Fourth Quarter NCREIF Farmland Index Release Shows Continued Moderation in Returns
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released the fourth quarter 2019 results of the NCREIF Farmland Index. The total return for the fourth quarter was 2.34%, up from 0.97% the previous quarter, but down from 2.85% in the fourth quarter of 2018. The quarterly total return was comprised of a 2.23% income return and appreciation of 0.11%.
Fourth quarter income return for the Total Farmland Index was 4 basis points higher than last year when the fourth quarter income return was 2.19%. Farmland values rose modestly in the fourth quarter, driven by annual cropland, posting modest appreciation of 0.11% after registering flat appreciation of ‑0.01% in Q3.
The trailing 4-quarter total farmland return was 4.81% through fourth quarter 2019, compared to 6.74% for the 4-quarters ending in the fourth quarter 2018. The annual total return was comprised of a 4.41% income return and 0.39% appreciation.
Rolling 4-Quarter Total Returns
Permanent cropland outperformed in the fourth quarter with quarterly total returns of 3.86% for permanent cropland and 1.44% for annual cropland. Annual cropland outperformed on appreciation for the quarter, with annual cropland appreciation of 0.58% versus permanent cropland appreciation of ‑0.70%, while permanent cropland outperformed on income for the quarter, with permanent cropland income return of 4.57% versus annual cropland income return of 0.86%. Over the trailing year, permanent cropland returned 5.48%, compared to 4.40% for annual cropland. Since inception, total returns for these two categories have a modestly wider gap with annualized returns of 11.98% for permanent cropland and 10.08% for annual cropland.
Rolling 4-Quarter Annual Cropland Returns
All of the ten NCREIF regions registered positive total returns in the fourth quarter. The Pacific West (3.53%), Lake States (3.21%), and Pacific Northwest (2.57%) led regional performance for the quarter, while the Northern Plains (0.11%), Appalachian (0.81%) and Delta States (0.99%) regions lagged. All regions posted positive income for the quarter, while the Pacific West (-0.84%), Northern Plains (‑0.67%), and Appalachian (-0.94%) regions posted negative appreciation.
Rolling 4-Quarter Permanent Cropland Returns
The NCREIF Farmland Index consists of 1,152 investment-grade farm properties, totaling $11.4 billion of market value. These farm properties are comprised of 897 annual cropland properties and 255 permanent cropland properties. The index includes 373 properties in the Corn Belt, 229 in the Pacific West, 138 in the Delta States, 116 in the Lake States, 85 in the Mountain States, 83 in the Pacific Northwest, 67 in the Southeast, 34 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.