News & Analysis

HAIG expects leased row crop returns to remain below 5%

The US-focused farmland investment firm says its returns outstrip NCREIF values, but expects them to remain near current levels.

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Hancock Agricultural Investment Group (HAIG) has said in its twice-annual newsletter that it expects leased row crop returns to remain below 5 percent ‘for the foreseeable future’.

The 1-year income return on HAIG row crop properties as of 30 September 2014 was 4.12 percent, before fees.

HAIG manages more than 100 farms with its integrated farmland manager Hancock Farmland Services, all of which are leased to tenants on 1 to 10-year leases. They cover 200,000 gross acres across 18 states and nine National Council of Real Estate Investment Fiduciaries (NCREIF) regions.

Property-level income returns on HAIG-managed assets have outperformed NCREIF income returns over the last four years, but both remain below 5 percent.

Leased row crop properties have a lower risk profile than directly-operated permanent crop properties, as permanent crops are subject to commodity price fluctuations, and therefore bear a lower return rate.

The newsletter also looks at HAIG’s steps to increase productivity at an alfalfa farm in Northern California, US Department of Agriculture projections for farm income and row crop cash rents, the life-cycle of almonds and the effect the China-Australia free trade deal will have on macadamia producers.

Click here to read the report (row crop returns on page 3).