Third Quarter NCREIF Farmland Index Release Shows Lackluster Farmland Appreciation
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released the third quarter 2019 results of the NCREIF Farmland Index. The total return for the third quarter was 0.97%, up from 0.73% the previous quarter, but down from 1.29% in the third quarter of 2018. The quarterly total return was comprised of a 0.98% income return and appreciation of -0.01%.
Third quarter income return for the Total Farmland Index was 8 basis points lower than last year when the third quarter income return was 1.06%. Farmland values took a negative turn in the third quarter, driven primarily by permanent cropland, posting appreciation of -0.01% after registering appreciation of 0.13% in Q1.
The trailing 4-quarter total farmland return was 5.33% through third quarter 2019, compared to 6.82% for the 4-quarters ending in the third quarter 2018. The annual total return was comprised of a 4.37% income return and 0.94% appreciation.
Rolling 4-Quarter Total Returns
Permanent cropland outperformed in the third quarter with quarterly total returns of 1.06% for permanent cropland and 0.91% for annual cropland. Annual cropland outperformed on appreciation for the quarter, with annual cropland appreciation of 0.15% versus permanent cropland appreciation of ‑0.29%, while permanent cropland outperformed on income for the quarter, with permanent cropland income return of 1.35% versus annual cropland income return of 0.76%. Over the trailing year, permanent cropland returned 6.73%, compared to 4.45% for annual cropland. Since inception, total returns for these two categories have a similar gap with annualized returns of 11.94% for permanent cropland and 10.11% for annual cropland.
Rolling 4-Quarter Annual Cropland Returns
Eight of the ten NCREIF regions registered positive total returns in the third quarter. The Mountain (1.64%), Pacific West (1.44%), Northern Plains (1.38%), and Southeast regions (1.33%) led regional performance for the quarter, with the Pacific Northwest (-2.50%) and Lake States regions (-0.01%) the only two regions to post negative total returns. All regions posted positive income for the quarter, while the Pacific Northwest (-2.69%) and Lake States regions (-0.94%) posted negative appreciation.
Rolling 4-Quarter Permanent Cropland Returns
The NCREIF Farmland Index consists of 1,139 investment-grade farm properties, totaling $11.0 billion of market value. These farm properties are comprised of 889 annual cropland properties and 250 permanent farmland properties. The index includes 371 properties in the Corn Belt, 221 in the Pacific West, 138 in the Delta States, 115 in the Lake States, 84 in the Mountain States, 84 in the Pacific Northwest, 64 in the Southeast, 35 in the Northern Plains, 21 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.