Research

In-House Research Leads to Investment Success

Research plays a crucial role in all phases of our investment process from acquisitions to property management to dispositions. Our research publications are used to educate potential investors, while keeping our current clients informed of topics relevant to their portfolio.

All of our in-house research publications are accessible to the public.

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August 2018, Hancock Farmland Research Note: Tariffs and Their Impact on US Agricultural Trade

In recent months, trade with China, Canada, Mexico and the EU has been a dominant and recurring story in the mainstream media. The Trump Administration has identified trade imbalances as a key component of their agenda, with notable frustrations around NAFTA, China and the EU. At various points, certain products with these trade partners have become flashpoints for public comments and threats from all sides. The Trump Administration has announced and implemented certain trade measures designed to weaken Chinese and Mexican competitiveness in a variety of import markets, particularly the steel and aluminum industries. In turn, China and Mexico have imposed tariffs or other restrictions on US products, including agricultural products. Mexico and China represent the US’ second and fourth largest trade agricultural trade partners, responsible for around 28% of the value of US agricultural exports1, on average, over the past five years. Any restrictions on US access to the Chinese and Mexican markets will have impacts on US farmland markets. This document identifies the agricultural commodities most at risk, and outlines Hancock Agricultural Investment Group’s (HAIG’s) view on the possible outcomes.

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May 2018, Hancock Farmland Investor: 2018 USDA Prospective Plantings Report: Corn and Soybean Acreage Down and Wheat, Cotton and Rice Up

Cotton, Rice and Wheat Expected to be Favored over Corn and Soybeans Due to Profitability in 2017
Farmers tend to make planting decisions based on the profitability of the previous year’s crop and market expectations headed into the upcoming crop year.
Rice up 230,000 acres (+9.3%)
Cotton up 860,000 acres (+6.8%)
Wheat up 1.33 million acres (+2.9%)
Soybean down 1.16 million acres (-1.3%)
Corn down 2.14 million acres (-2.4%)

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April 2018, Hancock Farmland Research Brief: Update on Potential Tariff Impacts of U.S. Agriculture

In recent weeks, trade with China has been a dominant story in the mainstream media. President Trump has long identified trade imbalances as a key component of his agenda, with notable frustrations around the North American Free Trade Agreement as well as trade relations with China, South Korea and the European Union. While NAFTA is actively being discussed, President Trump recently announced certain trade measures designed to weaken Chinese competitiveness in a variety of import markets, particularly the steel and aluminum industries. In turn, China has threatened to impose tariffs or other restrictions on US products, which could include agricultural products. China is the largest export market for US agricultural products, and is responsible for an average of 23% of US agricultural exports over the last five years. Anything that restricted access to the Chinese markets would likely be felt in the US farmland market. This document identifies the commodities most at risk, and outlines HAIG’s view as to the impact on the farmland market generally and our client portfolios more specifically.

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2017 Q4 Hancock Farmland Investor: 2017 U.S. Farmland Investment Performance

U.S. farmland properties returned 6.2 percent in 2017, 90 bps below 2016 returns, continuing the downward correction that began in 2014. U.S. Annual cropland properties returned 4.75 percent in 2017 (4 bps above 2016 levels) while permanent crop properties returned 8.14 percent (199 bps below 2016).

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2017 Q3 Hancock Farmland Investor, U.S. Farm Economy

U.S. farm sector profitability is expected to improve in 2017 for the first time in four years. USDA forecasts net cash income for 2017 at $96.9 billion (up 3.9% from 2016), while net farm income is forecasted at $63.2 billion (up 2.7% from 2016). Meanwhile, the farm sector debt-to-equity ratio is expected to move slightly upward from 14.49 in 2016 to 14.52 in 2017, largely driven by an increase in real estate debt.

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Hancock Farmland Research Brief, 2017 Tax Reform: Implications for Agriculture and Farmland Investments

The potential impacts for U.S. farmland owners of the federal tax reform signed into law at the end of 2017 should, in general, be favorable. The reduction in the corporate and individual tax rates is likely to lead to more disposable income for U.S. consumers and businesses to spend on food and agricultural products, increasing domestic demand, and potentially leading to rising prices. However, the tax bill is likely to lead to higher domestic inflation, which could place pressure on the Fed to increase interest rates at a faster clip. This could have the impact of strengthening the USD versus other agricultural producing countries’ currencies, which would impact U.S. exports negatively. Overall, the boost in domestic demand is likely to outpace the reduction of U.S. competitiveness in the export market, and the U.S. farmland market is likely to benefit from tax reform, at least in the short term.

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November 2017, Hancock Farmland Research Brief: The Risk of Catastrophic Loss on Farmland Can Be Mitigated by Active Management and Portfolio Diversification

In 2017, farmland properties in Texas, Florida, and California experienced significant casualty loss from hurricanes and fires. In Texas and Florida, Hurricane Harvey and Hurricane Irma were accompanied by high winds, torrential downpours, and catastrophic flooding during harvest season. In California, unusually severe fires in Napa and Sonoma counties destroyed numerous acres of farmland. This research brief examines the impacts of these catastrophic event on a global farmland portfolio and discusses strategies to mitigate the risk of casualty losses.

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2017 Q2 Hancock Farmland Investor, Optimized Diversification in Farmland Portfolios Can Produce Higher Returns and Lower Risk

Based on the historical performance of eight crop types in the NCREIF Farmland Index, we demonstrated how farmland portfolios can be optimized to most efficiently deliver targeted expected returns or targeted levels of expected risk. Farmland portfolios often contain a mix of crop types. Some properties produce annual row crops such as corn, soybeans, rice, cotton, and wheat. Other properties are comprised of orchards and vineyards that produce so-called permanent crops such as almonds, pistachios, walnuts, and wine grapes. Optimal diversification among these different crop types can be used to design portfolios that deliver the highest
expected returns for a targeted level of expected risk, or the lowest expected risk for a targeted expected return.

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2017 Q1, Hancock Farmland Investor, 2017 USDA Prospective Plantings Report: Corn and Wheat Acreage Shifts to Soybeans and Cotton

Cotton acreage up 2.1 million acres (20.8%)
Soybean acreage up 6.1 million acres (7.3%)
Corn acreage down 4 million acres (-4.3%)
Wheat acreage down 4.1 million acres (-8.2%)
Rice acreage down 0.5 million acres (-16.5%)

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