Fiduciaries (NCREIF) | Updated: 11/11/2013
The National Council of Real Estate Investment Fiduciaries (NCREIF) released its third quarter 2013 results of the NCREIF Farmland Index. The total return for the third quarter was 2.94%, comprised of 0.85% appreciation and 2.09% income return. This was an improvement from last quarters’ 1.97% and the best third quarter since 2005.
The 2.94% return greatly exceeds the 1.91% return from third quarter 2012 and the long-run third quarter average of 1.40%. The 2.09% income return is the highest quarterly income return for any quarter other than the fourth quarter in the history of the NCREIF farmland index.
The trailing four quarter total return of 21.25% is the highest since fourth quarter 2006. The split on the trailing four quarter return was 11.76% appreciation and 8.78% income. The four quarter rolling return from a year ago was 17.64%.
After alternating for eight quarters, permanent cropland outperformed annual cropland for the second consecutive quarter. Permanent cropland had a 5.18% total return compared to annual cropland’s 1.83% return.
Permanent cropland’s 5.18% return was split between 0.85% appreciation and 4.33% income. The income return was the highest in history for the third quarter and the key driver of the strong quarterly return for the entire index. The rolling four quarter return was 25.76%, split 7.09% appreciation and 17.85% income.
The Pacific West was the leading region in the third quarter with a 5.27% total return. This was split 0.84% appreciation and 4.44% income. The next closest region was the Mountain region with a 3.76% total return. The Pacific West’s strong return was driven by permanent crops which returned 6.79% including 5.70% of income. on a rolling four quarter basis the Pacific West’s 24.72% was just below the Mountain region’s 24.86%.
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The Lake States and the Southeast were the worst performing regions with a 0.92% and 1.11% total return, respectively. The Southeast had only 0.34% appreciation and the Lake States income return was a paltry 0.39%. The Southeast was also the worst performer on a rolling four quarter basis at 12.00%.
Christopher Jay, Chairman of the NCREIF Farmland Committee and Director of Financial Analysis with Prudential Agricultural Investments, noted that: "The third quarter income and appreciation returns for the Farmland Index exceeded the third quarter returns from a year ago. Third quarter 2013 returns were led by the Pacific West where many of the diverse crops grown in that region remain strong. The one-year total return is an impressive 21.25%. Interest in U.S. farmland remains firm from all potential buyers, including institutional investors. "
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The NCREIF Farmland Index consists of 548 investment-grade farm properties; comprised of 403 annual cropland properties and 145 permanent farmland properties. The index includes 178 properties in the Corn Belt, 123 in the Pacific West, 65 in the Delta States, 54 in the Pacific Northwest, 45 in the Mountain States, 34 in the Lake States, 25 in the Southern Plains and 23 in the Southeast. This data enhances the ability of institutional investors to price the risk of farmland investments across the United States.
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