Agricultural land values in the Central Valley, and Kern County, have slipped a bit but most analysts aren’t worried about a major drop.
Though water will become a larger question mark in coming years.
For now, analysts are looking at the recent dip in values as more of a “breather” from the meteoric rates at which ag land values shot up between 2010 and 2015.
Does that mean high values are a bubble?
No, said Roland Fumasi, an analyst with Rabobank’s Fresno-based RaboResearch Food & Agribusiness division.
“Because prices are supported by economic reasons,” he said.
Those economic reasons — high demand for Kern’s produce — are still in place, which is why Fumasi and others aren’t predicting a steep drop in land values through the end of 2017.
The biggest drop in Kern will be for land planted in pistachios, Fumasi said.
He’s projecting a 13 percent drop from a high of about $38,000 per acre in 2015 to about $33,000 an acre by the end of 2017.
For almond lands, Fumasi is projecting a 9 percent drop in valuation from a high of $35,000 per acre in 2015 to $32,000 by the end of 2017.
Almond acreage, unlike pistachio and other acreage, enjoys some beneficial factors that help buoy its value.
“California has the nurseries, we produce 80 percent of the world’s supply, growers control the processing and marketing,” Associate Rabobank Analyst James Williamson said. “There’s a lot more control and very little competition globally.”
As economies strengthen elsewhere in the world, an increasing middle class is looking for healthier foods, which means almonds still have a large and growing market.
Though the price per pound has dropped from about $5 to around $2.60, Williamson said that is still profitable for farmers.
And, Fumasi argued, more attractive prices will increase sales.
While tree nuts have driven land valuations in the past, Fumasi said demand for other Kern products, especially table grapes and easy-peel mandarins (Cuties and Halos), remains strong.
That demand is expected to protect land values from any dramatic declines.
Water, though, is a major question mark.
Mike Ming, an analyst with Bakersfield’s Alliance Ag Services, is projecting very similar dips in almond and pistachio land values.
But he’s also predicting a drop of 20 percent to 30 percent for pistachio orchards in the so-called “white lands.”
Those are farmlands that are outside the boundaries of any agricultural water districts, meaning their only source of water is typically groundwater.
Groundwater is now governed under the Sustainable Groundwater Management Act, which will eventually set limits on how much farmers can pump.
Those limits are still unknown and uncertainty can have a chilling effect on investment.
Preliminary estimates are Kern could be forced to fallow 185,000 of its 900,000 irrigated acres, costing 12,400 farm jobs and $631 million in farm income.
“We do appraisal and evaluation as well as brokerage,” Ming said. “And our buyers, the first question they’re asking is about the water. It is very relevant.”