January 31, 2013

The National Council of Real Estate Investment Fiduciaries (NCREIF) recently released the latest Farmland Property Index (the Index), describing the investment performance of 543 agricultural properties in the United States over the year ending December 31^st 2012. The total value of the properties in the Index was $3.55 trillion. The 2012 annual return was 18.58%, consisting of 9.99% appreciation and 8.08% income return. The 2012 annual return was the highest since 2006, when returns were 21.15%. The total 2011 annual return was 15.16%.

The Index’s permanent cropland’s annual return was 20.80%, consisting of 5.06% appreciation and 15.34% income return. Annual cropland’s annual return was 17.41%, consisting of 12.62% appreciation and 4.39% income return.

Every region in the U.S. had a positive total return, although the returns varied greatly by region due to differing makeup of annual and permanent cropland. The Corn Belt performed the best in 2012, experiencing annual returns of 24.82%. The annual return was driven by strong appreciation of 20.05% (the income return was 4.19%).

According to Christopher Jay, Incoming Chairman of the NCREIF Farmland Committee and Director of Financial Analysis with Prudential Agricultural Investments, “The 2012 year-to-date performance of the NCREIF Farmland Index…continues to show the strength of agriculture as an investment for institutional investors. The strength in demand for U.S. farm products, particularly in the export market, has helped fuel these returns.”

The agricultural properties included in the Farmland Index have been acquired by tax-exempt institutional investors, most of which are pension funds. Of the total 543 properties contained in the Index for the 4^th quarter, 403 were annual cropland and 140 were permanent cropland. The base year of the Index is the 4^th quarter in 1990. Calculations are based on quarterly returns of individual properties, inclusive of property-level management fees, but excluding portfolio-level asset or investment management fees. Each property’s return is weighted by its market value, and Index values are calculated for income, appreciation, and total.

You may read more about the NCREIF Farmland and Timberland Indexes (and learn how to subscribe) here: http://www.ncreif.org/faqsfarmtimber.aspx

Furthermore, NCREIF will hold a webinar on Wednesday, February 6, at 1 pm Central Time to discuss an overview of the NCREIF Property Index (NPI) and the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE), the Farmland and Timberland Indices, as well as a detailed discussion of the results and interesting data from the NCREIF Property Value Trends report. The conference call is being webcast live and can be accessed here. An online replay of the webcast will be available on NCREIF’s website at www.NCREIF.org.