Annual farmland hits 30% total return in Q4 – ANREV

Agriculture showed ‘remarkable resilience’ as an asset class over 2020 as returns held relatively steady throughout the year.

Total annualized returns in ANREV’s Australian Farmland Index dipped below 12 percent in Q4 2020 for only the second time since mid-2016, despite a very strong performance from annual farmland.

The index, now compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles, showed a small but steady drop in total returns on an annualized basis over the course of 2020, dipping from 14.47 percent in Q1 to 11.69 percent.

The Q4 total comprised an income return of 7.31 percent and capital growth of 4.11 percent.

Despite falling below 12 percent, the overall return figure has remained relatively steady since Q2 2019, hovering between 12.49 percent and 14.91 percent until Q4 2020’s small dip.

For Q4 2020 the total quarterly return was 2.45 percent, the second consecutive year that the return for Q4 has fallen. In Q4 2019 the total return was 3.08 percent, while in Q4 2018 the total return was 4.32 percent.

The income return for Q4 2020 was 1.06 percent, a slight increase on Q3 2020’s 0.48 percent. Capital growth eased slightly to 1.39 percent, from 1.56 percent in Q3.

ANREV director of research and professional standards Amélie Delaunay said that the figures showed agriculture’s “remarkable resilience” as an asset class in 2020, despite the slight dip in returns from the year before and called for more investors to contribute to improve the data set.

Gunn Agri Partners said that the annual farmland segment of the index, which constitutes 26 percent of the index’s asset base, had generated “stellar returns” in 2020 thanks to favorable climatic conditions across much of Australia. The remaining 74 percent of the index covers permanent horticulture crops.

The performance for Q4 2020 of annual farmland, which includes broadacre grain and oilseed farming and livestock grazing, recorded its best performance since inception of the index in 2015, with an annualized return of 30.26 percent comprising 13.34 percent from income and 15.03 percent from capital growth.

“The performance of annual farmland over the full year to December has been strong due to consistent quarter-on-quarter growth in capital values since the third quarter and the highest income return in Q1 since inception of 10.12 percent,” the firm said.

“Strong Q1 2020 results were driven by a well above average winter crop harvest on the eastern seaboard and soaring beef cattle prices as exporters and re-stockers fiercely competed for stock.”

Gunn Agri Partners said the strong performance in Q1 2020 showed positive signs for a follow-up record performance in Q1 2021, with Graincorp reporting this year that its combined intake across the 2020-21 harvest had totalled more than 13 million tonnes of grower receivals year-to-date.

“Capital growth for the quarter remained well above long-term trend for the third successive quarter as sustained high commodity prices flowed through to asset values. Agricultural asset values have also benefitted from the flight towards real assets from capital allocators and an easing of interest rates and lending policies of rural lenders,” Gunn Agri Partners said.

The Australian Farmland Index tracks the income and capital appreciation performance of 42 farmland properties with a market value of more than A$1. billion ($764 million; €649 million), of which 74 percent by value are horticultural crops and 26 percent are annual farmland assets.

The current businesses that contribute farm data are Argyle Capital Partners, Aware Super, goFARM Australia, Gunn Agri Partners, Hancock Agricultural Investment Group and Rural Funds Management. ANREV assumed the responsibility to compile the Australian Farmland Index in September 2020. It was previously managed by ANREV’s sister organisation in the US, the National Council of Real Estate Investment Fiduciaries (NCREIF).