US Farmland Returns Begin to Cool in First Half of 2023

by Matt Harrod

US Row Crop Farmland shows signs of cooling in the first two quarter of this year according to the latest NCREIF data. As can be seen above, the quarterly appreciation rate of 1.0% is down from 2.4% the previous quarter, while the latest year-on-year increase (sum of current and previous three quarterly figures) is 8.7%, down slightly from 9.0% the previous quarter.

So how far do the returns drop? Obviously it’s difficult to say but other indicators we have suggest that this run is probably over and it’s likely to revert back to or below the three and ten year averages. A speculative low for the remainder of the year might be two more quarters of or near 1% which would give Q4 2023 yearly average of 2.4+1.0+1.0+1.0 = 4.4% for the year, while a high value might be finishing the year with the next two quarters going back up to 2.4%, so 2.4+1.0+2.4+2.4 = 8.2%, which seems unlikely certainly is possible.

If history is an indicator, returns might stall at 7% - 7.5% for two or three quarters before dropping to 1.5% to 2.5%. Either way, its important to note this data is for appreciation, and not prices. So we are not saying farmland is likely to lose value in the next 6-12 months, only that it will gain value at a slower rate.

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