5. Graying Farm Ownership
As independent farm ownership ages agriculture land is increasingly
concentrated in the hands of fewer large corporate entities seeking
control of a scarce ecosystem resource…prime agriculture land
• Average farmer is 57.1 years or older
− 57.7 years in fruit and tree nut categories
− California has the 4th oldest average age of US states (56.6 years)
− 26.2% are over 65
− Average age has increased in every census since the 1970’s
− Less than 15% of farms have 2nd generation succession in place
• Percent of young people joining the profession is
declining
− 15.9% in 1982
− 5.8% in 2002
Note: USDA Census of Agriculture 2007
6. Losing California Farmland
• What’s happened:
– Between 1984 and 2006, CA lost
1.2 million acres of farm and
grazing land (1875 square miles)
– 461,000 acres of that was
considered prime farmland
– Essentially, we lost the geographic
equivalent of Delaware
• What may happen:
– On present course, CA will lose
~5,500 square miles of farmland,
open space and recreation areas by
2050
– Let’s throw Connecticut in with
Delaware
Note: “Vision California: Charting Our
Future”, May 2010, Calthorpe Associates
6
$0
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$2,000
1975
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1996
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Value/Acre
Historical Farm Land Values Continue to Rise
7. Implications
Today’s farm ownership does not have access to the capital, or the
expected lifespan, to reinvest in their permanent cropland
• Yet consumers and the rest of the value chain are demanding new
products, organics, increased service that require investment
• So this cropland is being sold to:
– Developers
– Corporate “farmers”
• Leads to:
– Loss of farmland to development (short and long term)
– Less sustainable farming practices
• Short term mentality
• Not worried about next generation
8. Farmland as Asset Class
Ag Land has:
•Income Return
•Inflation Hedge
•Capital Preservation
and Appreciation
•Managed Risk and
Diversification
9. Asset Class Gaining Attention
Investors seeing farmland as safer bet than stocks Wary
of fluctuations on Wall Street, more wealthy Americans,
private funds and foreigners are putting money into
parcels of cornfields, fruit orchards and other U.S.
agricultural products.
Is farmland going to be the next gold? It isn't as
implausible as it may sound. Forecasts are always a
sucker's game, but there are good reasons why the next
few decades could see a new boom in farm country—and
big money for those who own the land.
A catch-all phrase for environmentally beneficial farming,
sustainable agriculture has long been the province of
organic enthusiasts. But venture capitalists say a growing
awareness of conventional agriculture’s contribution to
climate change and concerns over its consumption of
water and energy are creating markets for technological
innovation to minimize those effects.
10. Why Invest in California Citrus
California citrus is an attractive long-term investment: capital preservation,
an income return component, low to moderate risk, and high
diversification potential.
• Income Return
- Citrus is second highest valued U.S. fruit crop, behind grapes, in total US sales annually
- Average annual net revenues from $4,000 to $9,000 per acre
- Operating costs per acre vary from $2,200 to $2,800 per acre depending on variety,
cultivation type (conventional versus organic), tree density, and maturity
• Inflation Hedge/Capital Preservation
- Citrus, and farmland returns in general ,have historically been good inflation hedges
- Farmland supply is shrinking, adding value to the underlying asset
• Managed Risk and Diversification
- The highest quality citrus is grown in California
- Rind protects citrus and allows for up to three months storage; citrus is used in many
processed products
- The many citrus varieties allow for broad diversification around seasons, varieties, and
cultivation methods
11. Solution
• Local knowledge
• Strong management
capabilities
• Proprietary deal flow
• Unique target markets
• Interest in preserving
farmland for future
generations
• Regeneration of
ecosystems
• Healthier products
Merge local knowledge, strong management capability,
proprietary deal flow, and a unique target market with truly
sustainable practices to create an investment alternative for
wealth managers and institutional investors
Financial Success Sustainability
Investment
Opportunity
12. – Soil – High quality, San Joaquin Valley soils are some of the finest in the world, capable of
growing an incredible variety of crops
– Water – Water is a scarce resource in California, therefore a premium is paid when land has
both high quality surface water rights and access to good groundwater
– Climate – The San Joaquin Valley is climatically acceptable for any number of crop types,
however there are micro-climates across various regions that make it imperative to choose
location wisely
– Varieties for an optimal portfolio will vary depending upon the locations/qualities of the individual
ranches purchased.
Primary Investment Criteria
The appropriate combination of soil, water and climate will yield above
average returns over time through superior production and quality as well as
mitigate risk by allowing the owner to plant many different varieties/crops to
meet changing market demand
