The reality of a six-year-old state law aimed at protecting aquifer levels is now starting to be reflected in farmland values as areas with access to minimal or single-sources of water continue to lose value relative to other areas.

The annual Trends Report by the California Chapter of the American Society of Farm Managers and Rural Appraisers reveals that in 2019, farmland values rose or held steady for the most part in popular crops like almonds, though the price traded for these orchards closed in respect to other regions.

The report also suggests that there seems to be no limit on what people will pay for premium vineyards in Napa Valley as the new ceiling there rose to $450,000 per acre, while nearby Sonoma County values remained flat at about half that price.

Nuts

It's no secret that almonds remain the more popular crop in California with over 1 million acres of producing trees planted. Relatively stable prices with profitable margins and successful global marketing efforts make it one of California's top crops.

Even so, there has long been a disparity in the value of almond orchards traded from north to south, and within those blocks that produce better than others.

In the northern San Joaquin Valley, including Stanislaus and San Joaquin counties, almond orchard values lead the state by as much as $5,000 per acre over other regions. While this gap closed significantly from 2013 to 2015, it widened somewhat over the next two years, but narrowed a bit in 2019.

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At the other end of the spectrum, almond orchards across the Sacramento Valley traditionally sell for lower prices than elsewhere in the state because yields there tend to trail the rest of the state's growing region. In 2019 the top price paid per acre for an almond orchard across the state ranged from about $32,000 in the Sacramento Valley, up $2,000 from the previous year, to $40,000 in the northern San Joaquin Valley.

Among the four regions – north, central, south San Joaquin Valley and the Sacramento Valley – the biggest change year-over-year was seen in the south as the highest price commanded for an almond orchard there rose $4,000 per acre compared to the previous year.

Janie Gatzman, co-chair of the annual trends report, and a rural appraiser from the Oakdale area – her family is a long-time almond grower and handler in the north Valley – said there were little surprises from the report. Commodity prices and economic factors aside, the biggest news out of the report this year is the realization that future water availability is becoming clearer. Researchers now predict significant losses in farmland and financial capital will come as the State Groundwater Management Act is implemented.

Along with a narrowing of almond orchard values, Gatzman says land values at the low end of the spectrum continue to drive overall orchard values much more than the well-managed, higher-producing orchards, she said.

Investor groups remain actively engaged in almond orchard purchases and tend to be "savvy when it comes to understanding water availability and those risks," she continued.

Perhaps of more current concern to the almond industry is an issue not related to land values. Commodity prices, while still profitable and largely stable, may become a concern as the final numbers on last year's crop have now surpassed the 2.5-billion-pound mark. Those numbers are still being tallied as appearances suggest high production out of the 2020 crop.

Land values planted into pistachios ranged from $30,000 to $41,000 per acre in the southern San Joaquin Valley in 2019, up slightly from the previous year. Values in the central portion of the Valley remained unchanged at $17,000-$36,000 per acre. This year's U.S. pistachio crop, of which over 98% comes from California, is projected to surpass 1 billion pounds of production for the first time ever.

As for walnut orchard values, prices that peaked in 2014 and 2015 were down in all areas in 2019 as grower returns shriveled. Northern San Joaquin Valley orchards (those in Stanislaus and San Joaquin counties) still command the highest prices, with the top price paid at $40,000 per acre, down $2,000 an acre from the previous year.

Vineyards

While grape acreage across the state continues to fall significantly due largely to market conditions, two regions – Napa Valley and Temecula – recorded increases.

After remaining unchanged for three years, Temecula vineyard sales exceeded $100,000 at the top end for the first time with the top vineyards selling for nearly $140,000 an acre.

Still, Napa continues to be in a world all to its own as prime vineyard properties last year traded at or above $400,000 with a growing value range among secondary vineyards at $160,000-$400,000. Napa still owns the ceiling for the highest valued vineyard at $450,000 an acre.

At least part of the price runup in certain regions stems from winery decisions to better control their supply of grapes, Gatzman says. This works on both a quality and quantity basis.

Napa's neighboring county of Sonoma remains solidly in second place in the vineyard values race. Prime vineyard ground there traded from $100,000 to over $200,000 an acre last year with secondary properties commanding a narrower gap between $75,000 and $100,000. Vineyard values elsewhere on the North Coast were largely unchanged from the previous year.

Central Coast vineyard values – Monterey, San Luis Obispo and Santa Barbara counties – remained stable for the second year in a row, ranging from $25,000-$75,000.

San Joaquin Valley vineyard values with dual water sources ranged from $22,000-$36,000 per acre last year on a declining value trend. Ian LeMay, president of the California Fresh Fruit Association, said two significant consolidations last year signaled a push in one instance to remove vines altogether and plant citrus, and another to focus on new, higher producing table grape varieties as that industry struggles with fruit quality and trade challenges.

Fruit

If there was one outlier in all this stability last year, Tulare County fruit orchard prices led the way.

Though lumped into one large category, citrus sales were a large part of this, according to Gatzman. Still, stone fruit orchards saw a precipitous sales uptick as well. Strengthening was also seen in Ventura County lemon grove values.

Tulare County citrus groves that in 2018 traded for between $14,000 and $25,500 an acre saw their values jump to $21,000-$40,000. Other tree fruit likewise saw a rise in range from $17,500-$23,500 in 2018 to between $25,000 and $30,000 an acre. Olives likewise saw a significant increase, topping out at $28,000 an acre, a $7,000 increase from the previous year's top sales price.

Gatzman says water availability in the region is largely credited with buyer interest as new groundwater sustainability reports were released, showing at least some clarity in water availability as the state wrestles with its ability to better manage its aquifers.

Elsewhere in the state, prices for avocado groves were unchanged last year. Coachella Valley table grape values were likewise unchanged while date values were up slightly in the region.

Water

The realization of the Sustainable Groundwater Management Act is beginning to drive land values in the San Joaquin Valley. Similarly, changes in local water management on the Central Coast is affecting land prices in the Paso Robles area as new definitions are established for those with "vested" and "non-vested" water sources. Basically, those with "vested" groundwater resources have higher land values than those who do not. In 2019 those values ranged from $12,000-$20,000 for vested arable land to $5,000-$10,000 for "non-vested" land. "Non-vested" means land that will need to augment its groundwater pumping through other means.

As a result, the availability of good water on a predictable basis is driving up underlying land values in places where a combination of surface and well water can be demonstrated and documented. Gatzman expects to see similar economic impact in areas like the Sacramento Valley once the groundwater sustainability plans for districts in that area are made public in the coming years.

This year's annual Trends Report is available for purchase in hard or electronic copy. To purchase those at $25 for the .pdf version or $30 for the hard copy, visit http://www.calasfmra.com/.