California farmland returns shrink - even as rains return
The end of California's drought has not answered all its farmers' problems.
Returns for US farmland owners in 2017 made their weakest start to a year on records going back to 1992, according to data from Ncreif, the National Council of Real Estate Investment Fiduciaries.At 0.49%, total returns for the January-to-March period undershot the 0.65% reported for the first three months of 2002 which had represented the lowest reading for a first quarter.
Declining Q1 returns on US farmland
Source: Ncreif. Returns comprise both price change and income
And the weak start to 2017 reflected a rare negative return in the Pacific West, which is centred on California and has been a star performer, helped by strong returns to the state's almond and tree fruit farmers."The Pacific West was the only region with a negative total return in the first quarter as permanent cropland lagged, which accounts for 179 of the 220 farmland properties [surveyed] in the region," Ncreif said.Steep declineThe Pacific West's performance represents a marked turnaround on that in the last three months of 2016, when it offered the best returns of all eight regions in which Ncreif divides the US.Indeed, the region has been a leading performer for the past five years, thanks to its focus on permanent crops such as apricots, avocados and peaches, rather than the annual produce, such as corn and soybeans, grown in the likes of the Midwest.The state is responsible for two-thirds of US fruit and nut output, as well as more than one-third of vegetables output, according to official data.Ncreif flagged an "extended divergence in total farmland returns by property type since 2012", with permanent cropland outperforming in a way "unique to this cycle" in the landmarket."Historically, total returns for these two categories are much closer as shown by the since-inception  return for permanent cropland of 12.40% versus 10.60% for annual cropland."...