The Farmland Fund Delivers Stable, Positive Returns in 2015
Series 1 and 2 investors are invested in this farm partnership. Despite low commodity prices the investment continues to perform well. Below is an update from the farm managers.
The investment continued to deliver stable positive returns in 2015 with net returns of 0.53% for the fourth quarter and 3.74% for the year despite a tough commodity price environment. Since inception in December 2007, it has generated an annualized net return of 13.45%. There are 495 investors and assets of $460 million as of year-end. Property holdings consist of 227 farms with 73,038 acres and an average market value of $5,787 per total acre or $6,995 per tillable acre adjusting for irrigation equipment, buildings and timber. Prices for farmland in core Midwest markets have remained essentially flat over the past two years.
Commodity prices finished the year near their lows, and remain well below their projected long-term averages. We believe crop prices have bottomed and will slowly recover in 2016 as excess inventories from recent bumper crops are worked off. We expect more financing stress among farmers this year which we anticipate will generate farmland buying opportunities not seen for a decade as local farmers, our primary competitors for land, face depleted cash reserves and much stricter credit conditions.
While our goal is to generate positive absolute returns we also know that relative return / diversification is a key reason for many of you to invest in farmland. A well-respected wealth manager in Boston put together the analysis at the right which shows farmland (including permanent crops) outperforming all other asset classes during the year. So although the investments return in 2015 was lower than in past years, it was positive and exceeded the negative return of most other asset classes.