US Annual Cropland Returns Year on Year Increase Remains Near 10% for 4th Consecutive Quarter
By Matt Harrod
As we posted last December, US farmland values have been on a tear for the last year and half, increasing at rates not seen since 2011 – 2013. The current run up in prices has numerous drivers, including drought last year in the EU and China, drought in the US and China this year, war in Ukraine disrupting grain shipments in the Black Sea, and, not least, monetary inflation hitting numbers not seen since the early 1980’s.
The chart below is US annualized quarterly row crop farmland value returns from NCREIF (if you aren’t familiar with NCREIF, see the description below the chart). There has been much speculation as to how long these high appreciation rates will continue and when they might revert to the mean or possibly even decrease. We still don’t know the answer to that as year-on-year (red line) annualized returns remained near the peak of 10% for the fourth consecutive quarter in Q4 of 2022, supported by a quarter over quarter increase of 3.4% (blue line). This may be somewhat of a surprise after the quarter over quarter increases had slowed to 1.3% and 1.9% in Q2 and Q3 of last year after having peaked at 3.6% in Q4 2021, the highest increase since 2013.
This is the third post of several we’ll be doing to explore the issues, drivers, and what we can learn from history. Stay tuned!
From the NCREIF (National Council of Real Estate Investment Fiduciaries) website:
"Established over 35 years ago, NCREIF serves the institutional real estate investment community as its Data Central, representing the largest, most robust and diverse database of country-specific real estate assets in the world.”
“The NCREIF Farmland Index is a quarterly time series composite return measure of investment performance of a large pool of individual farmland properties acquired in the private market for investment purposes only. All properties in the Farmland Index have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds.”