By Natalie Willis, Reporter, Valley Ag Voice
The state of the agriculture industry in California was discussed at length at the California State Board of Food and Agriculture meeting in August, with key themes centered on land values, specialty crops, and the mixed economic challenges and opportunities facing the sector.
Several industry experts presented the most recent updates and trends occurring in Central Valley agriculture, which has notably been strained by regulations, water restrictions, and market volatility. Don Cameron, president of the California Food and Agriculture Board explained that the presentations would allow for an overview of the true state of agriculture today.
According to Janie Gatzman, representing the California Chapter of the American Society of Farm Managers and Rural Appraisers, the Sustainable Groundwater Management Act has had a marked impact on agricultural land values, particularly in the Southern San Joaquin Valley.
“This is where the SGMA pumping restrictions are probably the most mature. So, we see [land] values on the low end of that value range in 2024, probably below $5,000 an acre in the most water-insecure areas,” Gatzman said.
In Kern County, state water and well-only areas — particularly the Kern River Delta — have seen stable high-end land values this year, while the low end has experienced significant declines. In Kings and Tulare Counties, well-only areas are valued at around $5,000 per acre, with more secure water supplies slightly over $20,000 per acre, though these values have also softened, Gatzman explained. This trend is consistent across the state, reflecting changes from 2023 to 2024.
“There’s been a significant difference and it’s been felt in every commodity in every area of California,” Gatzman said. “That doesn’t happen very often in California, so it is somewhat of a historical time that we’re living through.”
California walnut orchards, for instance, are facing significant challenges due to a prolonged period of low pricing, leading to steep declines in orchard values. Walnuts are further along in the commodity cycle compared to other crops, meaning they have been experiencing low prices for several years.
“In looking at the data when you have multiple years back-to-back of below income or below break-even pricing, the orchards just don’t have a lot of value now,” Gatzman said. “I don’t want to joke, but we’ve said it before that just about every walnut orchard is for sale today in California.”
Wine grape vineyards in the Central Valley are also seeing a drop in value according to Scott Bozzo, regional farm manager at Macotera Ag Group. This drop in land value is directly connected to grape pricing which decreased in 2023.
“It’s no secret that commodity prices drive land values,” Bozzo said.
According to CALASFMRA’s 2024 Trends in Agricultural Land and Lease Values, the market for wine grapes has declined due to excess supply. Jeff Bitter, president of Allied Grape Growers highlighted the significant economic impact of the wine industry on both the state and national levels, explaining that wine grapes are among the most planted permanent crops in California.
“The economic impact of California wine is huge on both our state and nationally…and a lot of jobs created. Wine grapes, I believe, are probably the third most planted permanent crop in California behind nut crops,” Bitter said.
However, the industry is facing severe difficulties, including the aftermath of the pandemic, rising labor costs, and changing consumer demographics. These issues, combined with the impact of the anti-alcohol movement and increased foreign competition, have led to a concerning inventory surplus, with many wine grapes left unharvested due to a lack of market demand Bitter explained.
“We have this inventory bubble, which I spoke about earlier, and that was really due to the pandemic. There were some false market signals, if you will, during that time, where consumers were pantry loading. And so, there were some decisions made in the industry to increase production,” Bitter said.
However, the trend shifted in mid-2022 with a decrease in wine shipments to roughly 8% per year, he explained.
“And so, the inventory bubble is kind of a short-term issue,” Bitter said. “Once that passes, we will get back to some type of normal inventory movement, but longer term we also have an oversupply of acres in the ground, and that’s more of a structural problem for the long term.”
Bitter’s recommendation to the board and wine grape growers is to remove acres, but this has been complicated by the prohibition on agricultural burning under the California Air Resources Board. The end goal would be to nearly eliminate agricultural burning by 2025.
“We need to get down to about 520,000 to 540,000 bearing acres. We’re not there. We need some additional removals to get us into that arena, but I suspect by 2026 we may get there,” Bitter said. “Unfortunately, the reason those removals are going to be happening is because growers are going to be going out of business, they’re not going to be able to pay bills, they’re not going to be able to sustainably farm their wine grape vineyards.”
STATE OF THE INDUSTRY PANEL
In the latter half of the meeting, industry leaders representing key sectors of California agriculture addressed the current state of their respective industries. The panel featured Steve Arnold, President of the California Cattlemen’s Association; Catherine Van Dyke, Water Policy and Organizing Manager for the Community Alliance with Family Farmers; Jeff Bitter, President of Allied Grape Growers; and Geoffrey Vanden Heuvel, Director of Regulatory and Economic Affairs for the Milk Producers Council.
CATTLE OUTLOOK
The cattle industry is relatively optimistic according to Arnold whose family has farmed and ranched in San Luis Obispo County for five generations. He explained that the industry is currently experiencing strong market conditions which may be attributed to improved rainfall over the past two years, leading to a robust grass crop, and favorable market dynamics driven by long-term reductions in cattle populations due to drought
“I might be the only person at this table that can actually say that our industry is doing fairly well right now,” Arnold said.
He highlighted the genetic advancements in cattle, which resulted in a higher percentage of beef meeting premium quality standards.
“Our product, we had a lot of trouble even getting to 50% choice in the past. Now we’re up around 70% to 75% total, so you cannot attribute that to anything but genetics,” Arnold said. “My hat’s off to those breeders.”
SMALL FAMILY FARMS
Van Dyke addressed the challenges facing small and mid-size family farms in California, emphasizing the continued consolidation of agricultural land, with a significant reduction in the number of farms under 500 acres, despite these small farms still making up 88% of California’s farming businesses.
Land access remains a critical issue, particularly for beginning farmers who struggle with high land prices and poor water access. Van Dyke also highlighted the difficulties small farmers face in accessing capital, insurance, and infrastructure necessary to transition to more sustainable and labor-efficient crops.
“Crop insurance has been a big topic for a number of different specialty crops,” Van Dyke said. “It’s extremely difficult for folks who are diversified when you’re growing maybe over 20 different kinds of vegetables in your one business.”
Van Dyke also highlighted recent successes, specifically noting the funding of the CDFA’s Farm to Community Food Hub and the continued support for the California Underserved and Small Producer program.
DAIRY INDUSTRY
Vanden Heuvel, representing the Milk Producers Council, provided a historical perspective on the dairy industry, reflecting on his 45-year career that began in 1979 in Southern California. Vanden Heuvel discussed the dramatic reduction in dairy operations in the Inland Empire, once a dairy capital, due to urbanization and changing market conditions.
Despite these challenges, he explained that the industry has remained adaptable and continues to sustain itself.
“Our production is maintaining, and this is through efficiencies and improvements in the productive capabilities of our cows,” Vanden Heuvel said.
According to Vanden Heuvel, milk now has higher butterfat and protein content, allowing for a smaller environmental footprint with fewer cows in California.
Still, dairy farmers are faced with economic challenges, as they have no control over volatile “mailbox” milk prices, which can vary greatly, creating narrow margins for profitability. In 2014, prices were high, but by 2017, they dropped significantly. Vanden Heuvel explained that the bottom line is impacted by feed costs, and the current USDA safety net program doesn’t fully protect against the narrow or negative margins caused by these price fluctuations.
