A recent Rabobank report shows sharp declines in nut prices are causing a subsequent reduction in agricultural land values across the state.
This downward trend comes after a decade of substantial agricultural gains, and Rabobank analysts say it may be the result of the bubble bursting as nut prices were on a steep rise until 12 to 18 months ago, when prices suddenly dropped.

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“Agricultural land prices are giving back some of their increases, particularly in regions where tree-nut prices have had an impact on previously rising valuations,” said Roland Fumasi, a senior analyst with Rabobank’s Food & Agribusiness Research and Advisory department, who authored the report.
Local agricultural land broker Stanley Kjar said he has seen fewer buyers in the last year and a half, and those he has seen have been more critical of properties since the commodity decline. The price of almonds in particular, he said, has had the most impact.
“Almond prices had increased rapidly to $5 a pound until last October [2015] and then started to decline,” Kjar said. “The prices of almonds were essentially too high to support export markets. With the dollar being stronger against foreign currencies, it made commodities more difficult to export. Almonds in particular were extremely expensive in foreign countries due to the exchange rate, and that’s a serious marketing issue, especially when well over 70 percent of California almonds are exported.”
In the San Joaquin Valley, the impact of the drop depends heavily on the location and quality of land, the type of crop and its water source.
According to the Rabobank report, which is based on an analysis of U.S. Department of Agriculture cropland values and rural land sales data from the American Society of Farm Managers and Rural Appraisers (ASFMRA), San Joaquin Valley walnut and almond orchards exhibit the most significant drop in value, but open cropland with less dependable water sources in Madera, Fresno, Kings, Tulare and Kern counties also faces considerable pressure.
Walnut, almond and pistachio orchard values have declined an average of 30 percent, 24 percent and 17 percent, respectively, over two years, the report shows.
Although stone fruit and citrus acreage values have been supported by profitable prices for crops, especially mandarins, those orchards are also projected to decline — stone fruit orchards by 14 percent in 2016-17 and citrus orchards by 5 percent in 2016. Citrus groves, however, are expected to rise in value in 2017, especially in the South Valley, where mandarins are king. In that area, citrus acreage may increase by as much as 15 percent.
Table grape vineyards may see minimal impact — a 2 to 6 percent decline — but like citrus, the demand and price of table grapes support land values.
The report forecasts open cropland will be both the most and least affected by the decline, with values increasing by 1 percent in the Lodi area and declining by as much as 40 percent on the west sides of the central and southern San Joaquin Valley through next year.
How much an individual piece of cropland will be affected depends largely on its access to water, its production history and the quality of the soil and crops, Kjar said.
“For the past five to seven years, with the exception of last year, there was very little inventory property-wise, and whatever we got our hands on we could sell,” Kjar said. “Now, there are a lot of properties hitting the market but they don’t have the best options for water or they aren’t the best quality…a couple of years ago that didn’t matter, especially for nuts. It didn’t matter what water district the property was in, or the quality, there were many different buyers for all types of properties.
“Now, most buyers want a property with good water and a good production history.  Property values have not declined a great deal in areas within the best irrigation districts, however many other properties have decreased anywhere from 15 to 30 percent in value.”
With the recent drought and new legislation calling for the monitoring of groundwater use, Kjar said water is one of the biggest factors that will determine the value of agricultural properties moving forward.
“In regards to water, properties with two sources of water [ground and surface] are more valuable then those that just use groundwater, largely due to the Groundwater Sustainability Act that Governor Brown signed into law.”
Though the decline will have short-term impacts on land values and cause headaches for those wanting to sell, Kjar said landowners in it for the long haul shouldn’t be concerned.
“We’re seeing this softening recently, but for the long term, California ag is still a very sound investment compared to the stock market and other investment opportunities,” Kjar said. “If you’re in it for the long term, this is just another cycle similar to what we’ve seen in the past.”
The Rabobank report also concludes that the historical upward trend in land values will remain intact over the long term.