Farmland Index Posts First Negative Return in 19 Years

Posted on 05/08/2020 1:13 PM

For the first time in 19 years, an index which measures total return to farmland owned by pension and investment funds posted a negative total return in the first quarter of 2020. The National Council of Real Estate Investment Fiduciaries (NCREIF) says the total return for its Farmland Index was -0.10% for the first quarter. That is down from 2.34% the previous quarter and 0.70% in the first quarter of 2019.

First quarter income return for the index was 16 basis points lower than last year when the first quarter income return was 0.54%. Farmland values declined in the first quarter, driven by permanent cropland, posting appreciation of -0.84% after registering appreciation of ‑0.70% in Q4.  The trailing four-quarter total farmland return was 3.98% through the first quarter of 2020, compared to 6.08% for the year ending in the first quartr of 2019. The annual total return was comprised of a 4.25% income return and a negative 0.26% appreciation. 

                                     Annual Return Cropland Type Continues to Decline

Annual return to the total Farmland Index

Annual cropland outperformed in the first quarter with quarterly total returns of 0.66%. Permanent  cropland marked a loss of 1.35%. Annual cropland outperformed on both appreciation for the quarter, with annual cropland appreciation of -0.27% versus permanent cropland appreciation of ‑0.84%, as well as income for the quarter, with annual cropland income return of 0.93% versus permanent cropland income return of -0.51%. Over the trailing year, permanent cropland returned 4.51%, compared to 3.69% for annual cropland. Since inception, total returns for these two categories have registered annualized returns of 11.81% for permanent cropland and 10.01% for annual cropland.

Annual Income and Appreciation Returns to Annual Cropland

Returns for annual cropland

Six of the ten NCREIF regions registered positive total returns in the first quarter. The Southern Plains (2.10%), Appalachian (1.61%), Delta States (1.47%), and Southeast (1.04%), led regional performance for the quarter, while the Northern Plains (-3.10%), Pacific West (-1.24%), Pacific Northwest (-0.60%), and Lake States (-0.57%) regions all posted negative returns. Nine regions posted positive income for the quarter, with the Pacific West (-0.46%) the lone region to post negative income, and seven regions posted negative appreciation, with only the Southern Plains (1.06%), Appalachian (0.74%), and Delta States (0.73%) regions posting positive appreciation.

Annual Income and Appreciation Returns to Annual Cropland

Annual returns to permanent cropland

The NCREIF Farmland Index consists of 1,163 investment-grade farm properties, totaling $11.7 billion of market value. These farm properties are comprised of 902 annual cropland properties and 261 permanent cropland properties. The index includes 374 properties in the Corn Belt, 232 in the Pacific West, 141 in the Delta States, 115 in the Lake States, 87 in the Pacific Northwest, 85 in the Mountain States, 66 in the Southeast, 36 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.

Add new comment