Some of California’s largest and most productive real estate is under threat in 2019. Farming conditions are declining, and land values are at risk.

A large majority of bankers have reported decreases in national farm income each quarter since 2014. Both quality farmland and pastureland experienced property value declines in Q1 2019, with quality farmland down 0.3% and pastureland falling 3.3% from a year earlier, according to the Federal Reserve Bank of St. Louis.

Further, lending conditions for farms are expected to decline in 2019, with decreases expected in:

  • demand for loans;
  • availability of funds; and
  • rates of loan repayment.

62% of surveyed lenders said the biggest risk to the farm industry in 2019 is the danger of adverse trade outcomes. In other words, the growing trade war with China (and perhaps other countries) is likely to deepen the reduction in farmer incomes, decreasing their ability to repay loans.

With less profitable outcomes and rising trade tensions threatening future prospects, it’s no surprise that lenders expect fewer farmland purchases in the months to come. [See RPI Form 158-1]

As U.S. borders tighten, farmers don’t only have trade agreements to worry about. Their source of labor is under threat, too.

Roughly half of California’s farmworkers are undocumented immigrants. Further, documented farmworkers are aging quickly, as younger documented individuals opt for higher paying and less physically draining work. This information is part of the reasoning behind lawmakers’ plans to make a pathway to work permits and eventually citizenship for California’s undocumented farmworkers.

This plan, called the Blue Card Bill, is supported by the California Farm Bureau Federation (CFBF), a non-profit organization representing the interests of family farmers and ranchers. The CFBF sees the potential change a positive step toward curbing the labor shortage already present in farmlands across the state.

Even if the Blue Card Bill passes — which is not very likely since it lacks bi-partisan support where it’s needed at the national level — the farmworker shortage will continue throughout 2019 and the coming years, until the political climate changes. The trade war will continue chip away at farmers’ profits, making farmland less desirable until the economy reverses course.

Related article:

How the trade war is impacting California real estate