NCREIF Farmland Property Index Released

Overperformance for Annual, Underperformance for Permanent Cropland

The NCREIF Farmland Index (NFI), which currently includes 1,235 properties and $13.24 billion in market value, has released its third quarter 2021 results. The total return for the quarter was 1.51%, comprised of appreciation and income returns of 0.61% and 0.90%, respectively. These results are slightly higher than the total return in Q3 of the previous year; the NFI returned 5.54% overall on a trailing twelve-month basis, of which 1.61% was appreciation and 3.88% was income.

Annual Cropland, which accounts for 61% of the total market value of the NFI, significantly outperformed Permanent Cropland for the seventh straight quarter with a total Q3 return of 2.25% versus 0.38%. Annual Cropland continues to experience significant appreciation at 1.48% for the quarter and 4.28% of the past twelve months. In contrast, Permanent Cropland has only see a total return of just 2.13% over the past twelve months including both appreciation and income.

For returns based on Crop Type, pistachios saw both the largest total quarterly return of 4.26% and largest annual return of 19.82% . Almonds experienced the most significant decline in Q3 for a total return of -4.00%, primarily due -6.11% depreciation. Almond performance has struggled over recent quarters due to weak income from low almond prices and orchard value deprecation. Within the same twelve-month block, fresh produce had a total return of 10.2%, commodity crops produced a total return of 8.38%.

Regionally, the Corn Belt saw the greatest total return of 4.14% in Q3, driven by appreciation returns of 3.62%, the highest of any region for the quarter. The Pacific West had the lowest regional total return of only 0.51% in Q3, which is consistent with lower returns the past few quarters and twelve-month total return of only 3.37%. Water concerns impacting appraised values and higher water costs impacting income is probably a significant contributing factor.

Overall, the NFI has continued on its trend of steady returns this quarter as the total return for the index has wavered between 0.9% and 1.6% on a quarterly basis over the past year. Even with rising inflation concerns and uncertainty of the economic short-term future of the United States, farmland proves to be a secure investment and continues to show its stability as an asset class.

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