California Farmland’s Value Set by Crops, Crops, Crops--and Location

What is California farmland worth?

Field crop acreage in the Imperial Valley might bring as little as $700 an acre for poor-quality soil, but land good for produce is averaging $2,600 an acre on the heels of last winter’s high-priced lettuce market.

Rangeland in the southern San Joaquin Valley can be bought for $100 to $300 an acre, but orange groves sell from $6,000 to $9,000 an acre, depending on such factors as production history, potential and frost-protection requirements.

Sacramento Valley rice land sells from $1,200 to $2,000 an acre, but almond orchards command as much as $6,000 an acre.

And Napa Valley’s famous varietal vineyards are in a world apart, with the best premium parcels selling for $35,000 to $45,000 per acre.

Such huge differences in land values were discussed during a forum sponsored by the California Chapter of the American Society of Farm Managers and Rural Appraisers.

Prices vary widely, depending on the quality of the soil, improvements--such as irrigation systems--and the market outlook for the type of crops suitable for a given property.

Soils are scientifically rated as Class I, II, III and IV with I the best, giving potential buyers solid details about the land’s quality. Improvements that have been made to a particular property also can be factored fairly accurately.

But after those things are considered, the purchase price still depends on difficult assessments that have to do with what can best be grown on that land and how much that crop can bring in the marketplace.

For most of this decade, California farm prices fell because of hard times that hit farming across the nation as overseas markets declined, causing surpluses and lower prices paid to farmers.

But farm income stabilized and began climbing the last two years. Appraisers who gave an overview of prices in their sections of the state said land prices also are stabilizing and increasing a little.

“Most buyers out there are people who thought land prices have hit bottom and are starting up,” said Mike Evans.

Evans, who described Sacramento Valley prices, said there have been “some sweet deals, but also some deals where we feel people are paying a lot more than the land is worth.”

Michael E. Jewett of Ventura said local buyers and outsiders are showing interest in South Coast farmland.

“Real estate is becoming an attractive investment due, at least in part, to fears of falling stock and bond prices,” Jewett said. “People are looking for safe places to invest capital, and it may be that land will again become the favored vehicle.”

Linda B. Flint of Merced noted that, unlike 1986-87, foreclosed farms being sold by banks are no longer a major factor in the market in the northern San Joaquin Valley. She noted that the Turlock-based marketing office of the Farm Credit System had 30 to 35 properties for sale a year ago but only four now.

Clayton Beagle of Bakersfield said southern San Joaquin Valley land values “have stabilized generally across the board. Absent a further general economic catastrophe, it appears that will probably continue.”

But some commodities are still suffering from overproduction. Jim Wheyland of Pacific Consultants noted that 30 million pounds of last season’s dates remain unsold, so prices of Coachella Valley date farms have declined to $17,500 an acre, down from $20,000 to $25,000 two years ago.

And then there’s the unique situation of the Napa Valley, where land good for grapes is limited, but the quality of the wine they produce is not.

Richard Brockmeyer, a land buyer for William Hill Wine Co. of Napa, noted that wine is one of the few farm products in California where real differences can be perceived in the end product.

“If you compare wine from Napa and my hometown of Bakersfield, I guarantee there is a real physical difference in those two products,” Brockmeyer said.

Because of that quality difference and because Napa Valley has only about 30,000 acres of varietal vineyards, land there is priced far above any other farmland in California. Brockmeyer says lesser-quality Napa Valley land might bring $20,000 to $25,000 an acre, the best land as much as $45,000.

That’s perhaps 10 times as much as non-varietal wine-grape land would bring in the San Joaquin Valley, where some individual diversified farms are as large or larger than the entire 30,000 acres suitable for top-quality wine grapes in the Napa Valley.

“If you are comparing Napa Valley values with the Central Valley, you add a zero; if you are comparing acres, you take off a zero or two,” Brockmeyer said.