Annual report evaluates trends in land values

Issue Date: April 5, 2017
By Dennis Pollock

Move over, tree nuts, and make way for premium winegrapes when it comes to rising land values.

"Remember how often we mentioned 'record profitability in the tree nut market' last year, describing 2015 land values?" appraiser Janie Gatzman said. "Well, simply replace 'tree nut' with 'winegrape' and you've successfully transitioned into land values for 2016."

Gatzman's comment came in this year's "Trends in Agricultural Land Lease Values." The publication was released at the Outlook 2017 Agribusiness Conference in Fresno by the California chapter of the American Society of Farm Managers and Rural Appraisers. It provides a detailed look at the 2016 price of farmland in California and Nevada.

Gatzman, of Gatzman Appraisal in Oakdale, shared the podium at the conference with appraiser Tiffany Holmes of Hilmar-based Edwards, Lien & Toso Inc. and Tony Correia, principal and owner of The Correia Co. in Sonoma.

Both Gatzman and Correia made it clear that the boost in land values for winegrapes is not a statewide phenomenon.

Napa and Sonoma grapes benefit from a trend to "premiumization," they said, with buyers willing to purchase wine at higher prices. But in the San Joaquin Valley, which produces more tons per acre than other regions, acreage lags in pricing because the region's grapes go into the value-wine category.

"While the premium markets have benefitted from increased profitability, the same can't be said of the economy wine segment in the San Joaquin Valley," Gatzman said. "While vineyard prices have remained stable in this area, it is not due to profitability, as economy grape prices have suffered from competition with low-priced imports."

Correia said San Joaquin Valley vineyards often sell for the value of the underlying land rather than the value of the grapes. In many instances, the vines are removed and replaced with another crop.

"If you have decent land with a decent water supply, somebody will come along and buy it," he said. "They don't buy it to farm grapes. They buy it to bulldoze it and plant almonds, walnuts or pistachios, or whatever they think they are going to make more money on."

Gatzman, whose family grows almonds, said a 2015 drop in nut prices took a toll on nut orchard sales as 2016 progressed. In the Sacramento Valley, walnut orchard sales fell to pre-2014 levels, while almond orchard sales remained fairly stable.

In the San Joaquin Valley, walnut, pistachio and south valley almond orchards fell the farthest to pre-2014 price levels, largely due to lack of water availability.

"As nut prices, particularly almonds, finished out 2016 at stabilized and profitable levels, confidence is returning to the market, though buyers remain picky," Gatzman said.

In analyzing other markets, she said reduced fruit supplies brought greater profitability to nearly all soft fruit markets. And table grape vineyard sale prices in the San Joaquin Valley grew steadily in 2016, with much higher prices paid for young plantings with popular new varieties.

Gatzman said rice ground showed strengthening values, "mainly because so little of it was on the market."

She said dairy operators purchasing smaller facilities for expansion faced less competition from farmers intending to convert land to tree nuts.

Despite full reservoirs this year, availability of water remains a factor for pricing of land. Holmes said there was a huge jump in prices in 2014 and 2015 for land in good water districts. She said values for Central Coast irrigated farm- land remained stable.

In reviewing the winegrape market, Correia described how in the past five years winegrapes have risen by a half-billion dollars to become a $3 billion crop.

"If we look at just Napa County cabernet, total crop value, the average of the last five years is almost double the value of the prior seven years," he said.

He detailed how growth is concentrated at the top of the price scale. In 2016, sales of wine priced at more than $20 rose by 9.9 percent; for $15 to $20, it was 11.8 percent; for $12 to $15, it was 8.9 percent; and for $9 to $12, it was 6 percent.

"We essentially have two markets in California," Correia said. "We have premium wine that sells for over $10 a bottle and not-so-premium wine that sells for less."

He said a wine cycle that shows considerable peaks and valleys for chardonnay, the variety with the highest production and what Correia called "the workhorse of our industry," has stabilized in recent years.

Challenges he said he sees for the future include the limited availability of vineyards, land and employees.

"Napa is essentially planted out," he said, adding that there is a bidding war on grape prices.

Correia said there is a diminishing supply of independent vineyards and fewer grapes available on the open market. He added there is exhaustive testing of new plant material to guard against diseases such as red blotch.

Other challenges for the grape market include changing consumer preferences among millennials, plus competition from imports, craft beer and spirits.

Correia said indexed contracts will continue to drive grape prices up, which will drive vineyard prices up. He said there is a challenge of securing long-term grape supply when vineyard valuations seem prohibitive.

(Dennis Pollock is a reporter in Fresno. He may be contacted at

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.