California farmland values, buttressed by low interest rates and stronger outlooks for nut crops, wine grapes, and cotton, were generally steady with some modest increases during 2003.
Mark Clarke of Santa Maria and Tony Corriea of Fresno, both members of the California Chapter of the American Society of Farm Managers and Rural Appraisers (ASFMRA), offered profiles of the past year's sales and leases of agricultural properties.
They spoke during the chapter's Spring Outlook Conference held in Visalia. A committee of chapter members spent five months compiling data from sales throughout the state to reach conclusions presented.
Clarke, an investment banker, reported on sales trends for coastal areas, Southern California, and the Imperial Valley, and he noted that his and Correia's comments were not to be taken as a forecast of values.
“In general,” he said, “land values across California did not change significantly” from 2002. One exception was continued erosion in vineyard values for many counties.
The once soaring values in the Napa Valley, however, continued stable. Values for vineyards on resistant rootstock peaked in 2000 in the range of $50,000 to $180,000 per acre and sales activity in 2003 was virtually nil.
The link between value of farmland and the income it produces “is being stretched very thin,” he said.
Among other influences, Clarke added, a weak U.S. dollar against other world currencies has been a boon to California farm exports while it increased the costs of imported products.
Land value drivers
Water issues continue to drive land values, and population and economic growth override declining fundamentals in agricultural production.
“But we have good news too. Never underestimate the value of cheap money,” he said, citing attractive interest rates for residential, commercial, and agricultural properties.
Nut crops, he continued, are in good shape and earlier fears about the almond industry's ability to find markets for billion-pound crops have been calmed.
The outlook for wine grapes is improving, although Clarke said the economic fundamentals, particularly demand, have been slow to respond.
“And even cotton is looking up with improved prices and more acreage being planted.” On the other hand, scant improvement has surfaced for other crops, particularly raisins, several types of citrus, and older varieties of tree fruit produced by smaller operators in the wrong locations.
In a sampling of 2003 values regions covered by Clarke, Monterey County row-crop land was stable with values of $10,000 to $38,000 per acre with a rent range of $800 to $2,400 in an increasing trend.
Land for the same use in Ventura County was valued in the range of $32,000 to $53,000 with an increasing trend, while rents there were $1,300 to $3,300 and also trending upward.
Value of dairy facilities in the Chino-Pomona area reached an astounding $250,000 per acre in 2003.
“The next use of these properties,” Clark said, “will be for subdivisions and not dairies,” and he expects the shift to complete urbanization there will be accomplished in the next 10 to 15 years. Dairymen are consequently cashing in and relocating to the San Joaquin Valley.
Fortunes are improving for strawberries and avocados in coastal counties, and offerings of good quality land vanished there in the first quarter of 2004.
Turning to the Central Valley, appraiser Correia said if the $17 billion agricultural production there were of a nation, it would be the world's fifth largest ag economy.
Most values there have held and some have increased, although they are driven by market demand, which is not necessarily tied to the income-producing potential of the properties.
That may be partially because of the emergence of inflation in the U.S. economy and partially because investors, repulsed by cases of corporate malfeasance, are shifting their attention away from stocks and other traditional investments.
“Given this ‘hot’ market,” he explained, a lot of potential sellers are remaining on the sidelines, waiting to see how high the market will go with more buyers than sellers.
He credited the almond industry situated in valley counties with marketing billion-pound crops while sustaining rising prices. He said handlers now know that such crops can be moved and fears of overproduction are somewhat abated.
“Roughly, up and down the valley,” Correia said, “the value of an acre of almonds was about $7,000 to $8,000 in 2003, but in Stanislaus and San Joaquin counties, people who want to live out in the country have driven some of those values up to $16,000 an acre. So, today I don't know where you could buy a young, high- producing almond orchard for $8,000 an acre.”
Correia said the consolidation of the wine industry was continuing and dramatized with the escalating bidding for ownership of Golden State Vintners, which includes several wineries and 9,000 acres of vineyards.
The wine industry is in the midst of another cycle but this time it is heavily influenced by heightened demand for grape concentrate.
“We are also seeing tremendous consolidation in the concentrate industry and that will have direct impact on Central Valley grape growers,” he said.
French Colombard and Chenin Blanc, casualties in the grafting and plantings of Cabernet, Chardonnay, and Merlot during the nineties, are now in demand as sources of white concentrate.
He added that some observers are predicting an upswing in wine grape planting across the state, even as Central Valley acreage, largely Thompson Seedless, is being removed. As the raisin industry seeks balance and economic viability, raisin vineyards in many cases are valued at little more than open land.
Open land with district water in Fresno County, valued at $5,000 an acre in 2003, somewhat below levels of recent years, is attractive to buyers interested in planting permanent crops, he said.
Such land, where water exchanges are available, is holding value and, in some cases, appreciating, all based on the assumption, Correia added, of potential for obtaining water supplies for soils that will carry high production of almonds.
Demand by dairymen needing surrounding acreage for effluent management and by commercial developers is supporting farmland values in the southern part of the SJV.
Family farms with tree fruit around northern Tulare County, he said, have had difficult times in the face of retail consolidation and that has caused some downward pressure on values of small parcels of tree fruit. Properties valued at about $9,000 an acre since the mid-90s slipped to around $8,000 in 2003.
Copies of the ASFMRA chapter's report, 2004 Trends in Agricultural Land and Lease Values, which carries data and analyses, by region, for California, are priced at $10 each and available by contacting the chapter office, telephone (209) 368-3672 or www.calasfmra.com.