2025 Midyear Farmland Snapshot: What This Rare Downturn Reveals About Resilience

In 2024, the NCREIF Farmland Index posted its first negative annual return in more than three decades. For investors accustomed to farmland’s historically steady performance, the downturn marked a rare departure from the asset class’s otherwise consistent track record. Now, with first-half 2025 data in hand, it’s an opportune moment to step back, assess the underlying drivers of recent performance, and revisit farmland’s long-term role in a well-diversified portfolio.

While some investors may view this period as cause for concern, the numbers tell a more nuanced story—one that highlights farmland’s structural resilience, income durability, and relatively low volatility compared to traditional public assets^[1].

What the Data Shows

The NCREIF Farmland Index posted a total return of –1.03% in 2024^[2]. Permanent cropland (such as tree nuts and fruit) saw steeper declines than row crop properties, driven by commodity-specific pricing pressure and localized weather challenges.

The first two quarters of 2025 suggest a continuation of these trends. As of Q2, the NCREIF Farmland Index posted a 0.33% total return, with income (+0.59%) offsetting negative appreciation (–0.26%). Row crops remained positive (+0.98%), while permanent crops continued to decline (–0.71%)^[3], reflecting ongoing commodity and regional pressures

Regionally, results were mixed. California and the Pacific Northwest—markets with higher exposure to permanent crops like almonds, wine grapes, and apples—posted Q2 total returns of –0.69% and –0.71%, respectively, reflecting negative appreciation offset by modest income. By contrast, the Southeast (+4.05%) and Lake States (+2.20%) delivered stronger gains^[4].

Historically, this type of regional divergence has proven cyclical, with California and the Pacific Northwest rebounding as global demand and pricing trends normalize. Over the long term, these regions remain among the most productive and valuable farmland markets in the U.S., which is why institutional capital continues to be concentrated there. When viewed in aggregate, however, these quarterly variances reinforce farmland’s long record of consistency.

Taken together, this pullback, while notable, represents an anomaly in an otherwise robust multi-decade record. Since the index’s inception in 1991, U.S. farmland has averaged annual returns of ~10.2%. Negative years have been exceedingly rare, with 2024 marking the first calendar year of negative performance.the asset class’s consistency despite broader macroeconomic fluctuations.

What Drove the Decline

Several converging forces contributed to farmland’s underperformance over the past 18 months. The most significant was soft commodity pricing. Crops such as almonds, corn, and soybeans faced weaker pricing environments due to oversupply, shifting global demand, and trade dynamics that compressed export volumes. These pressures were especially acute in export-reliant markets like California almonds, where a multi-year supply boom intersected with diminished international buying.

At the same time, producers continued to grapple with elevated input costs. While some categories—such as fertilizer—have begun to normalize, others like labor and fuel remain persistently high, as outlined in the USDA’s February 2025 Farm Sector Income Forecast. For many farms, this combination of weaker revenue and elevated costs reduced net operating income and, in turn, dampened asset-level appreciation.

Weather also played a role. Late frosts, early heatwaves and irregular precipitation patterns affected yields in key growing regions, introducing another layer of variability into the 2024 financial results. In parallel, rising interest rates applied downward pressure to asset valuations in select markets, particularly where properties had been acquired with leverage or where capitalization rates expanded in line with broader credit conditions.

In aggregate, these pressures created a challenging—but not unprecedented—environment for farmland investors. Crucially, many of these dynamics reflect cyclical conditions rather than structural weakness.

Historical Context and Comparisons

Contextualizing recent performance requires zooming out. Over the past 30 years, U.S. farmland has delivered positive total returns in 28 out of 30 calendar years, with average annual volatility significantly below that of public equities or REITs. The NCREIF Farmland Index has historically shown annualized volatility of 6.82%, a stark contrast to the 17.59% for U.S. stocks and 18.77% for public REITs^[5].

While farmland’s appreciation component softened in 2024, the underlying income streams remained resilient^[6]. That dynamic distinguishes farmland from more sentiment-driven asset classes, where total return often hinges on capital gains alone. Income-generating lease structures, crop-share agreements, and direct operating partnerships helped many farmland investments maintain positive cash flow^[7], even in the face of valuation adjustments.

According to USDA forecasts, inflation-adjusted U.S. net farm income is forecast to increase by $37.8 billion (26.4%) to $180.1 billion in 2025 —driven in part by input cost stabilization and forecasted improvements in cash receipts for select crops. While not all farms will benefit equally, the shift suggests that the worst of the recent pressure may be behind us.

What This Means for Long-Term Investors

Periods like this have historically proven constructive entry points, as investors gained exposure at lower valuations while income streams remained intact. Periods of underperformance, while uncomfortable, are part of any long-term investment strategy. What differentiates farmland is the nature of its risk exposure. Unlike equities, which respond to capital market sentiment, or REITs, which are sensitive to public market liquidity, farmland is underpinned by biological productivity, land scarcity, and consistent consumer demand for food and fiber.

Its value is driven not just by financial cycles but by physical yield and long-term supply constraints. The United States continues to lose arable farmland each year due to development, water scarcity, and climate pressure. Against this backdrop, productive land with water access and proximity to infrastructure remains a finite and increasingly valuable resource.

Importantly, moments like this—when valuations are soft and sentiment is muted—have historically been constructive entry points for long-term investors (see how farmland performed in prior recessions). Farmland is a slow-moving, illiquid market, which means it tends to lag both on the way up and on the way down. As such, periods of temporary pricing pressure can create opportunities for disciplined capital to enter at more favorable basis levels. For buyers with a multi-year horizon, acquiring assets when income remains intact but valuations are under pressure may offer a compelling risk-adjusted profile.

Farmland’s historical role as a store of value and income generator is particularly relevant in portfolios focused on capital preservation. While it may not offer the explosive growth potential of venture capital or public tech stocks, its stability, income profile, and low correlation to traditional assets make it a powerful diversifier—especially in uncertain macroeconomic environments.

A Disciplined Approach to a Long-Term Asset

At FarmTogether, our underwriting philosophy is built around these long-term fundamentals. We prioritize conservative structuring, focus on markets and operators with proven performance, and avoid overexposure to commodity-specific volatility. In challenging periods, that discipline becomes even more important—not just for portfolio stability, but for reinforcing investor trust.

Looking ahead, we believe the farmland investment thesis remains intact. In fact, recent underperformance may offer a reminder of why real assets matter: they don’t move in lockstep with the market, and they offer exposure to value rooted in utility, scarcity, and income—not hype.

Want to learn more?

For additional detail, explore our Recession Performance White Paper or review the Sustainable Farmland Fund, our diversified vehicle designed for long-term income and capital preservation.