Returns to pension and investment funds turned slightly positive in the second quarter of 2020 following the first negative quarterly return posted in the first quarter. That’s according to the Farmland Index calculated quarterly by the National Council of Real Estate Investment Fiduciaries (NCREIF). The total return for the second quarter was 0.61%, up from a negative 0.10% the previous quarter, but down from 0.73% in the second quarter of 2019. The quarterly total return was comprised of a 0.58% income return and appreciation of 0.02%.
Second quarter income return for the Farmland Index was 2 basis points lower than last year when the second quarter income return was 0.60%. Farmland values remained flat in the first quarter, with annual cropland posting appreciation of 0.03% and permanent cropland posting appreciation of 0.01%, after registering appreciation of -0.27% and -0.84%, respectively, in Q1.
The trailing four-quarter total farmland return was 3.85% through second quarter 2020, compared to 5.67% for the four-quarters ending in the second quarter 2019. The annual total return was comprised of a 4.23% income return and -0.37% appreciation.
Annual cropland outperformed in the second quarter with quarterly total returns of 0.82% for annual cropland and 0.26% for permanent cropland. Annual cropland outperformed on both appreciation for the quarter, with annual cropland appreciation of 0.03% versus permanent cropland appreciation of 0.01%, as well as income for the quarter, with annual cropland income return of 0.79% versus permanent cropland income return of 0.25%. Over the trailing year, annual cropland returned 3.89%, compared to 3.82% for permanent cropland. Since inception, total returns for these two categories have registered annualized returns of 11.71% for permanent cropland and 9.95% for annual cropland.
Rolling 4-Quarter Annual Cropland Returns
Nine of the ten NCREIF regions registered positive total returns in the first quarter. The Southeast (2.65%), Pacific Northwest (1.07%), Southern Plains (1.04%), and Delta States (1.00%), led regional performance for the quarter, while the Pacific West (-0.04%), Northern Plains (0.07%), Appalachian (0.09%), and Mountain (0.23%) regions lagged on regional performance for the quarter. All ten regions posted positive income for the quarter, led by the Southeast (1.88%), Southern Plains (1.08%), and Mountain (0.93%) regions.
Rolling 4-Quarter Permanent Cropland Returns
The NCREIF Farmland Index consists of 1,175 investment-grade farm properties, totaling $11.9 billion of market value. These farm properties are comprised of 910 annual cropland properties and 265 permanent cropland properties. The index includes 378 properties in the Corn Belt, 230 in the Pacific West, 141 in the Delta States, 118 in the Lake States, 91 in the Pacific Northwest, 87 in the Mountain States, 66 in the Southeast, 36 in the Northern Plains, 21 in the Southern Plains, and 7 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.