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Farmland values go nuts
Source: United States Department of Agriculture
Ed Sills of Pleasant Grove Farms in Sutter County said he scoffed when experts spoke decades ago about premium prices for land when limited farmland met a growing global demand for food.
"Maybe we're at that point," he said.
Lyndol Swartz, who grows almonds on the north side of the Sutter Buttes, said an investor bought nearby farmland and then resold the property. The price for an acre of ag land has reached as a high as $14,000, Swartz said.
"I've never seen this value before," Swartz said.
That's not a good thing, he added, since a young grower needs to add acreage.
"It's too expensive," Swartz said of farmland.
Vic Tolomeo, director of the California office of the US Department of Agriculture's Agricultural Statistics Service, notes the average farm real estate in the state was valued this year at $7,200 an acre — a record high for California and $300 more an acre above the previous record set in 2011.
A huge influx of money, including private investors and international funds, has taken place, said Josh Cook, a real estate agent at Stromer Realty in Yuba City.
"There's a lot of money looking to buy land," Cook said, "especially here in Northern California."
Broker Pat Laughlin at Stromer Realty notes the value of rice land has tripled in the past 15 years from about $2,500 an acre to $7,500 an acre.
What's known as the "nut market" — almonds, walnuts and pistachios — is booming, fueled in part by a growing demand in China for premium California products. Northern California is walnut growing country while the Bakersfield area is home to almonds, Laughlin said. Interest in ag property has soared, he said.
"We have tons of buyers," said Laughlin. "And we have very few sellers." Tolomeo said that while farmland values can fluctuate from year to year, in the past decade, the value in the state has nearly doubled. He added that agriculture, because of changes in national and international markets, weather and currency exchange rates that affect the value of goods sold, is by its nature always in flux.
"It's probably one of the more uncertain industries that exist," Tolomeo said. "Generally, in agriculture if you make a profit every five years, you're doing well."
Reece Cordi, who grows grapes and olives north of the Sutter Buttes, said the boost in farmland value comes as growers have seen their fuel and fertilizer costs climb. When he started farming in 1990, diesel fuel went for 60 cents a gallon. Now it costs about $3.
For growers who want to add farmland, Cordi noted, the rise in prices means they'll pay more for property. Still, the higher values allow growers to borrow more against their land, he added.
Cook said farmland is unique because it can produce income every year and holds an additional appeal for investors amid an uncertain economy.
"It has to do with people looking for a safe haven for their money," Cook said.
Laughlin said China's economic growth is driving the demand for farmland.
"There's so much wealth being created," he noted. "The Internet has opened up the whole world to the American way."
CONTACT Ryan McCarthy at email@example.com or 749-4780. Find him on Facebook at /ADrmccarthy or on Twitter at @ADrmccarthy.