The National Council of Real Estate Investment Fiduciaries (NCREIF) reported that the United States farmland returns for the fourth quarter increased to its highest level in six years at 9.56 percent as values appreciated, and crop harvests boosted income. Additionally, Farmland returned a total of 19% for the year of 2012 (H/T Pensions & Investments)

Hedge Funds

In an e-mail statement to  Bloomberg, NCREIF said the increase in farmland returns were driven by land appreciation, which accounts for 5.27 percent and income from higher crops, which contributed 4.29 percent.

According to NCREIF, the total farmland returns for 2012 climbed to 19 percent compared with the 15 percent farmland returns in 2011. Last year, the price of corn and soybeans, the two largest crops in the country surged to record highs as massive droughts reduced production.

In July, wheat also reached a four-year high and ended the year 19 percent higher than any of the 24 commodities listed in the Standard and Poor’s GSCI Spot Index.

NCREIF reported that the corn region generated 13 percent returns in the fourth quarter and 25 percent total returns for 2012 while the Southern Great Plains delivered the lowest returns at 2.1 percent during the period.

According to Christopher Jay, incoming chairman of NCREIF Farmland Committee and director of financial analysts at Prudential Agricultural investments, “The strength in demand for U.S. farm products, particularly in the export market, has helped fuel these returns.” He added that the index gains showed the strength of agriculture as an investment for institutional investors.

In 2010, former hedge fund manager, Michael Burry said he invested a significant amount of money in farmable land. Back then, he predicted that productive agricultural land with water on site would become very valuable in the future.

The NCREIF Farmland Index is composed of 182 properties in the Corn Belt, 119 in the Pacific West, 64 in the Delta States, 53 in the Pacific Northwest, 45 in the Mountain States, 33 in the Lake States, 24 in the Southern Plains and 21 in the Southeast.