Pension Fund Index Shows Slight Decline

Posted on 08/30/2018 10:04 AM

The Farmland Index maintained by the National Council of Real Estate Investment Fiduciaries (NCREIF) shows the total return for the second quarter was 1.13%, down from 1.32% last quarter, and 1.63% in the second quarter of 2017. The quarterly total return was comprised of a 0.65% income return and appreciation of 0.48%.

Second quarter income return for the index was 8 basis points higher than last year when the second quarter income return was 0.57%. Farmland values continued a modest upward trend in the second quarter, according to NCREIF, posting appreciation of 0.48% after registering appreciation of 0.81% in Q1. The trailing four-quarter total farmland return was 6.55% through second quarter 2018, compared to 6.55% for the year ending in the second quarter 2017. The annual total return was comprised of a 5.28% income return and 2.87% appreciation.

Annual Quarterly Total Return

Total returns to index remain steady.

The index shows annual cropland continued to outperform in the second quarter with quarterly total returns of 0.39% for permanent cropland and 1.66% for annual cropland. Permanent cropland underperformed on both income and appreciation, with an income return of 0.38% and appreciation of 0.01%. Annual cropland performance for the quarter was evenly split between its income return of 0.84% and appreciation of 0.82%. Over the trailing year, permanent cropland returned 8.25%, compared to 5.22% for annual cropland. Since inception, total returns for these two categories have less of a gap with annualized returns of 12.19% for permanent cropland and 10.37% for annual cropland.

Quarterly Total Annual Return for Annual Cropland

Returns for annual cropland

All but one region had positive total returns in the fourth quarter, NCREIF reports. The Pacific Northwest (7.01%), Southeast (2.06%), and Delta States (1.31%) led regional performance for the quarter. All regions posted positive income for the quarter. The Lake States was again the only region to post a negative total return (-0.15%), driven by depreciation of 0.70%. This was the eighth straight quarter, and the seventeenth quarter out of the last eighteen, that the Lake States Region has posted depreciating values, resulting in a decline in value of 15.0% for the region since Q4 2013.

Quarterly Annual Return for Permanent Cropland

Total returns for permanent cropland

The NCREIF Farmland Index consists of 796 investment-grade farm properties, totaling $9.2 billion of market value. These farm properties are comprised of 552 annual cropland properties and 244 permanent farmland properties. The index includes 230 properties in the Pacific West, 199 in the Corn Belt, 100 in the Delta States, 73 in the Mountain States, 57 in the Pacific Northwest, 50 in the Southeast, 41 in the Lake States and 20 in the Southern Plains. The index is comprised of data provided by the following seven firms: Cottonwood, Gladstone, Hancock Agricultural Investment Group, Prudential Agricultural Investments, UBS Farmland Investors, US Agriculture, and Westchester. The intent of this data is to enhance the ability of institutional investors to price the risk of farmland investments across the United States, NCREIF says.

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