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.

Current

April 2019, Natural Resource Flash Report: Canada and China Clash over Canola Trade

In March 2019, China rescinded the export licenses of the two largest Canadian canola companies, Richardson International and Viterra, to ship canola to China, citing non-compliance with plant health requirements. These two companies own four of the fourteen major canola crushing facilities in Canada. China also intensified its inspection measures and standards for canola seed imports from Canada, and intends to import far less product from Canada, according to Chinese Agriculture Ministry officials.

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February 2019, NCREIF Farmland Returns Improve in 2018 After Bottoming Out in 2017

U.S. farmland properties returned 6.7 percent in 2018 (55 bps above 2017). This marked the first improvement in annual returns after four consecutive years of declines. Annual cropland properties returned 5.9 percent in 2018 (117 bps above 2017), and permanent crop properties returned 8.2 percent (9 bps above 2017). In 2018, institutional farmland investment (as reported by NCREIF) grew in terms of both the number of properties and value.

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January 2019, Natural Resource Flash Report

Impact of Shutdown on Timberland and Farmland
Timberland
We believe the extended federal government shutdown will be very limited in meaningful, direct impacts on the U.S. timber or forest products sectors. On the supply side, timber harvests on U.S. federal forests have not been a significant or consistent source of raw material to producers of lumber, wood panels or pulp since the early 1990s. In addition, restricted federal services are not likely to result in major impediments to the production or transport and sale of timber and forest products domestically, since most of the regulatory governance of the timber and forest products industries is at the state and local level, with limited oversight by the federal government. The federal government does have a significant role in funding forest fire control efforts (primarily in the western U.S.), but this will probably not be a major concern given the timing of the shutdown in the winter, when fire risk is near zero.

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January 2019, Hancock Farmland Research Brief: Total Trade Mitigation Payments Announced Reach $9.6 billion: Implications for Agriculture and Farmland Investments

On December 17, 2018, President Trump announced the second round of financial aid to U.S. farmers most impacted by the retaliatory tariffs on U.S. agricultural products imposed by major U.S. trading partners in 2018. The Market Facilitation Program (MFP) payments will be distributed by the USDA Farm Service Agency in early 2019, with the USDA estimating that payments will total $4.8 billion for this round, on top of the $4.8 billion sent to farmers in fall 2018. The impact of this additional trade mitigation payment to farmers is most material to producers of soybeans, grain sorghum, cotton, hogs and sweet cherries. Regionally, farmers in the Midwest will receive the vast majority of the aid.

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December 2018, Hancock Farmland Investor, The U.S. Farm Economy

The USDA Farm Income and Wealth Statistics report released 11/30/2018 projected a 12% decline in 2018 net farm income, partially reversing the gains realized in 2017. Rising costs and relatively flat cash receipts were the key factors driving the reversal in the direction of net farm income. The largest single component in rising production costs was an 18% rise in interest expenses, driven by increased debt levels combined with higher interest rates. Increased government payments moderated the overall drop in farm income, increasing 18% to $14 billion. In addition, the farm sector debt-to-equity ratio is on track to move higher in 2018, rising from 15.1% in 2017 to 15.6%, driven largely by increasing real estate debt.

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Hancock Farmland Research Brief: United States-Mexico-Canada Agreement

On September 30, terms of a comprehensive trade agreement among the US, Mexico and Canada were finalized. The new United States-Mexico-Canada Agreement (USMCA) culminates an extended year-long period of negotiations to update the North American Trade Agreement (NAFTA). The new agreement retains many of the core elements and structure of NAFTA, with the most prominent changes focused on: trade in cars, new policies on labor and environmental standards, intellectual property protections, and some digital trade provisions. The most impactful changes for the farm sector in the new agreement were the expansion of US access to Canadian dairy and poultry markets, and an equalization in terms of trade for grains between Canada and the US. The agreement is targeted to be signed by the three participating countries before the end of November, possibly at the G20 summit in Buenos Aires, Argentina, and all three countries would then still need to ratify the agreement. Congress will probably not address ratification until 2019, after the mid-term elections, and since the approval process will take time, most of the new USMCA provisions won’t go into effect until 2020.

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September 2018, Hancock Farmland Investor: The Investable Farmland Universe: 172 Million Hectares, Valued at $1.5 Trillion

Understanding the overall size, structure and geographic distribution of global farmland suitable for institutional investors is necessary information for the evaluation of how various farmland investments fit in an overall portfolio of investments. The Hancock Natural Resource Group (HNRG) conducted an inventory of global investable farmland, quantifying the value of regional investable farmland to be $1.5 trillion as of May 2018. For the U.S., the available data allowed a more granular analysis which broke out and quantified the area and value for row and permanent crops.

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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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