The National Council of Real Estate Investment Fiduciaries (NCREIF) has revealed its year-end 2024 Farmland Index returns. In response, Boston, Massachusetts-based AgIS Capital, which invests in permanent cropland on behalf of institutional investors, has published an analysis of the permanent cropland asset class. With a total value of approximately $16.3 billion, the NCREIF Total Farmland Index returned a loss of 1.03 percent in 2024, reflecting negative 3.46 percent in capital returns coupled with 2.49 percent in income returns.
The U.S. permanent crop industry has been under pressure since 2020, owing to a perfect storm of supply chain constraints, excess supply and a strong U.S. dollar, all of which present headwinds to exported U.S. nut crops. Permanent crops can be represented by perennial trees or vines including almonds, apples, pistachios, olives, and wine grapes that can be harvested annually and offer lifespans of two decades-plus. The lion’s share of U.S. permanent crops are grown on the West Coast and in the Southwestern regions of the country, owing to a Mediterranean climate that offers the right balance between growing temperatures and chilly winters, resulting in the right budding and blooming conditions, per AcreTrader.
Of the latest returns, AgIS Capital stated in its report, “This marks the first instance of the Total Farmland Index posting a negative return.”
In a bright spot, the Annual Cropland Index delivered a total return of 5.66 percent, the drivers of which were two pronged, including a capital return of 2.58 percent on top of the income return 3.02 percent. On the other hand, the total return for the Permanent Cropland Index was negative 10.18 percent, including capital returns of negative11.77 percent and income returns of 1.70 percent. Annual cropland total returns have surpassed permanent cropland total returns for the fifth straight year after nearly a decade in which the reverse was true and permanent cropland total returns exceeded annual cropland total performance.
For the second year running, the Directly Operated Permanent Cropland subindex had the distinction of delivering the lowest annual total return of those tracked, at negative 11.83 percent. Both capital returns and income suffered, and the performance marks the third instance of a negative total return for this index since inception. The capital return hovered at negative 12.45 percent, while the income return was fractionally positive. Income returns have suffered over the past five years, ranking among the six lowest since inception, while capital returns in 2024 reflected the sixth straight year of negative values, per AgIS Capital.
Pistachio crops are under pressure, with the Pistachio Index posting its second-straight negative annual return of negative 16.5% as capital returns of negative 20.16 percent overshadowed income returns of 4.25 percent. Pistachio production has experienced notable increases over the past decade while prices have stayed resilient compared with walnuts and almonds. In its latest state of the industry report, AgIS Capital said that pistachio farming remained profitable for growers with adequate water rights. While an increased supply is likely for the 2025 crop year, AgIS Capital forecasts “meaningful reductions to pistachio-bearing acreage after that.”
Back to the NCREIF data, where the almond index sank to its second-straight low total return of negative 16.44 percent, as capital returns of negative 18.14 percent outweighed income returns of 1.97 percent.
For a more detailed view of the analysis, see AgIS Capital’s full breakdown here.
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