Third Quarter Farmland Performance Edges Higher on Modestly Stronger Income
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released the third quarter 2018 results of the NCREIF Farmland Index. The total return for the third quarter was 1.29%, up from 1.13% the previous quarter, and 1.02% in the third quarter of 2017. The quarterly total return was comprised of a 1.06% income return and appreciation of 0.22%.
Third quarter income return for the Total Farmland Index was 28 basis points lower than last year when the third quarter income return was 1.34%. Farmland values continued a marginally positive trend in the third quarter, posting appreciation of 0.22% after registering appreciation of 0.48% in Q2.
The trailing 4-quarter total farmland return was 6.82% through third quarter 2018, compared to 6.15% for the 4-quarters ending in the third quarter 2017. The annual total return was comprised of a 4.41% income return and 2.34% appreciation.
Rolling 4-Quarter Total Returns
Permanent cropland modestly outperformed in the third quarter with quarterly total returns of 1.32% for permanent cropland and 1.26% for annual cropland. Permanent cropland outperformed on income but underperformed on appreciation, with an income return of 1.41% and negative appreciation of 0.09%. Annual cropland performance for the quarter was split between its income return of 0.83% and appreciation of 0.43%. Over the trailing year, permanent cropland returned 8.38%, compared to 5.61% for annual cropland. Since inception, total returns for these two categories have a smaller gap with annualized returns of 12.11% for permanent cropland and 10.31% for annual cropland.
Rolling 4-Quarter Annual Cropland Returns
All eight NCREIF regions registered positive total returns in the third quarter. The Southeast (3.22%), Pacific West (1.41%), and Delta States (1.40%) led regional performance for the quarter. All regions posted positive income for the quarter, while four regions; Lake States (‑0.98%), Southern Plains (‑0.28%), Mountain (‑0.18%), and Pacific West (‑0.05%), posted negative appreciation. The Lake States posted its first positive total return (0.06%) since the second quarter of 2017, driven by income of 1.04% and depreciation of 0.98%. This was the ninth straight quarter, and the eighteenth quarter out of the last nineteen, that the Lake States Region has posted depreciating values, resulting in a cumulative decline in value of 15.8% for the region since Q4 2013.
Rolling 4-Quarter Permanent Cropland Returns
The NCREIF Farmland Index consists of 851 investment-grade farm properties, totaling $9.4 billion of market value. These farm properties are comprised of 609 annual cropland properties and 242 permanent farmland properties. The index includes 229 properties in the Pacific West, 229 in the Corn Belt, 124 in the Delta States, 72 in the Mountain States, 57 in the Pacific Northwest, 48 in the Southeast, 42 in the Lake States and 21 in the Southern Plains. The index includes data provided by the following firms: 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.