Prices paid for California farm land in 2016 were largely off their record highs from the year before, but not in all cases as wine grape vineyards – particularly Napa Cabernet – stole the show.

While the sparkle on tree nut ground diminished somewhat over previous year figures, notable highs were seen around the state in wine and table grape vineyards, rangeland and land labeled simply as “cropland,” according to the latest trends report from the California Chapter of the American Society of Farm Managers & Rural Appraisers (ASFMRA).

For 27 years, the California ASFMRA has published a trends report on agricultural land values in the state, giving the industry a snapshot of farm land sales prices in the previous year. The reports are co-chaired by Californians Tiffany Holmes, senior appraiser with Edwards, Lien & Toso in Hilmar, and Janie Gatzman, Gatzman Appraisal, Oakdale.

Wine grapes

Perhaps the biggest news continues to be the rise in Napa Valley vineyard values, now up to at least $400,000 an acre, due in a large part to the scarcity of available land in the prime-growing regions or appellations.

Though not a part of this year’s report due to the timing of the acquisition, the recently-announced trade made when E&J Gallo purchased the 600-acre Stagecoach Vineyard in the Prichard Hill region and the Atlas Peak appellation should continue to push the trend upward, according to Tony Correia, a widely-recognized expert on agricultural land values and owner of The Correia Company.

The recent Gallo purchase of Stagecoach Vineyard excited other buyers, driving them to quickly snap up other Napa properties, Correia says.

“For any vineyards on the market for a while offers are being made on them,” Correia said during his presentation at the ASFMRA meeting held at Fresno, Calif.

Correia added the market effects of Gallo’s purchase of Stagecoach Vineyards could drive vineyard prices skyward in the Napa Valley as perceptions suggest a current shortage of premium wine grapes.

“The question is how temporary this phenomenon is,” he notes.

The significance of the Stagecoach purchase is the premium nature of the grapes grown and the fact that those grapes are sold to 90 different wineries.

Premiumization continues to be a driving factor in vineyard prices, according to Correia. Premiumization is a term used by the industry to signify consumer demand for higher-value bottles of wine in economic good times.

According to the Trends report, much of this is driven by the insatiable demand for Napa Cabernet and high-profile red blends.

Aside from its prime location for growing quality wine grapes and its successful tourist trade, vineyard prices continue to rise significantly because “Napa County is essentially planted out,” Correia says.

While other wine regions in California are not commanding near the value for land as in Napa, most appeared to hit all-time highs in 2016, according to the Trends report.

As Sonoma vineyards, at about $150,000 an acre on average, remain less than half the value of neighboring Napa Valley, the remaining wine regions of California – Temecula, the various Central Coast regions and the Central Valley – continue to be valued more closely together at prices that range from less than $50,000 for Central Valley wine grape vineyards to about $100,000 for similar properties in Temecula, with Central Coast vineyards priced in between.

The San Joaquin Valley (SJV) is really a story of two wine grape growing regions – the Lodi-Delta region and the rest of the valley. For Lodi, land values tend to be higher since wine grapes produced in the region are viewed as higher quality and are “the preferred option to supply lower-priced but relatively higher-quality fruit for premium red blends,” according to the report.

As for vineyard values outside of Lodi, vineyard values elsewhere in the SJV are more closely tied to the speculative value of the underlying land and its ability to support tree nuts – primarily almonds and pistachios – than it is the value of the wine grapes growing on them which tend to sell for prices at or below the cost of production and must compete with lower-priced imports.

Table grapes, on the other hand, appear to be enjoying a profitable period which has helped push vineyard land values in the south SJV to record values of about $45,000 an acre.

Tree nuts

The rush to buy tree nut orchards from about 2013 to 2015 appears to have slowed due to prices somewhat lower than the previous year’s peaks.

The report blames the drop in nut prices in general as walnut prices in particular drew those orchard values down to pre-2014 levels.

Walnut orchard values, particularly in the Sacramento Valley, began their steep climb in about 2012, significantly outpacing the rate of growth in pistachios and almonds for a period of time. Noteworthy in walnuts was the fact that at the time prices began to sharply increase walnut land values in the Sacramento Valley were trailing SJV walnut orchards in value by over $10,000 an acre. By 2014, the gap had closed to within $5,000 an acre and today is nearly identical at about $35,000 an acre.

Orchard sale prices declined the most furthest in the San Joaquin Valley (SJV), falling to pre-2014 levels that, depending on the crop and region of the SJV, ranged between $30,000 and $35,000.

Nut orchard value declines in the SJV trended in similar fashion for Sacramento Valley walnuts and pistachios. Almond orchard prices in the North State remained stable in 2015 and 2016 at about $30,000 an acre, perhaps due more reliable surface water supplies in the region.

Yet another trend seen in 2016 was the shift in new almond plantings in all regions away from marginal valley hillside locations to better soils on the valley floor.

Vegetables

Other big movers in land values seen in the Trends report included Sacramento Valley prune orchard values, which in 2013 hovered around $10,000-$15,000 an acre, then shot up to $35,000 in 2015 before softening the following year to under $30,000.

The report also examines coastal vegetable land sale prices which reportedly remained stable in 2016 in prime growing regions as buyers moved to secondary locations to grow leafy greens, berries, artichokes and other crops. The move helped push land prices higher in those areas, the report says.

As California begins to roll out cannabis legalization, the move is having a corresponding impact on markets, particularly for existing greenhouse space along the Central Coast, which suffered an overabundance of empty greenhouses after the North American Free Trade Agreement (NAFTA) was signed years ago. According to the Trends report, NAFTA effectively “decimated the local cut-flower business.”

In Monterey County in particular, the passage of a legal mechanism to tax cannabis sales caused greenhouse prices to soar. On the North Coast, legalization is said to be bringing growers “out of the woods” and into legitimacy, helping to drive up the value of vineyards and crop land as the demand for growing space creates greater competition.

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