Farmland Value Trends Across the U.S.: Arizona

Activity in Arizona’s rural and transitional markets has been impacted by two important factors: drought and residential development. ( Stock Image )

Arizona Chapter of ASFMRA

Activity in Arizona’s rural and transitional markets has been impacted by two important factors: drought and residential development.

The ongoing drought has resulted in something of a two-tiered market relative agricultural lands. The Yuma area, which receives water directly from the river and holds one of the premier rights to Colorado River water, continues to support a robust market setting. That strength is bolstered by the area’s desirability for fresh produce and specialty crop producers.

Central Arizona markets, which rely on water delivered by the Central Arizona Project (CAP), are facing cut-backs, as the water level at Lake Mead continues to decline. Uncertainty is compounded by the thirst of Arizona’s metropolitan areas for greater supply in support of continued growth. Development-driven demand for farmlands in transitional areas near metro areas has been strong, pushing prices upward. There is less demand for outlying lands located further from urban infrastructure and development due to water concerns and lower commodity prices.

Truly rural areas of the state are generally holding steady in terms of market activity and price levels.

Western Maricopa

Maricopa County markets are primarily driven by the demand for new development in the residential, industrial and commercial sectors.  Agriculture is typically an interim use.   The infill and urban sprawl edges reflect stable activity with upward pressure on prices.  The outlying areas of Maricopa County that continue to be rural in nature and primarily driven by the agriculture sector reflect stable to slowing market activity, but prices have remained stable.

Pumpland Farms

Pumpland farms in more remote rural areas are typically larger economically sized farms ranging from 1,200 – 5,000+ acres.  The current market activity is minimal, however recent drip irrigation developed farms are currently offered on the market.  It is noted that development of irrigated cropland to drip irrigation continues in these rural pumpland areas.

Pinal County

Activity has been slow. Prices and rents appear to have remained relatively flat with some downward pressure. Price and rent ranges for 2018 are similar to those reported in 2017. The primary concern is the CAP water and the impact of potential rationing if Lake Mead hits the benchmark. There are also concerns related to encroaching development. With a transition from agriculture to residential and other uses, farmers are concerned there will be changes in the water statutes that may favor developers and place less priority on farm water rights.

On the other hand, residential activity is booming in Maricopa, San Tan Valley and, to some degree, Florence and Casa Grande, thus offsetting the negative factors on transitional parcels. Overall, a wait and see attitude prevails, with few farm sales and few offerings.

Yuma County

The market for Yuma County farmland remains stable to modestly appreciating in value, driven by winter vegetable industry, which desires land in the river valleys for a variety of crops, particularly lettuce. Farmland suitable for fresh produce is appreciating in value between 3% and 5% annually depending on location and qualities. Values for farmland used for field crops only are stable.

Yuma County irrigation districts have senior water rights on the Colorado River that keep us in good position during current drought. There is an adequate pool of farm labor available in Yuma and across the border in Mexico.

Arizona Citrus Outlook

Most of the citrus grown today is lemons - Lisbon Lemons. Values (land planted with lemons) have been increasing over the past couple of years as a result of strong commodity prices.   Planted acreages are down significantly as a result of urbanization. Harvest starts in early September and continues through November-District III, Desert Region per Sunkist.  No trees have been found with Asian Citrus Psyllid or Citrus Greening Disease, a strong reason to invest in the dry Arizona citrus market.

Southeast Arizona

Irrigated cropland prices are stable overall with sales being slow over the past 12-36 months. Vineyard sales have been very slow in the past 36 months with prices holding steady. Ranches and pastureland are stable overall with larger ranch sales being slow and prices holding steady. Southeast Arizona is experiencing a generational turnover of smaller ranches which are selling at a slow to moderate pace in the past 12 months.

Nut Crops

Sales activity is up. Prices have remained stable There have been several recent sales of pecans orchards with young and/ or mature trees. And there are a few farm parcels reportedly in escrow based on planned pecan development. There has been little, if any, pistachio-based sales this year.

Arizona Cattle Ranches

Ranch sales activity has been slow but steady over the last 2 years.  Prices have been stable.  The price increases seen in urban land have not moved into ranch land, yet.  One contributing factor is that the rural subdivision market has been very slow.  Also, many potential urban ranch-buyers are still paying off debt from the long recovery, building their companies back up, and cannot justify a non-essential investment at this time.  Meanwhile, most working ranchers can afford to expand their operations only a few times over their career.