Overview
Our farm partner finished the year strong with net returns of 1.83% for the fourth quarter and 6.12% for the year. Since inception in December 2007, it has generated annualized net returns of 10.3%. The Fund has assets of $843.4 million at year-end consisting of 430 farms with 132,206 acres and an average market value of $5,610 per total acre. Their fund continues to identify and purchase farmland throughout their core Midwest region at attractive income and valuation levels.
The biggest event of the quarter was the final agreement on the Phase I Trade Agreement with China that was signed on January 15. In the Agreement, China pledged to purchase an additional $32 billion of U.S. agricultural products over two years. Exports to China in 2020 and 2021 are therefore targeted at $36.5 billion and $43.5 billion per year, respectively. To achieve these sales targets, China will have to increase its purchases of U.S. pork, beef and poultry, as well as direct grain purchases of soybeans, corn and wheat. Therefore, American farmers will benefit significantly from expanded sales are projected to experience a material increase in farm income.
Fourth Quarter Update
During the fourth quarter, the portfolio management team evaluated 153 properties and contracted to purchase 10 farms, totaling 2,128 acres, for $11.2 million or $5,270 per acre. Our partner will generate current farm income on these properties of 5.39% with flex leases in place to increase that return as commodity prices increase. In addition, some of these farms offer opportunities to generate additional revenue from non-farm sources such as timber, minerals, recreation and solar development.
Looking Ahead: Acquisition Pipeline
The acquisition pipeline is robust as we enter 2020. The portfolio management team is currently evaluating over $60 million in private transactions as well as 40 auctions across six states where our partner currently owns farms, including several very attractive farms that are adjoining or near existing farm holdings. Many of these target acquisitions will provide the opportunity to do high-return, value-add projects that are aimed to grow crop yields, improve farming efficiency and increase overall investor return. We also expect to be presented with a significant amount of additional private deal flow in the first quarter for our evaluation.
Feel free to contact us with any questions regarding our farm partner!
