California’s epic, headline-grabbing drought has not dented the value of the state’s farm land.
According to a new USDA dataset released today, California cropland rose 2.1 percent in value per acre in the last year, and 16 percent since 2012. Despite drought, California cropland remains at $10,900 an acre the second most valuable in the nation behind New Jersey. (New Jersey? Ag econ nerds please help in the comments.)
One might hypothesize that groundwater pumping on irrigated land is the explanation. (I did, in fact, so hypothesize.) But one’s hypothesis might be wrong. Non-irrigated California cropland is rising more quickly in value than irrigated land – but both are going up.
In NJ its easy to maintain a good job to underwrite the farm, many have multiple incomes. Which in turns allows paying higher prices for the ground than farming it could generate. Strong urban areas also allow for outside individuals to in invest in farm ground. Today’s low interest returns from the bank, leads people to investing in strong long term assets such as farm ground.
Could it be a sign of land values going up across all California, with farmland being no exception?
Could it be that maybe the California farmland, particularly the non-irrigated cropland, is being eyed as something else in the future, e.g. subdivisions, and that’s why its value is rising?
I agree that the high price of farm land in New Jersey and California must be due to the potential to use the land for building houses or other non-farming uses. After all, what is now Silicon Valley was mostly farms a century ago.