2018 Trends Report gives a snapshot of California’s diverse ag world

Fri, 06/15/2018 - 2:00pm

California’s agriculture economy is so large and varied that it is almost unfair to make generalizations on how the sector is doing. We are, after all, in a huge state; parts of this great land have very different climates than others.

But there is one must-read annual publication that tries to give farmers, investors and observers some guidance in the area. That is, of course, the 125-page 2018 Trends Report put out by The California Chapter of the American Society of Farm Managers and Rural Appraisers. It was published in March, but it is only available after purchase for now. Previous year’s reports are free and can be viewed on the chapter’s website.

This year’s report was put together by a committee chaired by Tiffany Holmes and Janie Gatzman. In their introduction, they wrote the best word to describe the overall 2017 agriculture landscape was “strange.” Sure, there were some natural disasters such as fires and floods, but ultimately the vineyard grape crop stayed stable, top prices for tree nut orchards softened, but the floor also raised, providing more stabilization. 

As always, access to reliable sources of water is important for the value of farmland of all kinds. But now, there is extra emphasis on water in California, researchers noted, because of the Sustainable Groundwater Management Act. This law, passed in 2014, is often called SGMA. Depending on where your land is, according to the report, the more familiar – and worried – you probably are about the new regulations. As part of the legislation, groundwater sustainability plans need to be implemented as early as 2020. (For some areas of the state, the deadline is 2022.) We’ve decided to share much of what researches wrote in the statewide section of the report on the issue for your consumption.    

According to pages 9 and 10 of the Trends report:

The potential for coming restrictions on well water usage due to SGMA regulation weighed heavily on the minds of buyers in the central and south regions of the San Joaquin Valley and in parts of the Central Coast, though sellers were less attuned to the risk. Buyers sought and priced land accordingly.

In the northern San Joaquin Valley, buyers and sellers were less aware of SGMA or concerned that it might impact their operations. However, land sales outside of districts on the east side of Stanislaus and Merced Counties had already been severely curtailed due to county groundwater ordinances restricting the development of new wells.

In the Sacramento Valley (an aside, that is the region part of Placer County is put into), land buyers and sellers rarely mentioned SGMA, likely because most of the Sacramento Valley is not designated as “critically overdrafted,” and as a mostly mediumpriority basin, has a longer timeline for SGMA implementation than the San Joaquin Valley or the Central Coast. In both the northern San Joaquin and Sacramento Valleys, we expect greater divergence in values of land, orchards and vineyards that rely on well water only versus those that also have reliable surface water, as SGMA’s Groundwater Management Plan implementation dates approach in 2020 or 2022 (depending on basin prioritization).

SGMA awareness and its impact on value was most apparent in the San Joaquin Valley in 2017. In Madera County, district cropland fell by a mean of 16% from its 2015 peak, while well-irrigated cropland fell by more than twice that amount: a mean of 38% from its 2015 peak. Similarly, in Fresno County, central and east-side district cropland fell by a mean of only 3% from its 2015 peak, while cropland reliant on wells fell by seven times that amount: a mean of 21% from 2015. Tulare County showed its widest range of cropland value ever: from $15,000 to $28,500 per acre. The low end was defined by properties mostly or entirely reliant on well water, while the high end was defined by properties in the most reliable irrigation districts. The high end of the range actually increased by 5% from 2015, while the low end remained unchanged.

In Kings County, cropland in the north districts increased by a mean of 2% from 2015, cropland in the central districts remained unchanged, while cropland on the west side fell by a mean of 30% from its 2015 peak. In Kern County, cropland in the northeast and central areas decreased by a mean of 10% from 2015, cropland in the southeast area decreased by a mean of 5% from 2015, while land with state water decreased by a mean of 23% from its 2015 peak. No buyer interest was reported for open land in “White Land” areas of the county, which are areas with no water district coverage.

The report breaks down California into eight regions. We’re highlighting two below because, while Placer Title can work deals all over this Golden State, why not focus on the county that bears our name? It just so happens that Placer County is divided into an east and west sections and thrown into both Region 1 and Region 8 in this report.

Region 1, known as the Sacramento Valley region, includes the west part of Placer, Butte, Colusa, Glenn, part of Sacramento, Solano, Sutter, Tehama, Yuba and Yolo counties. Not only does this area historically have more water stability than other parts of the state, good rains in the 2016-17 season helped quell any emerging fears.

According to the report, there was demand in 2017 for established orchard properties and land that could be transformed into an orchard because such growers are “continuing to enjoy favorable returns for virtually all orchard crops with almond and walnut prices steadily rising.” The report also predicts that agriculture land in this region will continue to have an elevated value here, “due to the limited supply of suitable land being offered for sale,” compared to high demand from well-funded and active buyers.  

Region 8, known as the Mountains region, includes the eastern part of Placer, Alpine, Inyo, Lassen, Mariposa, Modoc, Mono, Nevada, Plumas, Shasta, Sierra, Siskiyou and Tuolumne counties, as well as part of Amador, Calaveras and El Dorado counties. In this region, researches broke up their explanations up by area and only talked briefly about eastern Placer County. That is probably because, as most of you know, there is not a lot of land in that part of the county that is available to farm. However, land values for any space suitable agriculture has stayed stable, and nut prices in the region have put a premium on any suitable open land. Demand is also stable for any land that can grow a good rice crop.         

The good people over at Western Farm Press went through the report for the greater good and put together this thorough, but quick recap. Their conclusion? Overall land prices are slightly down, but that’s mostly because the highs and lows for such properties are narrowing, which can be a good thing for most looking to buy or sell farmland these days, as long as you don’t own one of the outliers that was on the high side. The Western Farm report also includes easy-to-digest breakdowns of the outlook for vineyards (in the Lodi region, they’re still gaining in value), nuts and citrus. This is great info to share with your buyers and sellers!

No matter what kind of goals you have after your agricultural land transaction is complete, the Placer Title team wants to make sure you’re in the position to achieve them. Just like the weather or other unforeseen circumstances can be obstacles to you in the fields, among the trees or amongst the vines, sometimes real estate transactions can get complicated too. But when you have Placer Title on your side, you have the friendliest team in the business ready to do what it takes to help you complete the sale to your fullest satisfaction. 

Placer Title is the expert you need and the partner you can trust for any farmland transaction or other type of real estate deal. Contact us today!