With gross per-acre revenues for the 2014 corn and soybean crops down a forecast 19% and 23%, respectively, from the prior year’s crop, the slow inevitable correction in annual row-crop land values is underway.
Institutional investment returns in U.S. annual cropland shriveled to 6.3% (2.5% appreciation and 3.8% income return) in 2014, before management fees. That’s nearly one-third the 16.7% return reported in 2013, according to the National Council of Real Estate Investment Fiduciaries, an investment manager trade group in Chicago.
Six managers—Halderman Real Asset Management, Hancock Agricultural Investment Group, Prudential Agricultural Investments, UBS AgriVest LLC, TIAA-CREF’s Westchester Group Investment Management and public farmland REIT Gladstone Land Corp.—contribute data on 403 annual cropland properties valued at $3.02 billion. The managers typically lease the land to local farmers who raise a mix of corn, soybeans, cotton, alfalfa, peanuts, potatoes, rice, strawberries,vegetables and wheat.
Regionally, annual row cropland appreciation rates ranged widely in 2014, from up 8.4% in California and 6.7% the Oregon/Washington region, to down nearly 1% in Texas and off about 0.50% in the Corn Belt states of Illinois, Indiana and Ohio, according to NCREIF.
Permanent crop investments—driven by California almond and pistachio properties—continue to generate standout returns. For 2014, permanent crop properties posted a 21.1% return before investment fees. The double-digit return was comprised of 6.2% appreciation and 13.4% income return, based on 220 properties valued at $2.51 billion.
Investments in cranberry bogs—primarily in central Wisconsin—continue to suffer as large supplies pressure cranberry prices and crimp returns. The value of permanent crop properties in the Lake States region (Mich., Minn., Wis.) depreciated 11% in 2014—the fifth straight year of price declines. Permanent crop tracts in this region have depreciated 33% since January 2009, according to NCREIF data.
Last fall, the U.S. Department of Agriculture agreed to purchase up to $55 million in cranberry products, double its previous purchase, which was in January 2014. It is expected to absorb up to 68 million pounds of surplus cranberries. ■
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