Recent declines in nut prices, notably for almonds and walnuts, have made the jobs of California's rural appraisers a lot more challenging.

The lowered prices for those commodities compounds decision making around at least nine sectors of the state's agriculture, causing a variety of ripple effects in land planted to other commodities.

That was the theme sounded at an annual conference in Visalia presented by the California Chapter of the American Society of Farm Managers and Rural Appraisals.

A presentation on statewide trends concluded the conference, followed by the release of a detailed publication that looks at land and crop values in eight regions of California and all of Nevada.

During the conference-ending presentation, appraisers Erik Roget of UBS AgriVest and Janie Gatzman of American Ag Credit shared the podium to talk about 2016 trends in land and lease values.

Gatzman, who is based in Oakdale, has leveraged a farming background and involvement in many elements of the almond business into a specialty valuing commercial permanent-planting properties. Her husband, father and other family members are partners in an almond farming, processing, marketing and shipping operation based in Ripon, and her father and husband both serve on either the board or committees of the Almond Board of California.

"Nut prices began to slip in the latter half of 2015, led by the walnut market and followed in November by a stomach-clenching free fall in the almond market," Gatzman wrote to open the society's 108-page publication. "While the late-year volatility had little chance to impact 2015 land values, we can't raise our brimming wineglasses to toast record high land values without adding a sobering caveat: One of the key factors driving the increase in land values—record farm profitability—has fundamentally changed in 2016."

She added that orchards that had unstable, costly or risky water sources became targets for "low end sales," pointing out that in early 2016, Wonderful Orchards removed 10,000 acres of almonds in western Kern County, citing limited water resources and market factors.

In an interview, Gatzman said she thinks there will be stabilization in the nut markets, but values for land will not increase as they have in the past year.

"I don't anticipate a large drop this year, unless there is a poor water source," she said.

A challenge, she conceded, is going to be doing an appraisal at today's value, given the changes in nut markets. She said potential land buyers will need to determine whether they believe the reduced prices are temporary.

At the conference, she said challenges to the nut crops include a strong U.S. dollar, economic weakness in key markets, larger crops that are looming and lower costs for foreign nuts.

The 2014 almond crop totaled 1.8 billion pounds and the 2015 crop reached 1.9 billion pounds, speakers said, as bearing acreage increased by 20 percent and grower prices dropped.

Walnut acreage last year increased 30 percent, and the state boasted back-to-back record crops in 2014 and 2015, while China produced a large crop as well. Those growers' prices also went down.

Pistachio growers, less affected by the slump in pricing, nonetheless faced Iranian competition and are looking at looming large crops, Gatzman said. Bearing acreage has doubled since 2000. By 2020, it's expected California will boast a billion-pound crop.

Gatzman and Roget looked at sectors affected by the reductions in nut pricing:

• Winegrape vineyard removals will continue in the Central Valley, but the impact from low nut prices is not known.
  
  In the Central Valley, sales of $10 per bottle wine remained flat, as were 2015 grape prices, and a stronger dollar brought more competition from foreign wines.
  
  "Large crops in 2012, 2013 and 2014 would have created a hellacious drag on 2015, but 2015 proved to be a shorter year," said Roget, who is based in Lodi.
  
  On the Central Coast, sales of $10 to $20 bottles of wine increased and grape prices rose. But water, particularly in Paso Robles, proved scarce. Vineyards with good water may benefit this year, Roget said, but growers must be wary of the impact of groundwater legislation.
  
  On the North Coast, sales of wine priced at $20 per bottle and higher rose, availability of land was scarce, particularly in Napa, and grape prices rose.

• Raisin grape production increased 10 percent in 2015, and there was significant demand for nut crop ground. At the same time, bearing acreage for raisin grapes dropped by a third since 2000, to just 185,000. The nonbearing acreage hit a 35-year low of 2,000.

• There were limited sales of table grape vineyards. Those that did sell included mostly low quality or undesirable varieties, the assessors said. And again, water was a criterion in assessing sales.

• In citrus, older or inferior orchards have been converted to nut ground as 2015 values for open land rose. There was increased demand for specialty citrus; both surface and groundwater continued to be prized.

• For prunes, acreage dropped in the 2000s. Grower returns increased from $1,200 per ton in 2012 to about $2,500. But older, inferior orchards were converted into nut orchards. Now, few high-quality prune orchards are for sale, and as prune returns rise and nut prices drop, the question becomes whether those older orchards will stay.

• In the wake of cling peach orchard removals, crop prices have risen, and sales of orchards has been limited. Again, older, inferior orchards have been converted to nut ground. Buyers in the tree fruit sector tend to be vertically integrated growers-packers. There have been limited cherry orchard sales.

• Milk prices continued to drop, along with feed and fuel costs. Whereas in the past, many older dairy facilities might have been converted to nut-crop ground, that's less of a possibility today.

Gatzman said larger dairies will now likely show more interest in purchasing those properties.

"Nut growers might not be able to pay as much," she said, adding that the larger dairies are likely to make those purchases in order to grow their enterprise by increasing the permitted herd size.

• Rangeland became in demand for potential nut-crop ground, particularly before 2015. Cattle markets were up in 2015, and recreation and home site demand was weak.

• In the Central Valley, demand for land with poor or risky water declined. There was a scarcity of land available.

  Roget said even some areas in what had been "reliable" irrigation districts in Fresno and Merced counties became less desirable, as districts had to curtail or cease deliveries sharply because they were "seriously constrained in their supply."

On the Central Coast, vegetables and berries proved profitable, and land values and rents rose, while capitalization rates declined.

There was limited sales activity and higher demand for certified organic land, the assessors said.

Water costs, reliability and availability were concerns in Southern California, but the vegetable sector remained profitable.

Gatzman and Roget said the potential for record revenues brought record land values in 2015. Properties with favorable water were prized; those with unfavorable water, not so much.

(Source: California Farm Bureau Federation)

Click here to Like us on Facebook.