Farmland property index edges higher on modestly stronger income

The National Council of Real Estate Investment Fiduciaries (NCREIF) has released the third quarter 2018 results of the NCREIF Farmland Index. The total return for the third quarter was 1.29 percent, up from 1.13 percent the previous quarter, and 1.02 percent in the third quarter of 2017. The quarterly total return was comprised of a 1.06 percent income return and appreciation of 0.22 percent.

Third quarter income return for the Total Farmland Index was 28 basis points lower than last year when the third quarter income return was 1.34 percent. Farmland values continued a marginally positive trend in the third quarter, posting appreciation of 0.22 percent after registering appreciation of 0.48 percent in the second quarter 2018.

The trailing four-quarter total farmland return was 6.82 percent through third quarter 2018, compared to 6.15 percent for the four quarters ending in the third quarter 2017. The annual total return was comprised of a 4.41 percent income return and 2.34 percent appreciation.

Permanent cropland modestly outperformed in the third quarter with a quarterly total return of 1.32 percent, compared with 1.26 percent for annual cropland. Permanent cropland outperformed on income but underperformed on appreciation, with an income return of 1.41 percent and negative appreciation of 0.09 percent. Annual cropland performance for the quarter was split between its income return of 0.83 percent and appreciation of 0.43 percent. Over the trailing year, permanent cropland returned 8.38 percent, compared to 5.61 percent for annual cropland. Since inception, total returns for these two categories have a smaller gap with annualized returns of 12.11 percent for permanent cropland and 10.31 percent for annual cropland.

All eight NCREIF regions registered positive total returns in the third quarter. The Southeast (3.22 percent), Pacific West (1.41 percent), and Delta States (1.40 percent) led regional performance for the quarter. All regions posted positive income for the quarter, while four regions — Lake States (–0.98 percent), Southern Plains (–0.28 percent), Mountain (–0.18 percent), and Pacific West (–0.05 percent) — posted negative appreciation. The Lake States posted its first positive total return (0.06 percent) since the second quarter of 2017, driven by income of 1.04 percent and depreciation of 0.98 percent. This was the ninth straight quarter, and the 18th quarter out of the last 19, that the Lake States Region has posted depreciating values, resulting in a cumulative decline in value of 15.8 percent for the region since fourth quarter 2013.