With at least one predictable exception, agricultural land values in California remained stable from 2017 to 2018, though the larger trend was generally one of decline as buyers were pickier than in years past.

Rural Appraiser Janie Gatzman, co-chair of the much-anticipated Trends in Agricultural Land and Lease Values report, says the annual accounting of real estate values from the California Chapter of the American Society of Farm Manager and Rural Appraisers (ASFMRA) contains few, if any surprises.

“I didn’t feel the doom-and-gloom that I felt in years past with this report,” she said.

While farm prices in key crops like almonds were flat from 2017 to 2018 in parts of the state, the trend in tree nuts over the past several years is down, in some cases significantly, with a few exceptions.

Mean almond orchard values in the San Joaquin Valley are down 13 percent to 25 percent from 2015 while similar orchards in the Sacramento Valley are up 14 percent over the same period. Still, the highest price for a Sacramento Valley almond orchard remains unchanged at $30,000 an acre since 2015. If anything, the trend there is up largely because the lowest sales price for orchards in the region is up from about $14,000 per acre in 2015 to $20,000 in 2017-2018.

Easily the largest crop in California by acreage, Gatzman is still optimistic about almond production in California as bearing acreage was recently announced at an all-time high of nearly 1.1 million acres. Grower prices in the sector continue to be relatively stable and profitable, she says.

Real estate values for almonds have softened since their peak in 2015. Investors converting farmland to almonds for a quick sale were not as active in 2018, according to the report. Still, peak prices for some orchards were up, which appraisers attribute to higher-quality orchards being offered for sale, particularly in the south Valley.

One outlier in the report – an almond orchard in Tulare County – sold for $35,000. This compares to $25,000 to $32,000 for good-quality orchards in the southern San Joaquin Valley. Three years earlier that range was $29,000-$40,000 in the same region.

Almond orchards in an eight-county region in the northern third of the San Joaquin Valley tend to be the highest in the state, and 2018 was no different. Sales of orchards with good water availability ranged from $25,000 to $40,000 an acre. While the top sales price remained unchanged from the previous year, the range tightened $5,000 from the previous year.

Land value in walnuts and pistachios were a mixed-bag in the past several years. Mitigated by spikes in 2016 and 2017, the mean value of Sacramento Valley walnuts orchards was off 12 percent from 2015 to 2018.

Falling commodity prices in walnuts didn’t seem to affect orchard prices in the northern San Joaquin Valley last year. Though sales volume was limited, the sale of a few high-quality walnut orchards marked the high-end of the range at $42,000 an acre. The story was much different for south Valley walnuts, which saw their mean value decline 25 percent since 2015 before leveling-off in 2018.

Pistachio land values slid 9 percent in the central portion of the San Joaquin Valley from 2015 before leveling off in 2018. In the south Valley mean prices were off 17 percent between 2015 and 2018. This was mitigated by an 11 percent increase in values from 2017 to 2018, according to the report.

TABLE GRAPES

Table grape growers were said to have a “disastrous year” in 2018. The stated reasons behind this varied, but most often mentioned were trade tariffs and over-production. The report suggests a consensus among those in the industry that there will “be significantly fewer growers in the coming years, perhaps as soon as 2019.”

Table grape vineyards that ranged from $30,000-$45,000 in 2016 declined in value to $26,000-$35,000 per acre.

WATER

California’s water divide isn’t just north-south; south of the San Joaquin River Delta that divide is also an east-west phenomenon as the new “normal” in full federal water allocations for south-of-Delta contractors on the westside may be 65 percent of what was once considered a full allocation.

While it’s not that cut-and-dry as the east side of the San Joaquin Valley also has federal contracts, water sources there come from east-side reservoirs versus the Sacramento River for westside growers. Well water along the east side is a mixed-bag and as a result, areas without good wells suffer depressed land values as a result.

Gatzman says she’s starting to see this water divide play out more clearly in land sales prices as the first of several deadlines under the State Groundwater Management Act (SGMA) approaches in 2020. That’s when areas of significant groundwater overdraft must have plans submitted to the state outlining how local agencies will reach groundwater sustainability by 2040. Areas not as highly impacted by groundwater overdraft will have an additional two years to submit their plans to the state.

In counties like Madera and Fresno, where groundwater overdraft is significant, irrigated cropland values clearly reflect the difference between properties with access to district surface water, and those reliant on groundwater. For Madera the mean value of land irrigated with wells was down over 40 percent since 2015 while their district counterparts saw an 8 percent decline in land values from their 2015 highs. The latter is mitigated by an 8 percent rise in land on district water from 2017 to 2018.

Eastern Fresno County shows a similar story. Those primarily irrigating with wells have seen property values decline 37 percent since 2015, while access to district water saw a mean increase of 5 percent in the same period.

Land owners in the unregulated portions of the San Joaquin Valley – those areas not governed by districts with surface water access – are arguably in the most unfavorable position when it comes to SGMA. Their complete reliance on groundwater is quickly dragging down land values.

California ASFMRA President JoAnn Wall, an appraiser on the Central Coast, believes that buyers in 2018 were still not completely focused on the coming constraints SGMA will have. She does suspect that premium properties across all crops may begin to grow in value as the balance of supply and demand shifts with the loss of farmland because of inadequate water supplies.

WINEGRAPES

As Napa County is now “planted out,” meaning no more new land is available for vineyards or wineries – particularly in premium locations – the pressure is now on in neighboring Sonoma County as premium locations there now sell for over $200,000 an acre, or about half the price of similar land in Napa County.

Changes taking place in Napa Valley therefore are related more to the varieties grown as vineyard redevelopment on the valley floor saw Sauvignon Blanc, Chardonnay, Merlot and Zinfandel vineyards converted to Cabernet Sauvignon, even in areas thought not to have favorable weather for the popular red variety. According to the report, these new vineyards are yielding above five tons per acre with good fruit quality. In 2017 Cabernet Sauvignon growers in some American Viticulture Areas of Napa Valley reportedly received $10,000 per ton for their Cabernet Sauvignon grapes.

The Trends Report subdivides Napa vineyards into three categories: prime, secondary and outlying. As vineyard values in the prime zones now range between $300,000 to over $400,000 per acre on strong demand, vineyard values in those secondary zones are up to over $340,000 on the high end on similar demand. In both cases the value trend is increasing.

Vineyard values in Napa outlying areas widened in the past two years but remained stable in 2018 at $50,000-$130,000 per acre.

In neighboring Sonoma, prime vineyard values soared past $200,000 per acre in 2018 on moderate-to-strong demand. Wineries there continued to be the most-active buyers of vineyards “in order to better control grape supplies and costs,” the report says.

Vineyard values on the Central Coast from Monterey to Santa Barbara remain stable with peak prices above $70,000 per acre.

Vineyard values elsewhere in the state continue to slide, down 14 percent in mean value in Lodi since 2017 and off 12 percent in mean value since 2016 in the Fresno area.

CITRUS

Currently the highest-valued citrus groves in the state appear to be in the central San Joaquin Valley (Fresno and Madera counties), followed closely by southern California citrus, then Tulare and Kern County citrus.

Sales of citrus groves in Fresno county were limited to moderate in 2018, according to the report. Values there remain stable as demand was strongest in mandarins, clementine’s and blood varieties. Bearing acreage for Navels and lemons rose, while declines were noted in Valencia oranges.

In Tulare and Kern counties, sales were highest among newer Navel plantings as the price for citrus groves ranged from $14,000 to $26,000 per acre. The lowest prices were seen in the Terra Bella and Ducor area – two locations significantly-challenged by groundwater.

Citrus values in the Maricopa-Wheeler Ridge area at the southern edge of the San Joaquin Valley were said to be closer to the upper end of the price scale. Those sales are said to be rare as landowners there tend to hold their properties.

Gatzman says the overall trend by landowners to hold onto their agricultural properties – various crops – seems to be increasing, especially in the south San Joaquin Valley. As sellers in that region do list their properties, Gatzman says sales prices in 2018 tended to be inflated higher than sellers expected to receive, suggesting to some that they may have been “testing the waters.”