U.S. farmland returns in the fourth quarter were the highest in six years as values appreciated and crop harvests boosted income, according to an index from the National Council of Real Estate Investment Fiduciaries.
Returns rose to 9.56 percent, the most since the fourth quarter of 2006, the Chicago-based council said today in an e-mailed statement. Land appreciation accounted for 5.27 percentage points of the increase, while income from higher-priced crops was 4.29 percentage points.
For all of 2012, returns totaled 19 percent, up from 15 percent a year earlier and the most since 2006, NCREIF said. The prices of corn and soybeans, the two largest U.S. crops, surged to records last year as a drought cut production. Wheat reached a four-year high in July, and ended the year up 19 percent, more than any of the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index.
“The strength in demand for U.S. farm products, particularly in the export market, has helped fuel these returns,” Christopher Jay, the incoming chairman of the NCREIF Farmland Committee and director of financial analysis with Prudential Agricultural Investments, said in the statement. The index gains “show the strength of agriculture as an investment for institutional investors,” he said.
Corn Belt returns led all regions in the fourth quarter at 13 percent, of which 12 percent was through land appreciation, the council said. For the year, returns in the area totaled 25 percent. The Southern Great Plains had the lowest returns in the quarter at 2.1 percent.
The NCREIF Farmland Index consists of 182 properties in the Corn Belt, 119 in the Pacific West, 64 in Delta States, 53 in the Pacific Northwest, 45 in the Mountain States, 33 in the Lake States, 24 in the Southern Plains and 21 in the Southeast.