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California Farmland Investment in a Dynamic Market

July 10, 2024 - Curtis Buono

California has long been the United States’ most significant agricultural producer in terms of crop diversity and total crop value – its ag exports alone are worth more than the total production of 44 states and California is the only state that generates over 10% of America’s agricultural receipts.

While a confluence of factors has created recent headwinds that have challenged California’s agricultural sector, the state will always be America’s most important farming region. But with challenges come opportunities. There has been some softness in values in certain regions and crop sectors; however, over the long term, the Sustainable Groundwater Management Act (SGMA) and other factors will continue to reduce the amount of irrigated land in California.

This means many commodity sectors will come back into balance and land and orchard values will restabilize. It also means that we are currently in a unique window of opportunity to make compelling investments in California agriculture that come at a more reasonable basis; however, this is best done with local expertise like our team provides.

Peoples Company’s California professionals work with growers and investors who are active in all of California’s major farming regions and crop sectors. We offer these clients significant advantages in a dynamic market due to our sophistication, multiple service lines, and state-wide coverage for both our services and our industry-leading agricultural property database.

In today’s market, comparable sales are great, but they can be sparse, so understanding the current for-sale inventory – which can be massive for some geographies and commodities, like nut orchards, wine grape vineyards, etc. – can be just as important, as is having visibility of properties that recently failed to sell.

If we are in a slight value trough now, it may be more reasonable to expect value appreciation over the long term than it was in yesteryear’s times of frothier values; however, that should not encourage undisciplined buying today. The market participants who make the most successful farmland investments today will be those who are equipped with the best real estate data and who can also realistically underwrite deals based on factors such as future water availability, crop production potential and timing, and reasonable go-forward commodity pricing curves. Peoples Company’s California team is extremely well-qualified to assist California farmland owners and investors in this dynamic market and we look forward to hearing from you for any agricultural acquisition, disposition, appraisal, consulting, or other needs.