The National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index posted 2.08% total returns for the first quarter of 2015, which include 1.26% appreciation and 0.82% income return.
The Farmland in the United States includes both annual and permanent cropland, according to the NCREIF.
Themes for the next decade: Cannabis, 5G, and EVs
A lot changes in 10 years, and many changes are expected by the time 2030 rolls around. Some key themes have already emerged, and we expect them to continue to impact investing decisions. At the recent Morningstar conference, several panelists joined a discussion about several major themes for the next decade, including cannabis, 5G and Read More
Farmland Index: annual and permanent cropland returns
Permanent cropland generated the strongest results with 3.64% of total returns during the first quarter, the highest recorded QI performance since 2006.
Permanent cropland is used for cultivating crops for long periods. The crops such as fruit trees, nut trees and vines need to be replanted after each harvest. Lands that grow trees for wood or timber are included in the NCREIF Timberland Index.
On the other hand, an annual cropland is a land used for growing crops such as corn wheat and soybeans. During the quarter, annual cropland recorded less than 1% returns.
According to NCREIF, the returns of annual and permanent cropland were similar until around 2004. The returns of permanent cropland became higher than annual cropland for several years. Its returns moved back in line with annual cropland until about 2012. Since then, permanent cropland recorded higher returns than annual cropland again.
Farmland regional performance
Based on the NCREIF Farmland Index, the Pacific West was the best performing region during the quarter. The Pacific West delivered 3.77% total return including 3.11% appreciation and 0.66% income.
NCREIF noted that permanent crops boosted the performance of the Pacific West. Permanent crops delivered 4.43% returns for the region during the first quarter.
NCREIF Farmland Index showed that the second best performing region was the Mountain with 2.40% total return.
The Pacific Northwest was the worst performing region with -0.65%. The Lake States region also recorded a slightly negative performance. The Corn Belt recorded a positive return.
Bill Frisbie, chairman of the NCREIF Farmland Committee and managing director at Gladstone Land said, “Both income and appreciation returns for the Farmland Index in the first quarter were both positive but slightly lower than the first quarter returns from a year ago.”
Frisbie noted that the Farmland index’s total return for one-year at 12.24% was strong. According to him, “There continues to be strong interest in many markets for high-quality farmland from both institutional investors as well as local farmers on property that comes up for sale.”
The NCREIF Farmland Index consists of 603 investment-grade farm properties including 393 annual cropland properties and 210 permanent farmland properties.