Farmland values rise in tandem with commodity prices

High prices for agricultural commodities are beginning to be reflected in the selling prices of farmland in northern Nevada.

Tom Gunn, a farm and ranch broker with Nevada Farmland, just east of Sparks at Painted Rock, says the market for agricultural land is stronger now than ever with more demand than available supply — though much of the interest depends on the availability and source of water for irrigating crops.

Prolonged drought across northeastern Nevada has reduced hay production and driven up the price for Nevada’s prized protein-rich alfalfa, which sold for a yearly high of $212 a ton in August, the National Agricultural Statistics Service says. Due to the higher profit margins, farmers who might have been considering selling their properties and exiting the farming game are hanging on and subsequently creating a shortage of properties for sale.

Much of the interest in farmland is in the Winnemucca area and around Orovada, where huge swaths of wide-open parcels of land can be purchased — unlike the fertile areas surrounding Yerington and Fallon, where much of the available land for farming operations already has been broken into smaller parcels.

“There is demand there, but nothing comes up,” Gunn says. “The outlying areas, you can get more production from bigger places so there is more demand.”

And most inquires for farmland are for income-producing land that’s previously been irrigated with a firm source of water, says Tom Fennell, a broker with Dickson Commercial in Reno who works with partner Ryan Rife on ranch and agricultural sales in northern Nevada. Buyers are looking for land that can immediately be put into production or already is in seed.

Cropland near Winnemucca, Orovada and Lovelock generally sells between $3,000 to $4,000 per acre depending on improvements, Gunn notes. In Fallon that figure rises to around $5,000 per acre, and in Yerington and the Mason Valley it can go as high as $8,000 to $10,000 an acre due to the high yields for crops grown in the area. Non-irrigated land or land that’s been fallow for several years often sells for much less.

The fall opening of the new Dairy Farmers of America dry milk plant in Fallon, a facility that’s projected to need upwards of 2 million gallons of milk delivered daily to run at full production, could be expected to drive much of the interest in farmland in northern Nevada. Dairymen in the state need to increase their herds by more than 25 percent to meet that demand, which requires regional farmers to grow more feed.

However, Gunn says, only about 10 percent of prospective buyers have that scenario in mind. Though some land sales this year have been to Fallon-area dairymen seeking cropland to grow alfalfa to support their expanding dairy operations, more sales have been to people seeking safe haven for investment funds.

“A lot of people don’t know where to put their money, and they think agriculture is the backbone of the country,” Gunn says. “If they are going to park their money into something, agriculture is a good place to stick their money for a while. It’s fairly liquid and can move fairly quickly.”

Other well-established operations are expanding or shifting their focus. Winnemucca Farms, a large potato and crop producer in Winnemucca, purchased more than 1,600 acres of farmland at Orovada for $3.14 million in 2012 to expand its operations in the state. And Peri & Sons Farms, the largest onion grower in the Mason Valley, has diversified its field crops to include garlic, lettuce and other greens, Fennell says.

Pat Morrissey, broker and owner of Morrissey Realty in Reno, says that though the ag market has many prospective buyers trying to find the right deal to fit their budget and business plan, no two deals in Nevada are the same because of the availability of water.

Farms that operate with well water incur higher expenses for pumping — though it’s a much more stable supply. Farms that use natural streams, snow runoff and gravity to move water have less expenses but are much more susceptible to fluctuations in supply that impact production.

Sales and pricing for ranchland have suffered, Fennell says, because the prolonged drought has forced ranchers to sell cattle early to reduce their herd sizes.

“The beef guys have been having a hard time lately because there is such bad drought that grazing has been tough. If they only have BLM or Forest Service permits they have been struggling to have good feed.”

Despite the poor winters leading to fewer cuttings of alfalfa and lack of forage for cattle, sales of agricultural land in northern Nevada are expected to remain strong as the DFA plant comes online and ramps up production.

“It’s a brisk market right now; there’s not lot of availability but a lot of demand,” Gunn says. “The milk plant definitely has got some demand but it’s small. In five years there may be more from dairymen coming in from others areas and buying farms in the immediate area and within 100 miles.”