"The more efficient, horizontally or vertically integrated, farm operators are becoming larger and larger because many of their buyers are also consolidating," says Fresno appraiser Tony Correia.
Speaking in Visalia at the recent spring outlook forum of the California Chapter of the American Society of Farm Managers and Rural Appraisers, Correia reported on land and lease values in the San Joaquin and Sacramento Valleys.
Foremost in influencing land values in the San Joaquin Valley, he said, are dairies in contrast to a backdrop of poor returns for permanent and field crops.
Part of the expansion is from relocation of Southern California dairymen, bankrolled by liquidation of high-priced land. Others, long-settled in the SJV and formerly dependent on permanent crops, are expanding with efficient, state-of-the-art dairies.
Some moderation of expansion has occurred, however, because of the need for handling large volumes of dairy wastewater and the attendant permitting required.
Expanding population also drives land values as buyers seek small farm parcels, especially those closer to the Bay Area, as home sites. "We have more people and more of them want to live out in the country, and some permanent crops which offer a tax advantage are attractive," Correia said.
Almond land values
As an example of permanent crops, Madera County almond orchards in 2001’s upper range of $3,500 to $7,000 per acre, continued to slip from the peaks of $5,000 to $10,000 in 1998 and 1999.
Values for almond land are $5,000 to $8,000 in Fresno County, $5,000 to $8,000 in Kern County, and $8,000 to $12,500 in San Joaquin County, where population pressure is active.
Although the price of almonds is below $l per pound, Correia said, a 2,500- to 3,000-pound orchard can make money at 80 to 90 cents per pound. New orchards are going in on good soils and farmed with improved practices, while older orchards are being pulled.
Wine grape acreage values in Fresno County shrank to $4,000 to $6,000 in 2001, down from the $6,000 to $9,000 of two or three years earlier. Despite conversion to premium wine varieties, grape prices are down 61 percent in Fresno and Madera counties and down 75 percent in Kern County from peaks of 1996 and 1997.
As a result of wineries brimming with Chardonnay and Cabernet, demand for Thompson Seedless stalled, prompting growers to lay more raisins. That, in turn, depressed the raisin price to where grower returns were less than those of the mid-1980s.
Raisin vineyards, at as much as $11,000 an acres in 1989 and 1999, were at $5,000 to $6,000 at the end of 2001 and less today, Correia said. Exceptions, he added, are small parcels with potential for home sites or modern, dried-on-the-vine vineyards.
Irrigated values down
In Fresno County, irrigated land values, suffering from influences such as world cotton prices hardly more than the 35 cents of 1919, are $3,000 to about $5,500, down sharply from pinnacles of $12,000 two years ago.
Also subject to severe downturns is open, irrigated land for rice or tomatoes in the Sacramento Valley, where water shortages cast uncertainty over operations.
Restructuring of farm credit in the Sacramento Valley followed lower prices and higher production costs, and while this is a concern, it has not yet impacted land prices.
Reporting on coastal and southern parts of California, appraiser Mark Clarke of Santa Maria said there is a strong correlation between areas within 25 miles of the Pacific Ocean and land values.
"It’s nothing new, but anywhere in California you can grow commercial quantities of any two of the three crops of citrus, strawberries, or Pinot Noir grapes you’ll find the climate is where people want to live. That supports the highest land values in the state."
During the past two years, values in these areas have stabilized, he said. "However, we are seeing fewer sales to support these values. Normally, you’d want to see a number of sales to give confidence as to where values truly are."
Noting his concern for future values, he added that net income has flattened or has declined. "If this trend continues and the historical relationship between income and value remains, we could be reporting declines in land prices next year and, in some cases, significantly so."
The Central Coast vegetable industry, steeled by cycles of boom and bust, supports the highest land values in the nation, so it should be no surprise that some are looking to the inland valleys to the south.
A couple of Watsonville-based berry growers are experimenting with strawberries in the Coachella Valley in hopes of filling a market niche once belonging to San Diego and Orange counties.
A dramatic contrast in costs of irrigated land, Clarke said, is Imperial County’s land values of $5,000 and rents of $250 per acre and the Yuma area’s land for up to $16,000 and rents of $600 to $650.
"This is because produce growers want to be in the same place. They establish an infrastructure like they’ve done at Yuma and Huron."
Farmland around Salinas, valued at $20,000 to $39,000 with rents at $2,100 to $2,400, has seen few sales but values remain stable.
The south coastal communities of San Luis Obispo and Santa Barbara counties have a markedly different pricing pattern for land that produces the same crops and at the same time as Salinas. Prices are few and values remain firm.
Ventura County farmland is in a two-tiered system: the higher priced land at about $45,000 per acre and suitable for strawberries and the lower at about $30,000 for vegetables.
Rangeland in inland San Luis Obispo, at $600 to $700, he said, has a closer relationship of land values to agricultural production and the rents and income that might be achieved.
In wine grapes in Monterey County, sales are scant, and the range of $17,700 to $25,700 appears to be declining in the state’s third major cycle of the wine industry since 1970. Vineyard properties in the southern part of the county are for sale at considerably lower values. Clarke said indications are that contracts, crucial to insure an income stream, will figure prominently in the future value of Central Coast vineyards.
Land values on the North Coast, he added, "continue to defy gravity." Vineyards on resistant rootstock there have a range of $85,000 to $180,000, and a recent sale suggests underlying strength for top-quality vineyards.
However, he added, "At these values, the link between income and value becomes stretched pretty thin."
The ranges of land and lease values are gathered and presented annually by a committee of the California chapter. Fresno appraiser and committee chairman Gary Rudolf cautioned that the numbers represent a general market range and some sales or leases may be higher or lower than those listed. He recommended consulting on values for specific crops and locations with trained professionals