Breaking Down the 2024 NCREIF Farmland Performance: Key Insights and Trends

The National Council of Real Estate Investment Fiduciaries (NCREIF) has released its 2024 Farmland Index (NFI) report, providing a comprehensive overview of the performance of institutional farmland investments in the United States. The latest data highlights key trends in returns, regional variations, and crop-specific performance, shedding light on the broader market dynamics shaping farmland as an asset class.

Overview of the NCREIF Farmland Index

The NCREIF Farmland Index is a quarterly composite that measures the investment performance of a vast pool of individual farmland properties acquired in the private market for investment purposes. As of the fourth quarter (Q4) of 2024^[1], the NFI encompassed 1,023 properties with a total market value of $16.1 billion.

This portfolio is divided into $9.73 billion (~61%) in annual cropland and $6.33 billion (~39%) in permanent cropland. The properties are primarily held on behalf of tax-exempt institutional investors, such as pension funds, ensuring they are managed within a fiduciary framework.

Annual Performance Highlights

In 2024, the NFI reported a total return of -1.03%, composed of 2.49% income and -3.46% appreciation. This marks the first negative annual return in the index’s history. However, it is crucial to recognize that farmland’s long-term trajectory remains intact. Market fluctuations and periodic downturns are part of the investment cycle, but historical data suggests farmland continues to appreciate over time.

Historical Context and Long-Term Performance

Farmland’s resilience as an asset class is evident in its historical returns. Since 1992, the NCREIF Farmland Index has averaged an annual return of 10.15%, demonstrating stability even during broader economic downturns.

Asset Class Performance (1992-2024)^[2]

Despite 2024’s downturn, the long-term fundamentals that drive farmland appreciation remain intact. Supply constraints, rising global food demand, and its inflation-hedging characteristics all contribute to its enduring value. Market corrections like this can present opportunities for investors looking to enter the asset class at a favorable valuation before returns rebound.

Farmland’s strong performance over the past three decades is underpinned by fundamental drivers such as increasing food demand, limited arable land, and its ability to act as a hedge against inflation—characteristics that distinguish it from equities, bonds, and real estate. These factors contribute to its long-term investment appeal:

• Limited Supply: The amount of arable land is finite, and urban expansion continues to reduce available farmland. This scarcity supports long-term land value appreciation.
• Growing Food Demand: As the global population increases, so does the demand for food, boosting farmland’s long-term profitability.
• Inflation Protection: Farmland’s correlation to inflation allows it to maintain value even in times of economic uncertainty, as commodity prices and rental income tend to rise alongside inflation.
• Resilience to Market Shocks: Unlike equities or bonds, farmland has historically been less susceptible to market crashes, making it a valuable diversification tool for portfolios.

Given these strong underlying fundamentals, farmland should be evaluated through a long-term lens rather than focusing solely on year-over-year fluctuations. These long-term fundamentals also influence the performance of different farmland sub-sectors, particularly in how annual and permanent croplands respond to market fluctuations.

Annual vs. Permanent Cropland Performance

The NFI distinguishes between two primary categories of farmland: annual cropland and permanent cropland.

• Annual Cropland: This category includes properties used for crops that are planted and harvested within a single year, such as grains and vegetables. In 2024, annual cropland demonstrated resilience with a rolling four-quarter total return of 5.66%. This performance was driven by an income of 3.02% and appreciation of 2.58%. The stability in income returns reflects consistent demand and favorable pricing for staple crops.
• Permanent Cropland: This category includes orchards and vineyards producing perennial crops such as almonds, citrus, wine grapes, pistachios, and apples. While permanent cropland faced significant headwinds in 2024, posting a rolling four-quarter total return of -10.18%, its long-term track record remains strong. Historically, permanent crops have delivered an average total return of 9.89%, with 1.46% appreciation and 8.46% income. Despite recent fluctuations, permanent crops continue to benefit from durable demand, rising global food consumption, and premium pricing in specialty markets, underscoring their long-term investment appeal.

Given farmland’s historical performance and the rarity of negative years, today’s market conditions may present a strategic opportunity for investors seeking long-term exposure. Periods of temporary weakness have often been followed by renewed growth, reinforcing farmland’s resilience as values stabilize and appreciation trends resume.

As illustrated below, index values have consistently trended upward since 1991, with the recent downturn representing a rare anomaly in an otherwise strong long-term growth trajectory.

Farmland Index Values (1992-2024)^[3]:

Commodity-Specific Insights

A deeper dive into specific permanent crop commodities reveals varying performance trends:

• Almonds: Representing 16.5% of the permanent cropland sub-index, almonds posted a -16.4% return, largely due to oversupply and water cost challenges. However, long-term demand remains strong, with global consumption trends favoring health-conscious foods.
• Apples: Representing 9.4% of the permanent crop sub-index, this category recorded a -5.8% return, reflecting market adjustments despite steady consumer interest in premium varieties. While short-term volatility exists, continued investment in innovative production methodologies and storage technology is expected to support pricing resilience.
• Citrus: Citrus crops posted a -2.10% return in 2024, impacted by market pressures and shifting export conditions. Representing approximately 3.4% of the permanent cropland sub-index, lemons remain a key contributor, while the rising popularity of specialty citrus varieties like mandarins has provided additional support. Long-term investments in disease-resistant varieties and improved irrigation practices remain essential for stabilizing performance.
• Pistachios: Pistachios posted a -16.47% return, reflecting short-term volatility. However, expanding consumption in China and Europe signals a positive long-term outlook. Representing 16.5% of the permanent cropland sub-index, ongoing investments in mechanization and efficiency enhancements are expected to bolster resilience in this category.
• Walnuts: Walnuts, newly categorized as a standalone asset in Q3 2024 and representing approximately 4.2% of the permanent cropland sub-index, posted a Q4 return of -10.97%, reflecting temporary production shifts. Despite weather-related challenges, strong global demand continues to support long-term stability.
• Wine Grapes: Wine grapes posted a total return of -8.9%, reflecting market recalibrations while maintaining resilience in the premium and luxury wine sectors. Accounting for 34.5% of the permanent cropland sub-index, ongoing investments in advanced vineyard management practices and expanded export channels are helping to mitigate challenges and support long-term stability.

A breakdown of key row crops in 2024 highlights strong returns in staple commodities:

• Corn/Soybeans & Cotton/Soybeans: Accounting for roughly 70% of the annual cropland sub-index, corn and soybeans delivered a 3.87% YTD return, while cotton and soybeans outperformed with an 8.46% YTD return. Strong cotton prices contributed to this gain, while corn prices remained resilient due to ethanol demand and exports. Meanwhile, soybean markets navigated shifting biodiesel policies and global competition.
• Wheat: Posting a 6.17% return and representing 2.0% of the annual cropland sub-index, wheat benefited from global food security concerns and trade shifts. Its long-term outlook remains favorable with continued demand growth and drought-resistant crop innovations.

Regional Performance Analysis

The geographical distribution of farmland investments plays a crucial role in performance outcomes. The NFI's assets are predominantly located in the Pacific West (~38%), Delta States (~20%), and Corn Belt (~11%) regions, collectively accounting for ~69% of the index.

• Pacific West: Housing the largest share of the NFI's market value, the Pacific West experienced a total return of -9.94% over the past four quarters. This underperformance is largely due to challenges in the permanent cropland sector, especially within the almond industry. The almond market has faced short-term pressures from oversupply, fluctuating export demand, and increased water costs. However, industry advancements in sustainable water management, evolving trade policies, and strong long-term consumer demand for almonds continue to support recovery and future growth. For long-term investors, these temporary setbacks may represent an opportunity to acquire high-value permanent cropland assets at more favorable pricing before conditions improve.
• Delta States and Corn Belt: These regions, primarily focused on annual cropland, reported total returns of 6.60% and 1.71% in 2024. Favorable climatic conditions and relatively strong commodity prices for staple crops like corn and soybeans contributed to this positive performance. Additionally, increasing adoption of precision agriculture, advancements in seed technology, and strong export demand for grains have further supported profitability in these regions. The resilience of annual cropland in these areas underscores its ability to adapt to market conditions and remain a critical component of farmland investment portfolios.

Management Structures and Their Impact

The NFI also differentiates between management structures: directly operated versus leased properties.

• Directly Operated Permanent Cropland: Valued at $4.6 billion (~29% of the NFI), these properties are managed by the owners or their agents who assume 100% of the production risk. In 2024, directly operated permanent crops underperformed, primarily due to market challenges in the tree nut sector as mentioned above.
• Leased Permanent Cropland: Accounting for $1.7 billion (~11% of the NFI), these properties are leased to third-party operators. Interestingly, leased permanent cropland outperformed directly operated ones by 6.25% over the past four quarters. This outperformance is attributed to fixed lease agreements that insulated owners from market volatility affecting certain commodities.

Looking Ahead

The 2024 NCREIF Farmland Index highlights a rare negative year for the sector, but historical performance indicates these downturns have been infrequent and temporary. The fundamentals underpinning farmland investment—scarcity of arable land, increasing food demand, and inflation-hedging properties—remain intact.

For investors focused on long-term wealth preservation and growth, the current farmland market presents an attractive entry point. With historically strong performance, low volatility, and compelling risk-adjusted returns, farmland continues to serve as a strategic asset class capable of delivering value appreciation and stable income generation over time. The resilience of the sector suggests that today’s market fluctuations may offer opportunities to position portfolios for future gains as farmland values stabilize and long-term appreciation trends resume.

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