The takeaway message from a two-hour session on Arizona farm land sales, rents, and commodity trends is tree nut plantings are on the fast tract in Cochise County. Also, statewide crop ground prices and rental rates are mostly stable to inching higher.
These topics were discussed by farm appraisers and brokers at the 2017 Spring Ag Forum held in Phoenix, presented by the Arizona chapter of the American Society of Farm Managers and Rural Appraisers (ASFMRA).
Tree nut expansion
Doug Littau of Finley & Associates at Willcox located in southeastern Arizona’s Cochise County says pistachio and pecan plantings in the northern reaches of the county are quickly expanding, largely by California producers wanting to expand elsewhere due in part to reoccurring drought.
In Cochise County, “Pistachio growers are actively buying virgin land that’s never been farmed and developing it,” Littau said. “Pecan growers are looking for idle crop land with old wells not farmed in 30 years to re-develop those areas.”
He noted the county’s limited water supply issues, especially in the Sulphur Springs Valley. The region’s water supply is mostly groundwater, plus rain and snow melt.
Thomas Schorr, agricultural appraiser with Farm Credit Services Southwest at Tempe, added, “There’s a fair number of new orchard acres planted to pecans in the Bowie area” located near the Arizona-New Mexico border.
Schorr says Arizona pecan acreage (bearing and non-bearing) could reach 27,000 to 30,000 acres by 2020. Cochise County is home to about one-third of the state’s pecan acreage. Predominant varieties include Western Schley and Wichita with Indian varieties on the increase.
In 2014, Arizona was the fourth largest pecan grower in the nation (21 million pounds), preceded in order by Georgia (76 million pounds), New Mexico (67 million pounds), and Texas (61 million pounds), according to the Agricultural Marketing Resource Center.
California produces 98 percent of the U.S. pistachio crop on about 233,000 bearing acres. The balance is grown in Arizona and New Mexico. Schorr says today’s Arizona pistachio acreage totals about 4,500 total acres, including about 2,000 commercially bearing.
While Arizona pistachio acreage is small compared to California, Schorr noted, “Arizona pistachio acreage is growing substantially.”
“The (price) expectations for pecans and pistachios (by growers) are positive,” Schorr notes. “Growers have been making good money and will probably continue to moving forward.”
Littau also discussed wine grapes, specifically the results of the 2013 Arizona Wine Grape Survey completed by 94 percent of the state’s grape growers. About three-quarters of Arizona’s wine grape acres are located in Cochise County’s Willcox area.
Last year, Willcox was tapped as Arizona’s second American Viticultural Area, or AVA. Sonoita, located south of Tucson, was tapped as the state’s first AVA in 1984.
“Vineyards in Cochise County are slowly expanding,” says Littau.
Arizona is by far a net importer of grapes for winemaking, mostly fruit from California. Total grape acreage was just short of 1,000 acres in 2013, including 750 bearing acres. Yields averaged 1.8 tons per acre for total statewide production at about 1,370 tons. Arizona wine grape growers intended to plant 350 more acres by 2016.
According to survey results, the state’s Top 5 planted varietals were, in order, Cabernet Sauvignon, Syrah, Grenache, Zinfandel, and Merlot. Top 5 tonnage was from, in order, Syrah, Grenache, Cabernet Sauvignon, Mourvedre, and Sangiovese.
Land prices, rental rates
Looking elsewhere in the Grand Canyon State, strong prices continued last year for premium winter vegetable land in Yuma County, Ariz., according to appraiser Bill Moody of Robert J Moody Appraisers at Yuma.
“For the most part, produce drives the market,” Moody told the rural real estate crowd.
He believes overall land prices and rents in Yuma County are trending higher. For example, prime vegetable ground in the Upper Yuma and Gila valleys, plus a portion of neighboring Bard Valley (Calif.) is worth in the mid-$30,000 per acre range. In the outlying areas - further from Yuma, labor, and coolers – the price has mostly declined.
Looking at Yuma County agriculture overall, Moody says the number of farm land sales were down last year, yet it’s definitely still a “seller’s market” with few properties for sale. Most land buyers are produce companies and local growers.
On the fruit side, Moody says Yuma-grown lemons are also a bright spot in the local agricultural economy following four consecutive years of profitable citrus prices which Moody called “rare.”
Medjool date growers also enjoyed a profitable harvest last year with improved volume and larger fruit, he says. Date ground last year was valued at about $100,000/acre – mostly for Medjool date fruit production, plus some ornamental landscaping. Rents were 50 to 55 cents per fruit pound.
Looking across the Colorado River from Yuma at farm land in Imperial County, Calif., appraiser Todd Menvielle of Farm Credit Services Southwest (FCSSW) at Yuma says good adaptable ground (net farmable acres) was worth about $11,500/acre to $15,500/acre. Average adaptability ground is running between $6,900/acre to $12,000/acre. Rent prices are mostly flat, depending on the area.
Today, Phoenix is considered the fastest-growing city in the nation. Due to rapid growth before and after the Great Recession, investors have gobbled up farm acreage to build subdivisions and retail.
Land broker and appraiser Charlie Havranek of Southwest Land Associates at Goodyear (West Phoenix) teased the crowd with this quip - land in the Phoenix area had sold for a quarter-million dollars per acre. He added, “Land selling for a quarter million an acre is definitely not farm land,” he conceded.
The real estate veteran says urban influence continues to drive up farm land sale activity in the Phoenix area and prices with farm rents stable to the higher side. Growers in the region still grow many crops, including the mainstay’s alfalfa, cotton, and wheat. In fact, Maricopa County, where Phoenix is located, is the nation’s seventh largest producer of rose bushes.
Located south of Phoenix is Pinal County where broker-appraiser Steve Pendleton of Southwest Ag Services said 2016 was a repeat of 2015 – slow in farm sales.
“Everyone is concerned about water issues and prices, and low commodity prices. 2016 was a cautious year.”
Part of the water fear are expectations of a level one shortage call on the Colorado River in the next several years which would substantially reduce river-based surface water deliveries in Central Arizona.
Pendleton notes that the few farm land sales in the county last year were priced at about $2,000 per acre on the low end and $6,500 to $7,500 on the high end, depending in part on the land’s proximity to the interstate.
Appraiser Tom Van Hofwegen with FCSSW at Tempe said Arizona milk prices in the first half of 2016 were unprofitable for Arizona dairymen, yet prices improved to above break even in the second half. Statewide, 2016 milk cow numbers totaled 197,000 cows and milk production in 2015 totaled 24,270 pounds per cow.
On dairy farm sales, Van Hofwegen says “The market is really slow in Arizona. We don’t get many dairies trading hands.”
His chief concerns for the U.S. dairy industry include continued consolidation, plus potential changes in U.S. immigration and trade policies. Despite those concerns, Van Hofwegen is bullish on the Arizona dairy industry.
“The 2017 outlook is more optimistic as milk futures are higher and feed costs remain low.”
The Van Hofwegen family is a long-time dairy family in Central Arizona.
“I keep waiting for an influx of dairymen to come to Arizona because I think it’s such a great place to dairy. With increasing regulations and the minimum wage going up (California) we just may see it.”