Strong Australian ag returns despite slowdown

The NCREIF committee said it has ‘no concerns’ over contributor Blue Sky’s asset valuation process.

Growth in income returns from Australian agriculture slowed in Q1 2018, but still remained strong, according to the latest NCREIF Australian Farmland Index.

Total farmland return in Q1 2018 was 0.44 percent, down from 3.32 percent in Q4 2017. Income return was 0.59 percent, compared with 1.44 percent in Q4 2017.

Under-fire asset manager Blue Sky is one of the contributors to the index, and its compiler, the National Council of Real Estate Investment Fiduciaries, said its farmland committee had “no concerns about the process Blue Sky Water Partners undertakes for valuations and data contribution to the index.”

Blue Sky Water Partners investment director Michael Blakeney added: “Blue Sky Water Partners has been contributing data since the commencement of the index and sees it as a valuable and useful tool for both managers and investors. We are starting to see some interesting trends emerge.

“Our institutional partners are interested in the development of the index and the data. The growth in the index – in value, number of properties and contributing members can only add to the asset class’ maturity.”

Dry season

On an annualized basis, total farmland return stood at 16.24 percent in Q1 2018, compared with 16.89 percent in the same period of 2017, while income return fell to 4.12 percent from 8.06 percent in Q1 2018.

Commenting on the index, contributor AAG Investment Management said the lower annualized returns reflected the generally drier winter experienced in 2017.

Capital returns rose to 11.86 percent on an annualized basis, from 8.42 percent in Q1 2017, driven by strong demand for broadacre and permanent cropping properties, with avocado, citrus, nut and table grape properties experiencing particularly strong demand.

Income returns in 2017 were influenced by a number of climatic factors, according to AAG Investment Management. Both minimum and maximum temperatures in 2017 were above average, with 2017 as a whole recorded as the third warmest year on record. Prices for some key commodities like grains and oilseeds were weaker, resulting in lower yields, while beef and lamb prices also softened for livestock producers.

Oz beats US

In a positive note, the Australian Farmland Index continued to compare favourably with the US Farmland Index, also compiled by NCREIF, which recorded a total return of 6.19 percent for the same 12 months to March 2018.

The NCREIF Australian Farmland Index now has 67 properties at a market value of A$1.27 billion subscribing to it, with data contributed by Growth Farms, Blue Sky, goFARM Australia, Rural Funds Management, AAG Investment Management, Hancock Agricultural Investment Group and Laguna Bay.