmland Opportunity, has been added to the NCREIF Farmland Index. Additionally, two previously unpublished regions, Appalachian and Northern Plains, have met NCREIF’s data masking requirement for publication, and will be included as part of the NCREIF Farmland Index release in the future.
Permanent cropland outperformed in the second quarter with quarterly total returns of 0.93% for permanent cropland and 0.62% for annual cropland. Permanent cropland outperformed on appreciation for the quarter, with permanent cropland appreciation of 0.65% versus annual cropland appreciation of -0.18%, while annual cropland outperformed on income for the quarter, with annual cropland income return of 0.79% versus permanent cropland income return of 0.27%. Over the trailing year, permanent cropland returned 7.01%, compared to 4.82% for annual cropland. Since inception, total returns for these two categories have a similar gap with annualized returns of 12.01% for permanent cropland and 10.17% for annual cropland.
Rolling 4-Quarter Annual Cropland Returns
Nine of the ten NCREIF regions registered positive total returns in the second quarter. The Southeast (2.18%), Northern Plains (2.08%), and Pacific Northwest regions (2.05%) led regional performance for the quarter, with Mountain (-0.55%) the sole region to post a negative total return. All regions posted positive income for the quarter, while five regions; Mountain (‑1.45%), Lake States (-0.34%), Corn Belt (‑0.20%), Delta States (-0.08%), and Southeast (-0.05%) posted negative appreciation.
Rolling 4-Quarter Permanent Cropland Returns
The NCREIF Farmland Index consists of 899 investment-grade farm properties, totaling $10.5 billion of market value. These farm properties are comprised of 668 annual cropland properties and 231 permanent farmland properties. The index includes 243 properties in the Corn Belt, 222 in the Pacific West, 136 in the Delta States, 76 in the Mountain States, 63 in the Southeast, 56 in the Pacific Northwest, 45 in the Lake States, 30 in the Northern Plains, 22 in the Southern Plains, and 6 in the Appalachian Region. The index includes data provided by the following firms: Farmland Opportunity, Gladstone Land, Hancock Agricultural Investment Group, Prudential Agricultural Investments, UBS Farmland Investors, US Agriculture, and Westchester. This data enhances the ability of institutional investors to price the risk of farmland investments across the United States.