The threats faced by farmers since 2022 could not be better exemplified than through the collapse of some of the biggest farming names in the Central Valley.

The Prima Wawona brand could not escape nearly $700 million of debt and had to go into bankruptcy, selling off its assets.

Private equity-funded Trinitas Farming could not turn a profit after low commodity prices and high borrowing costs also sent the company into bankruptcy. Vintage Wine Estates’ bankruptcy came after what industry insiders said was too much expansion into a market that could not last.

While not having declared bankruptcy, Touchstone Pistachios and Maricopa Orchards have not been able to get banks to agree to financial restructuring, according to a statement from partner Darius Assemi. Assemi Farming faces nearly $1 billion in debt.

Disclosure: GV Wire Publisher Darius Assemi is a partner in Assemi Farming.

Nationally, a majority of ag economists expect the industry to be entering a recession, according to the Farm Journal.

Ag Might Be Turning the Corner

The collapse of farming giants suddenly brought tens of thousands of acres of farmland onto the market. But the land did not stay on the market as long as some feared. Many family farms saw the precipitous drop in values as an opportunity to invest, said Doug Phillips, president of land brokerage Schuil & Associates.

Economists and brokers say the industry may be turning a corner. While not as high as the COVID-era boom, income forecasts are upward bound, economists say. Commodity prices are stabilizing, interest rates are coming down, and farm costs are coming down. And the economic valley farmers went through may prove bountiful for those capable of riding the storm.

“Price of almonds is up here in the past couple months, as is walnuts, interest rates are dropping, so we’re seeing a light at the end of the tunnel,” Phillips said. “But I think the lack of large institutional buyer interest has been the sum of all those factors.”

Post-COVID Market Creates Perfect Storm for Ag

The collapse of Trinitas and Prima illuminated the industry’s condition, said Ryan Jacobsen, president of the Fresno County Farm Bureau.

“You saw two giants of the local industry fall within just weeks of each other,” Jacobsen said. “It showed the complexities of everything that we’re dealing with right now.”

Investors at institutional funds see ag as a hedge against other economic trends, real estate experts say. California almonds, with their high returns, long shelf life, and marketability, became the darling of the investment world. Trinitas Farming farmed the nut nearly exclusively on its 8,600 acres of land.

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Strong consumer demand and low interest rates during COVID supercharged investment.

Stuck at home, consumers turned to cheap wine, launching the market forward, especially in the Central Valley.

But, similar to the ag crisis in the 1980s, the sudden pull-back on interest rates quickly impacted growers, Jacobsen said.

Trade wars, container shortages, and a strong American dollar weakened commodity prices as exports dropped. Interest rates made borrowing far more expensive. Water availability dried up.

All while almond prices fell from $4 a pound to $1.50. And grape growers may need to pull up tens of thousands of orchard acres to stabilize prices, experts say.

“Weathering the storms up and down was not necessarily something that most investment brokerages were used to doing,” Jacobsen said.

Lower Land Values Means Expansion for Local Growers

The mostly family farmers that bought up Prima land bucked the trend of the previous decade, said Dan Kevorkian, senior vice president with Pearson Realty. Pearson handled the sale of the 13,000 acres of land. With good water and quality trees, Kevorkian normally would have expected institutional investment to pick up land.

“It just totally went the opposite direction of how it has been trending,” Kevorkian said.

Most buyers came from neighboring farmland, he said. Surprising as well, land sold at or above listing price.

“There was enough capacity in the industry to absorb the acreage,” Kevorkian said.

Helping family farms buy? Lower land prices.

Earlier this month, AgAlert reported vineyard and orchard land values had dropped 25% to 50% in the last eight months, much of that associated with water availability.

Prima land with one water source might sell for $12,000 an acre, Kevorkian said. Land with two water sources sold for $35,000 an acre.

While hard on sellers, buyers see opportunity.

Stephen Schuil, vice president at Schuil & Associates, said lower land prices brought family farmers into the market.

Schuil represented an institutional fund bidding against two local dairymen for land in Tulare County.

“They owned adjacent land, saw the price that Trinitas paid, and they were picking (it) up for virtually that same price with almonds on them,” Schuil said.

Phillips saw the same thing in northern California, where lower land values enabled local growers to expand.

Market Needs to Figure Out What Ag Is Worth

Many land valuations were “ridiculous” to start with, said Michael Swanson, chief agricultural economist for Wells Fargo.

Swanson noted a few California wine deals that fell apart due to “aggressive pricing.”

How much land sells for largely depends on how much money can be made from it. Farmers were getting used to buying and selling when treasury rates were down to .5%, Swanson said. With treasuries selling now selling closer to 4.2%, generating the cash flow needed to cover that cost of money is challenging.

Thus, with higher labor and water costs, land costs have to come down to make a profit.

Related Story: California Wine Squeezed Dry: What Does It Mean for Valley Grape Growers?

Almond prices have come up somewhat, according to experts, but markets are still unsettled. Not helping are consecutive bumper crops, said Swanson.

“At what price can we sell 2-plus billion pounds of almonds on a regular basis? It’s not $3,” Swanson said.

But at $2 a pound, growers can hardly cover costs, Jacobsen said.

Farm Delinquencies Lower Than 2018: Thornberg

Lowered commodity prices, high water and input costs have not gone unnoticed to banks. Appraiser Thomas Chandler of Chandler Appraisal has seen significant drop off in work he’s been sent by banks, which he takes to mean a drop off in loan activity.

“There has been a pretty good decline of business for me for doing work with banks,” Chandler said. “That’s a function of just probably not approving as many loans towards lands against real estate. Maybe it’s a function of the market out there. I think people have slowed down on wanting to buy land.”

A survey of ag economists found 75% think the industry is on the brink of a recession, according to the Farm Journal. Fifty-four percent think the industry is already in a recession.

Economists cited lower commodity prices as reasons. The U.S. Department of Agriculture expects farm incomes to decline 4.4% this year.

However, Chris Thornberg, founding partner for Beacon Economics, thinks a recession is overblown. Swanson echoed that sentiment.

Federal Reserve data shows the delinquency rate for ag loans in 2018 was 1.73%, Thornberg said. In the second quarter of 2024, delinquency rates were .96%.

Thornberg added that loan activity has been low across the board, considering interest rates. Fed actions to lower interest rates could bring back some ag activity.

Other lower expenses could also help.

The USDA also expects farmers to spend 10% less this year than last on fertilizer, pesticides, and fuel, due to price declines.

Strong Payrolls, Employment Should Be Good for Growers: Swanson

Kevorkian, Schuil, and Phillips all report a dramatic pull back on institutional investment into farmland. The insurance companies and pension funds looking for farm investments are still searching for opportunities, but not with the same gusto they did in the previous decade.

Major capital typically search for larger properties, high producing, with stability.

“But if everything’s great, and you have a lot of profitability, then you don’t see those kinds of properties come on the market,” Kevorkian said.

With a strong economy, Swanson sees greater stability. Right now, the U.S. has the highest payroll levels, population, and jobs figures ever seen. He said if something isn’t selling, it’s at the wrong price.

“With more people, more jobs, there’s no reason for consumer demand to be soft around food,” Swanson said. “Food is not where you go to save money.”