Pension Funds Note Strong Growth in Permanent Cropland Returns

Published on: 19:58PM Apr 27, 2015

Mike Walsten

Strong gains from permanent cropland resulted in a return of 2.08% for investment farmland during the first quarter of 2015, reports the National Council of Real Estate Investment Fiduciaries (NCREIF). The NCREIF's Farmland Index gain was comprised of 1.26% appreciation and 0.82% income return. The index includes both annual and permanent crop.

Permanent cropland showed the strongest quarterly performance with a total return of 3.64%, which is its strongest first-quarter return since 2006. Permanent cropland includes fruit trees, nut trees and vines. It does not include timber. In contrast the total return for annual cropland (corn, soybeans, wheat, for example) was slightly under 1% for the quarter.

The Pacific West was again the best performing region by a significant margin with a 3.77% total return for the quarter. This was split 3.11% appreciation and 0.66% income. The next closest region was the Mountain with a 2.40% total return. The Pacific West’s strong return was driven by permanent crops which returned 4.43% for the quarter.

In contrast to the Pacific West, the Pacific Northwest region was the worst performing region with a negative 0.65% return. The Lake States region was also slightly negative followed by the Corn Belt which just etched out a positive return.

Bill Frisbie, Chairman of the NCREIF Farmland Committee and Managing Director at Gladstone Land, noted that: “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. However, the one-year total return is strong at 12.24% 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; comprised of 393 annual cropland properties and 210 permanent farmland properties. This data enhances the ability of institutional investors to evaluate the performance of farmland investments across the United States.


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