Research - APRIL 21, 2017

Farmland performance down in first quarter

by Denise DeChaine

The National Council of Real Estate Investment Fiduciaries has released the first quarter 2017 results of the NCREIF Farmland Index. The total return for the first quarter was 0.49 percent, down from 2.89 percent last quarter and 1.38 percent in the first quarter 2016. The quarterly total return was comprised of a 0.51 percent income return and a slight depreciation of 0.02 percent.

These elevated index values are indicative of longer-term agricultural sector trends.

NCREIF reports that agricultural export expansion since 2000 has been a major source of farmland income growth, which is reflected in a more than tripling of the NCREIF Farmland Income Index since then.

The trailing annual farmland total return was 6.15 percent through first quarter 2017, compared with 9.59 percent for the year ending first quarter 2016. The annual total return was comprised of a 5.22 percent income return and 0.90 percent appreciation.

Permanent cropland’s return (­–0.03 percent) lagged annual cropland’s return (0.91 percent) in the first quarter, yet continued to outperform annual cropland for the year with permanent cropland returning 8.86 percent, compared with 4.01 percent for annual cropland.

As far as regional returns in the first quarter, both the Southern Plains and Pacific Northwest posted nearly 2 percent total returns, followed closely by 1.67 percent in the Southeast. The Mountain and Delta States recorded modest quarterly total returns of about 1 percent, while the Corn Belt and Lake States returned 0.35 percent and 0.31 percent, respectively. The Pacific West was the only region with a negative total return in the first quarter as permanent cropland lagged, which accounts for 179 of the 220 farmland properties in the region.


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