Farmland real estate bubble

The Badlands Journal editorial board heard  this week from ranch real estate agents that prices for farmlard are rising on sales to investors looking for a home for their money. It reminded us of an article that appeared on this site last September.
Meanwhile (see below Badlands article and congressmen's latest ag-pork announcement), the dogs bark but the caravan moves on. -- blj

 
10-25-10
Badlands Journal
The next speculative real estate boom

 
 

 
Badlands Journal editorial board

The new, farmland real estate bubble
Investment groups fleeing the stock markets are investing in farmland, including irrigated California farmland. Finance, insurance and real estate corporations have been discreetly buying and holding agricultural land for decades in the California Central Valley. Almond orchards and vineyards are good places to park money to wait for the next expansion of urban slurb. When the Enron/dotcom market crashed, California real estate, with its low property taxes, rapid growth and weak governments, was a very attractive investment. As a result, five or six county seats in the San Joaquin Valley have made the top ten for residential foreclosures for the last several years.
There is a lot of money in America; it comes and goes out of this valley like floods before the dams were built. Move over, Nathan Detroit, our economy is the richest floating crap game the nation has ever seen. But the players in this particular game may be farming the tax code more than the land and crops.
Some likely consequences of a major increase in outside-investor control -- control by financial entities not always interested in profits -- of agricultural production in California:
* Increasing over-production of nuts, fruits and grapes, depressing commodity prices;
* Impacts on water: more, larger wells, driving down the aquifers for real farmers;
* Increased, sophisticated, well-funded political pressure to destroy the San Joaquin Delta for the benefit of irrigated agriculture;
* Salts: increases speed at which farms salt up to the point they cannot be farmed;
* Expansion of orchards and vineyards onto seasonal pasture on both sides of the Central Valley from Tehama to Kern and Butte to Tulare counties -- reducing groundwater recharge areas and destroying habitat for federal and state-listed endangered species of flora and fauna;
* Managers of agricultural operations of the size that attract large pools of investment funds – for example, the Kern County-based 30,000-acre operation mentioned recently in the Los Angeles Times – are not and cannot ever be as efficient as owner-operated farms; it frequently occurs that the investors, rather than the land and crops, are being farmed; the greater the amount of farmland under control of over-sized agribusiness managers, the less efficient the farming operations are over all – a point made by J. Russell Giffen during the 160-acre limitation battle in the late 1970s. Giffen was one of the largest farmers on the west side of the San Joaquin Valley when the last battle to enforce the conditions of the Reclamation Act of 1902 was fought and lost by small farmers and their supporters;
* Land ownership will become more concentrated and farmland prices will rise; both factors will make entry into farming by new real farmers more difficult.
The game will be played essentially as it was in residential real estate. It will be acasino. Hedge funds will buy farms to "flip" them as the farmland prices rise, and seek, totally rationally, to do anything and everything to avoid being caught in the musical chairs game when the speculative farmland bubble busts. Thousand-acre agricultural parcels will be flipped like Mc Mansions were a few years ago. It will have as much to do with farming as the housing bubble had to do with homes.
However, there will be differences. Urban development, constantly braying the slogan, “Development pays for itself,” constantly ripped off municipalities. Contemporary real estate booms leave cities in their wakes full of frightened, demoralized residents, rising unemployment, rising crime rates, tent cities on their peripheries and extremely austere municipal and county budgets. The coming farmland casino, at least in the San Joaquin Valley of California – already gutted by one wave of real estate speculation – will demand, not more streets and roads, but more water. The irrigated farmland casino of California will be a bonanza for state and federal lobbyists, who will get a whole new class of clients with deep pockets and a giant thirst for the public-trust and public-funded natural resources of California. Since more than 70 percent of the state's developed water goes to agriculture, this new bubble will inevitably add more weight to the technocratic doctrine of Western water established by President Herbert Hoover: "Every drop of water that runs to the sea without yielding its full commercial returns to the nation is an economic waste," echoed at the time by Joseph Stalin's maxim that "water which is allowed to enter the sea is wasted."
We can hardly wait to see how the financial geniuses of America are going to slice, dice and securitize farm ownership in the nation, following the nice folks on Wall Street that are “tranching” their mortgages. When the land values rise to irresistible levels, around here in the San Joaquin Valley, we will lose the last generation of farmers and ranchers who actually know how to farm and ranch on this land. They’ll cash out and go elsewhere, creating a mini-boom in agricultural land values wherever they come to rest. It happened here already about 15 years ago when Southern California dairymen, whose land values increased to the point where it was insane not to sell, sold and bought dairies 10-times as large in the San Joaquin Valley.
Valley farmland owners will shuck and drawl and count the money. As was true during the urban boom, early sellers will make a lot of it. Politicians at all levels in the valley will welcome the investment and dispatch press releases about the new prosperity. State and federal environmental groups will remain silent, and if not, judicious contributions
may flow their way to ease their consciences. They have enough to do protecting the Sierra and the coast, anyway. Besides, the politics and economics of irrigated agriculture are beyond the intellectual scope of either the conservation-biology or the environmental attorney sets. The New York Times, at the behest of banks and investors, will write more stories about the terrible lack of water for agriculture in California, including interviews with yeomen cotton merchants and drugstore farm workers from central casting.
A handful of Valley grassroots groups will fight the new farmland casino because they won't want to see their home region economically sacked for a second time in a decade. They do not believe that the sociopathic rich have a god-given right to get richer speculating on the farm land, ranch land, natural resources, wildlife habitat and water resources in their region, further polluting our air and water quality and our minds with another dose of sick, speculator flak. They’ll no doubt get another throbbing, but they will show up for the fight and get a few licks in themselves as they did by exposing the phony “Chinatown” drought of 2006-2009.
 A free-market society is committed, whole-heartedly and by tooth and by nail, to three fictitious propositions: that there is a free market in land and natural resources, a free market in labor, and a free market in money. At some point the pain level in the society will cause some questions to be raised regarding these fictions, but that level has not yet arrived. As Aeschylus put it some time ago: Through suffering alone will we grow wise. However, the imperious demands of the immediate future drown out the voices from the very recent past. Business and government leaders always regard an act of memory a betrayal.
 7-30-11
Merced Sun-Star
Cardoza and Costa announce $9.5M in federal funding for state farmers…Sun-Star Staff
http://www.mercedsunstar.com/2011/07/29/v-print/1987176/cardoza-and-cost...
WASHINGTON, D.C. – Rep. Dennis Cardoza (CA-18) and Rep. Jim Costa (CA-20) said $9.5 million in additional funding assistance is now available for California farmers seeking to make on farm improvements that will help to improve air quality, water quality or conserve water.
The funds will be provided through USDA’s Natural Resources Conservation Service (NRCS).
The additional funding for the San Joaquin Valley includes $5 million for air quality practices and $4.5 million toward water quality on dairy farms and water conservation. The funding is offered through the 2008 Farm Bill’s Environmental Quality Incentives Program (EQIP).
“We are happy to provide this additional investment to help farmers and ranchers conserve and improve California’s air and water quality, and water conservation,” says Ed Burton NRCS State Conservationist. “While this funding will go primarily toward pending unfunded applications, our local offices will continue to take new applications year-round, and offer landowners ongoing conservation planning and technical assistance. The funding adds to the approximately $60 million NRCS has already obligated this year in EQIP conservation contracts.”
Details of the funding, according to a news release from Cardoza’s office, include:
· $5 million for EQIP air quality practices to help reduce ozone precursors in the high-priority non-attainment areas of the San Joaquin Valley; primarily for replacing old diesel engines with engines that run 75 percent cleaner.
· $4.5 million in EQIP for water quality and conservation practices in the San Joaquin Valley for increasing irrigation system efficiency and managing dairy waste.
Interested producers are encouraged to contact their local NRCS Service Center. Contact information is available at http://offices.sc.egov.usda.gov/locator/app?state=CA.
-----------------------------------------------
7-30-11
Merced Sun-Star
Amanda Carvajal: Growth policies should protect county's farmland… The author is executive director of the Merced County Farm Bureau.
http://www.mercedsunstar.com/2011/07/30/v-print/1987703/amanda-carvajal-...
The Merced County Farm Bureau has been the leading agricultural organization representing a diverse group of farmers and ranchers throughout the county since 1917. We regularly attend and comment at community meetings. Our members genuinely care about the direction the county takes as it affects the long-term viability of agriculture.
Farmers and ranchers not only contribute to the base economy and are connected to 35 percent of jobs in Merced County, but are also active members of the community. We shop at local businesses, work out at local gyms, serve on community boards and commissions and send our kids to local schools.
Since 2007, Merced County and the city of Merced have been involved in the process of updating their general plans. Right now, constituents have a unique opportunity to take a clear look at our prior decisions and learn from the issues that have contributed to the county's estimated $20 million deficit.
The farm bureau has been advocating for infill of abandoned homes and lots, higher residential densities per acre as the California Blueprint recommends, avoiding development of prime agriculture land and ensuring a recharge effort on our ever dwindling groundwater supply. We have consistently requested that the county work with industries and agriculture to dig the county out of the recession that we are experiencing.
We, as taxpayers, have to take a hard look at existing policies. In 2010, Merced County had one of the top 10 foreclosure rates in the country, according to Forbes. For example, within the city of Merced there are vacancy rates that will take about 10 years to fill, and can be only partially blamed on the foreclosure crisis.
The main culprit was the flood of new communities and housing developments approved by our elected officials outside of established city centers. One such mistake was the overcreation of new urban communities. Two examples are the Fox Hills and Santa Nella communities on the west side of the county that sit almost empty. Fox Hills owes upward of $3 million in back taxes, which they are attempting to pass back into the laps of taxpayers.
The county supervisors' track record for the expansion and creation of new communities has proven unsuccessful. Yet they continue to push for the new urban communities option. During focus groups, public comments and official letters, the public has decried the idea of the new communities option because people have seen the negative toll it has taken on our government agencies, infrastructure and agricultural resources.
The city of Merced's general plan has an expansion option that includes two large residential developments that will cover some 7,000 acres. This is another prime example of our elected officials' rubber-stamping the unnecessary expansion of our city and community.
Will Merced County become the community of more vacant lots?
There are those who may blame our economic struggles on our farmers and ranchers, but this is not the case. When things were robust, housing and developments were in full force, but the farmers and ranchers were struggling with severe water issues. Even with those struggles, they managed to keep a steady foundation for the community, averaging more than $2 billion a year in direct revenues. These agriculturalists were able to persevere because it is not just their source of income, it is their way of life.
Today, we are facing unparalleled economic hardships. Those same farmers and ranchers are still here, carrying on traditions of the generations before them and contributing to our local economy. Farmers and ranchers in Merced County have not once abandoned the community they call home.
With the growth of UC Merced and the pending high-speed rail project, there's a possibility for land speculation to occur again. The farm bureau has no intention of limiting or disrupting any solid opportunities for jobs and growth. However, it's time elected officials stopped talking about smart growth policies and started implementing them.
Please remember that when the dust settles and all of the investors have vanished, there might be fewer farmers, but they will be here, still farming, persevering and still supporting Merced County. To have your voice heard please attend the Board of Supervisors meeting on Aug. 9 or the City Council meeting on Sept. 19.
7-28-11
Diana Westmoreland Pedrozo: General Plan questions…Diana Westmoreland Pedrozo. The author is land use director of Merced California Women for Agriculture.
http://www.mercedsunstar.com/2011/07/28/v-print/1985088/general-plan-questions.html
For many years, Merced County has been in the process of a updating its General Plan. The city of Merced is finalizing an update to its General Plan. General plans are important to have in place because they are the blueprint for growth. Careful, thoughtful and informed planning is needed so we continue to grow population, strengthen our economy and our agricultural bounty for future generations. We are planning for the decades ahead, and we need 21st century policies and technology to be incorporated into the general plans.
While looking ahead we should also be evaluating the past and our current situation:
• Have we done a good job in bringing jobs to our community?
• Can we meet our infrastructure and safety requirements?
• Do we have a handle on what our water and energy demands are or will be?
• Where will we grow our food and how does it reach our tables?
• What are our educational/training and recreational needs and can they be mutually beneficial?
• Do we have an adequate supply of housing choices?
• How many lots are already approved in Merced today?
• What is our capacity to grow with infill and tighter densities?
We have current population numbers from the census. What is a reasonable population growth rate for the next decades for the cities and county?
Why do our city and county elected officials support the San Joaquin Valley Blueprint Policies and Goals at Merced County Association of Governments (MCAG) but do not implement in their general plan policies, or as a benchmark in approving projects?
Are the cities and county working together to use our tax dollars wisely for the benefit of all residents? I wonder, as the supervisors continue the "New Town" concept instead of the "City Centered" choice. The county has enough to manage with the already approved new towns on the Westside — Santa Nella, Villages of Laguna San Luis and the bankrupt Fox Hills eventually housing over 50,000 people. Winton, Delhi and Hilmar have room to add more than 20,000. It's not surprising that Merced is moving forward with a poor plan trying to annex and control almost 9,000 acres to combat the County's "New Town" direction.
And the million-dollar question: how many millions of dollars are owed in property taxes on incomplete housing and commercial developments? Merced had to cancel development agreements and call on bonds to complete infrastructure projects. Not collecting taxes causes deficits and layoffs. The upkeep of bank-owned and abandoned properties are a drain on dwindling city coffers.
We have lived with the results of developer-driven poor planning. We overbuilt and refuse to admit the mistakes made at all levels of government, banking, lending and individual actions. We knew we could not sustain the growth and infrastructure needed. Our property values have plummeted and we continue to struggle with bankruptcy and foreclosures affecting the housing market recovery. Over-reaching will keep our property values depressed. Development must pay its way without affecting existing taxpayers.

7-27-11
Jean Okuye: Not improving
http://www.mercedsunstar.com/2011/07/27/1984932/jean-okuye-not-improving.html
Two meetings regarding the vision for Merced in less than 24 hours: Merced City Planning Commissioners' on July 20 and Smart Valley Places Convention in Fresno.
Meeting 1: General Plan Update: Vote 5 to 0 to approve and send on to City Council for a vote. After public comments: costs more to build out, why grow so big? 20,000 acres to 33,000 acres, protect ag, our economic engine (est. $6 billion a year income to county), air quality will be worse, more cars, 78,000 people in city now with present plan can grow to 298,000 people, so where's the need?
Forward 12 hours: 200 people from San Joaquin Valley at Smart Growth Places Partnership Convention: Compact Cities: among the 14 listed is MERCED CITY. Where were our reps? Speaker Michael Freedman stressed need for retrofitted system, restructure suburbia, need consensus, shared ideas. He said our cities are broken, out of sync. Ghettos are produced by urban sprawl. There is a market demand for walkable communities which produces gained value. Are we improving our value, making this a better place? Appears we aren't. Solution: people demand better.
JEAN OKUYE
Livingston
 7-30-11
Cardoza and Costa announce $9.5M in federal funding for state farmers…Sun-Star Staff
http://www.mercedsunstar.com/2011/07/29/v-print/1987176/cardoza-and-cost...
WASHINGTON, D.C. – Rep. Dennis Cardoza (CA-18) and Rep. Jim Costa (CA-20) said $9.5 million in additional funding assistance is now available for California farmers seeking to make on farm improvements that will help to improve air quality, water quality or conserve water.
The funds will be provided through USDA’s Natural Resources Conservation Service (NRCS).
The additional funding for the San Joaquin Valley includes $5 million for air quality practices and $4.5 million toward water quality on dairy farms and water conservation. The funding is offered through the 2008 Farm Bill’s Environmental Quality Incentives Program (EQIP).
“We are happy to provide this additional investment to help farmers and ranchers conserve and improve California’s air and water quality, and water conservation,” says Ed Burton NRCS State Conservationist. “While this funding will go primarily toward pending unfunded applications, our local offices will continue to take new applications year-round, and offer landowners ongoing conservation planning and technical assistance. The funding adds to the approximately $60 million NRCS has already obligated this year in EQIP conservation contracts.”
Details of the funding, according to a news release from Cardoza’s office, include:
· $5 million for EQIP air quality practices to help reduce ozone precursors in the high-priority non-attainment areas of the San Joaquin Valley; primarily for replacing old diesel engines with engines that run 75 percent cleaner.
· $4.5 million in EQIP for water quality and conservation practices in the San Joaquin Valley for increasing irrigation system efficiency and managing dairy waste.
Interested producers are encouraged to contact their local NRCS Service Center. Contact information is available at http://offices.sc.egov.usda.gov/locator/app?state=CA.