California Forever: A glance at the underlying economic and policy issues

Posted on January 25, 2024 by Dan Bigelow

With the housing crisis facing many communities in the western US, who can argue against dense, affordable housing with tree-lined streets and easy access to bike lanes, shops, and schools? It’s a gamble that the investors in California Forever are willing to make. As has been reported widely over the past several months, the company is seeking to build a new city from scratch in Solano County, California. A recent piece in the New York Times paints a vivid picture of one of the main challenges the company has faced in getting the project off the ground: getting farmers to sell the land on which the proposed city will be built.

Acquiring a land base is the obvious first step for the project to proceed. The company’s tactics, which involves offering residing farmland owners lucrative, above-market prices for their land, has been met with some controversy, in no small part because of a lawsuit filed against a group of holdouts which accused them of colluding to drive up the company’s offer prices. Once the land base is acquired, it seems unlikely that it will be smooth sailing for the project to be completed. Building a city from scratch would require a complete upending of existing zoning laws made all the more difficult because the proposed development will border a US Air Force base, which has brought the Department of Defense into the fray. And that’s just to get the permission to build, never mind the actual construction of infrastructure and buildings that would make the city a livable reality.

With all of this said, here are some issues that the California Forever enterprise brings to mind for Oregon and other areas:

  • How should land use be regulated? Overhauling local zoning laws is challenging, to say the least. In Oregon, this issue would be compounded because of our statewide land-use planning program, the cornerstone of which is the establishment of urban growth boundaries, which dictate where new urban development is allowed to occur. In other words, Oregon’s land-use laws would effectively make something like “Oregon Forever” a non-starter. In addition to amending local zoning maps, a proposal like this would require approval from the Land Conservation and Development Commission, a state board that works in concert with the Oregon Department of Land Conservation and Development, to assure local adherence to statewide planning guidelines. Oregon’s land use laws can make hosting weddings on farm properties extremely challenging, never mind building an urban utopia from the ground up. As much as anything, California Forever should be thought of as a backlash against the difficulty of getting new development approved in existing urban areas.
  • Land market fundamentals. Most economists tend to think about farmland markets through the lens of what’s known as the “fundamental value of land”, which states that the value of land should reflect the discounted stream of income accruing to the landowner. When thinking about the role of non-agricultural factors, like development pressure, economists usually assume an orderly pattern of urban expansion where undeveloped land closest to existing urban areas is developed first. For this reason, the price of farmland with the same productivity potential can command widely varying prices depending on its location. If successful and mimicked elsewhere, California Forever’s model of farmland purchases in outlying rural areas has the potential to throw a wrench into the practical usefulness of existing land valuation models.
  • Who is going to live there? If it ends up being another bedroom community for the Bay Area, how will increases in commuting, as well as all of the necessary road and infrastructure construction, eat into the green-minded aspirations of the project developers? The Bay Area is often thought of as an outlier in terms of housing costs and availability, but how much of an effect will it really have on housing costs in the region, especially if it attracts migrants from outside the state? A related factor at play is remote work and whether prospective residents would even need to commute. That also brings up the issue of office-residential conversions, with a recent analysis pointing to the Bay Area as having one of the highest concentrations of candidate buildings for redevelopment.

In a broader sense, innovative ideas to generate rural wealth are often met with support, but how do we think about what this means if rural landowners are simply cut a check to fundamentally alter the character of their community? Despite all of the logistical hurdles that will need to be overcome, the California Forever CEO has a steadfast belief that the project will be completed in years, not decades. Regardless of how realistic that timeline might be, I’ll be interested to watch how this story plays out.

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How well do surveys capture farmland market conditions in Oregon?

Posted on January 4, 2024 by Dan Bigelow

In the past, I’ve written several articles and posts on farmland markets in Oregon. All of these have relied on the results of surveys conducted by the U.S. Department of Agriculture, which ask producers to report their best estimate of the market value of their land. Naturally, this brings up the question of how well these survey responses capture the price at which land would sell in a market transaction. This post will briefly shed some light on that by comparing recent trends in USDA survey responses and observed, actual farmland transaction prices in Oregon.

The sales data I’m using come from CoreLogic, a private data vendor that assembles information on housing and land sales from each county in the US. Currently, the sales transactions cover the most recent transaction of all parcels labeled in the database as “agricultural” through July of 2021. In the next few months, I’ll have access to a larger database that covers land sales up through 2023 and includes both the most recent and historical sales of all farmland in the state, but for now this is what I have. To make an apples-to-apples comparison, since sales prices do not split out the price of any buildings or infrastructure present on the parcel, the survey data measure I’m using is the average farm real estate value, which represents the combined value of both land and farm-related buildings.

Because the database requires some cleaning, in this initial post, which I plan to be the start of a longer series of posts and articles on farmland prices in Oregon, I remove observations that might reasonably be considered outliers. First, I adjust the prices and survey values for inflation using the 2023 Gross Domestic Product Implicit Price Deflator. I then remove all sales with a per-acre price less than $100/acre or above $50,000/acre, as very low prices would potentially indicate sales between family members that are not at full market value and very high prices likely indicate sales that are not made for a bona fide agricultural use. I also remove sales that are less than 20 acres or above 5,000 acres. Although sales outside of these acreage bounds might reflect true agricultural sales, I do this to be conservative. Small-acreage sales often point to land in uses that are not truly agricultural in nature and large sales might reflect data processing errors.

To further minimize the presence of sales made for immediate non-agricultural use, using GIS data from the Department of Land Conservation and Development I remove sales of parcels inside of an urban growth boundary at the time of sale. For each year, I then take the average acreage-weighted sale price for all sales taking place in that year, which gives me the average price for an acre of land as opposed to the average unadjusted sale price.

The statewide trends in survey values and observed transaction prices are shown in the above figure. While both point to a general upward trajectory in farmland values over the 1997-2021 period, it is clear that survey values fall considerably short of average observed sales prices in each year. In a given year, sales prices are, on average, 78% higher than the survey value. Over the most recent five years (2017-2021), the average sale price amounts to $5,057/acre, while the average self-reported value from the USDA is $2,935/acre. The sales sample size ranges from 362 in 2009, during the depths of the Great Recession, to 821 in 2020, the most recent complete year available. I expect the sample sizes to be larger once I have the complete sales histories put together over the coming months. However, farmland markets tend to be fairly thin, with relatively few land parcels up for sale each year (e.g., compared to housing markets), which partly explains the more erratic trend in observed prices.

What might explain the large discrepancy between self-reported land values and actual sales transaction prices? For one, because farmland markets are thin, it could be a case of sales selection bias, where only higher-quality parcels are likely to be bought and sold. It could also be the case that sales data are skewed towards land bought by investors or other market participants who plan to develop land, which would lead to a price premium. Although I remove sales inside UGBs, all else constant, we would still expect the price of land close to existing UGBs to be bid up relative to land further away. Producers responding to surveys may also underestimate the market value of their land, especially if they are not fully considering the land’s potential in a future developed or other non-agricultural use. At any rate, this brief analysis makes clear that survey-reported land values and sales prices are capturing different features of Oregon’s land market.

Going forward, I plan to delve more deeply into the sales data to look at relationships between land prices and things like urban proximity, irrigation water rights, drought, and other ongoing policy issues in Oregon’s farmland market.

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Estimating the economic impact of wolves on livestock producers

Posted on December 4, 2023 by Tim Delbridge

Tim Delbridge

I attended the Oregon Cattlemen’s Association annual convention last week, in part to talk to ranchers about their experience operating in areas of wolf activity. While wolf management policy is often controversial, there isn’t much disagreement that the return of wolves to the Oregon landscape requires that ranchers adjust their management practices. Unfortunately, there is little research on the economic impact of wolf presence on individual livestock producers, mostly because of the difficulty in collecting data on all the direct and indirect ways that wolf-livestock interactions affect a ranching business. This is a gap that we are working to fill and in the meantime I will use this blog post to provide some background on the growth in wolf populations in the state and how those populations overlap with livestock grazing areas. I’ll also touch on the challenges associated with developing a richer understanding of the economics of the wolf issue in the western US.

Figure 1

Wolves returned to Oregon in 2009, and the population has been increasing since. Figure 1 shows the minimum wolf population over time in Oregon. The Oregon Department of Fish and Wildlife (ODFW) publicly releases these minimum known population numbers, along with GIS data showing the areas of known wolf activity (AKWAs) for each named pack, and reports of wolf depredation events (with exact locations withheld). Figure 2 shows a map with ODFW AKWAs for each named pack in 2022. The number of packs has increased significantly in recent years, with the highest wolf populations in the Northeast, but growing populations in Central and Southern Oregon.

Figure 2

With the spread of wolves across the state, there has been large increases in both the number of cattle grazing in areas of wolf activity as well as the density of wolves in affected grazing areas. Data from public grazing lands, while only one part of the grazing picture, provide useful insights into how the situation has evolved for Oregon ranchers in recent years. Figure 3 shows the increase in the number of livestock on public grazing lands that fall within an ODFW AKWA. This can be thought of as the number of cattle that are at risk of interaction with wolves while on the public allotment.

Figure 3

Interestingly, the wolf population density on public grazing allotments has grown at a faster rate than the number of cattle exposed to wolves. Figure 4 shows a measure of average wolf density on BLM and USFS allotments over time. The density of wolves increased by more than a factor of ten from 2011 to 2022 while the number of cattle grazing in an area of known wolf activity increased by a factor of six over this period. I calculated this density metric for each allotment by applying to it the density of an any overlapping AKWA. In the case that multiple packs were active on a single allotment, the allotment’s wolf density is the sum of the individual pack densities. This method is sensitive to ODFW estimates of a pack’s range, which may not be perfectly reflective of wolf hunting patterns in summer months when cattle are on the public lands.

Figure 4

While the most obvious impact of wolves on livestock is direct attack, there are several other ways that wolf presence can reduce ranching revenues and increase the cost of production. These include the labor costs associated with staying with and moving livestock to minimize interactions with wolves, and the cost of improved fencing, flags, and other materials that may deter wolves. Wolf related stress on cows and calves can result in reduced animal health and body condition, lower conception rates, and lower calf weight at the time of weaning or sale. These impacts likely exceed the cost of direct livestock kills, though we don’t have good data on how these costs vary from ranch to ranch and from year to year. The impact per producer or per head of cattle may be small when averaged over all livestock operations in the state, there can be very significant costs to individual ranches in affected areas.

Figure 5

Finally, Figure 5 shows the wolf density measure by grazing allotment in the form of a heat map for 2022.  The next step in our economic analysis is to gather data on ranch level production costs and revenue reductions that are associated with different levels of wolf activity. We will then apply ranch-level impact estimates on maps of public and private grazing areas according to the density of wolves seen there. With this approach we will be able to produce an estimate for total statewide impact and provide guidance on how these impacts are distributed across the landscape and across Oregon’s cattle producers.

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Most recent cash rental rate estimates paint a mixed portrait for Oregon

Posted on October 20, 2023 by Dan Bigelow

An OSU Extension article containing the same information as this post can be found here.

Agricultural producers can gain access to the land they need through two general channels. Some own their land, after purchasing it from another landowner, bidding on it in an auction, or inheriting it from a family member. The alternative to ownership is renting land from another producer or a non-operating landowner (a person who owns land but is not actively involved in agricultural production). Per the most recent data published in the 2017 Census of Agriculture, rented farmland in Oregon accounts for 30% of all farmland in the state. This is relatively low compared the national figure, which stands at 39%, but still accounts for roughly 4.7 million acres of land in the state.

The comparatively low rental percentage in Oregon can likely be chalked up to a few things. One is the large amount of grazing (pasture and range) land in the state. If it is not owned by the federal government, grazing land is generally more likely to be owned by the producer using it. There is also a large amount of irrigated cropland in Oregon – roughly 27% of all cropland in the state was irrigated in 2017 – which is also less commonly rented out than non-irrigated cropland due to the capital and maintenance costs associated with irrigation infrastructure.

Each year, the US Department of Agriculture’s National Agricultural Statistics Service (USDA-NASS) publishes cash rental rates at the state and county levels. The county-level data come from a cash rental rate survey conducted every summer to collect information on the cash rents paid for non-irrigated cropland, irrigated cropland, and pastureland. A unique aspect of this survey is that it provides county-level data on an annual basis. Additionally, at just one and a half pages in length, the survey is very short and less complicated compared to other USDA surveys, which tends to produce a higher response rate. In 2023, 70% of the 3,700 surveyed producers responded to the USDA-NASS cash rent survey in Oregon. The state-level cash rent data come from the same June Area Survey that USDA-NASS uses as the basis for its annual farmland value estimates (see my recent OSU Extension article here).

Note: Values in the figure are adjusted for inflation to $2023 using the BEA’s GDP Implicit Price Deflator.

Over the past year, the statewide cash rent for irrigated cropland declined by 3.75% in inflation-adjusted terms. Irrigated cropland tends to be rented for much more than non-irrigated cropland, due to the higher returns associated with irrigated production and the costs of maintaining irrigation-related equipment and water conveyance infrastructure. In 2023, irrigated cropland was rented for an average of $259/acre, which is comparable to the previous five-year average of $260/acre. Looking across the state, irrigated rents tend to be highest in the northern Willamette Valley and other counties along the Columbia River (Hood River, Wasco, and Morrow). With a couple of exceptions (Klamath and Malheur), counties in the eastern, central, and southern parts of the state tend to see lower irrigated cash rents. Changes in irrigated cropland rents over the past year varied widely, with the largest percentage gains occurring in Clackamas, Baker, Union, and Lake, and Grant, Cook, and Lane seeing the largest declines.

Note: The color shading in all maps corresponds to the cash rental rate reported for 2023. Where present, the numeric value on the map corresponds to the 2022-23 real percentage change in cash rent. Shaded counties without a numeric label did not report a rental rate in 2022. 

In contrast to irrigated cropland, non-irrigated cropland rent, at $107/acre, was up by 2.75% over the past year. Note, however, that the 2023 rental rate is actually down compared to the most recent previous five-year average of $109. Counties in the northern and mid-Willamette Valley tend to have the highest rents, along with Tillamook and Union. Southern, coastal, and northeastern Oregon tend to have lower non-irrigated cash rents. The largest annual percentage gains were in Jackson, Douglas, and Wasco. Columbia, Clackamas, and Harney, on the other hand, had relatively large percentage decreases.

The average 2023 pasture cash rent was $11.50/acre, a 3.01% decrease compared to the 2022 value, continuing a downward trend since USDA-NASS started their current rental rate reporting program. Although the dollar values involved tend to be lower on a per-acre basis, pasture operations tend to be much larger, so small deviations in rental rates can add up quickly. Pasture rents have generally declined continuously since 2009, with the 2023 rent being nearly 16% lower than the previous five-year average of $13.68. The Willamette Valley, coastal, and central parts of the state tend to have the highest pasture rents, while eastern Oregon, where farms tend to be larger, have lower per-acre rents. Lake, Douglas, and Morrow had the largest percentage gains in pasture rents over the past year, contrasting with the large declines in Umatilla, Klamath, and Coos.

As I mentioned in a previous blog post, it bears emphasizing that the USDA-NASS pasture rent figures paint an incomplete picture of the rental market for this type of land. This is because the USDA survey only reports on land rented for cash, but most private grazing land is rented on a per-animal unit month (AUM) or per-head basis. In addition, a considerable fraction of land in grazing operations comes from public land owned by the Bureau of Land Management or U.S. Forest Service, with those lands also rented on a per-AUM basis.

Cash rents can be a useful snapshot of the overall health of the farm economy, as they are heavily influenced by the net returns to agricultural production. They do, however, tend to be a lagging indicator. Rental leases for the upcoming year tend to be negotiated following harvest in the late fall, winter, or early spring, so the values reported by NASS for 2023 are more reflective of what landowners and renters expected the year to bring, not what actually happened. In addition, some leases, particularly for irrigated farmland, tend to be renewed on a multi-year basis. Thus, for example, a three-year fixed-cash lease covering the 2021-2023 production years could also be included in the 2023 NASS values, which makes it further removed from current production conditions.

Because purchasing land outright typically requires extensive financial capital (e.g., money for a down payment and other land currently owned as collateral), renting is often seen as a way for new and beginning producers, or producers who are otherwise financially disadvantaged, to build and grow an operation. Land rental, however, is not limited to smaller producers, as most commercial farms in the US contain a mix of owned and rented land. As is the case with land values, changes in rental rates produce winners and losers. As commodity prices rise, landlords tend to raise rents and gain a higher nominal return on their land investment, which offsets the benefit of higher prices for their tenants.

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The urgent need to improve groundwater management

Posted on September 19, 2023 by jaegerw

William Jaeger

Groundwater is one of the most challenging resources to manage, in large part because it is hidden below ground and thus poorly understood. Many regions of the world have a high dependence on groundwater for agricultural, municipal, and domestic uses, as well as for aquatic habitats and other groundwater-dependent ecosystems. Yet aquifer depletion continues at an alarming rate, imposing costs on rural communities, farms, the environment, and society generally. This is particularly true in the western United States where consumptive use of water is expected to exceed available surface and groundwater by 2030. As surface water becomes fully allocated, groundwater withdrawals have increased, in part because western U.S. states have not done enough to regulate groundwater pumping. A recent detailed analysis of the problem by the New York Times found declining trends over the past 20 years in many areas – as indicated in red and orange in the map below.

Source: NY Times

The trend is particularly severe in Oregon where two-thirds of monitoring wells have declined since 1980. How and why has this happened? Like other states, Oregon has been slow to recognize that the accommodating approaches to managing an abundant resource of the past are insufficient in a world of scarcity, one where nearly all new uses of groundwater can be expected to cause interference with existing uses of both groundwater and surface water.

As in most parts of the western U.S., Oregon’s groundwater use is dominated by agriculture (about 90% of the total groundwater withdrawn), and the areas of concern across Oregon are widespread as indicated in the map below:

Source: 2021 Oregon Groundwater Resource Concerns Assessment

Efforts are underway, however, to fully recognize the realities of groundwater scarcity and, to some degree, groundwater’s unique management challenges. Over the past six months I’ve participated in this process as a member of the Oregon Water Resources Department’s Groundwater Allocation Rules Advisory Committee (RAC). The goals include clarifying and updating the rules for evaluating applications for new groundwater rights. Central to the approval process is determining whether “water is available” (in order to allow additional groundwater right). It is not an easy question. Groundwater resource rights are connected hydrologically to surface water. Pumping from a new well will potentially impact other existing wells, as well as surface water where it can interfere with surface water rights, springs, stream flow, and wetlands.

So how do we decide if “water is available” to allow development of a new right to withdraw groundwater? We need data on water levels and trends nearby and over a period of years. But reliable data is scant, and levels can fluctuate year to year. Most wells don’t collect or report the kind of data needed to develop a good understanding of the capacity of a given aquifer to sustain additional demands. Many well owners are reluctant to share information about their pumping rates and water levels. This unfortunate situation is counterproductive to gaining a good understanding of the state of the resource. Imagine trying to manage Oregon’s coastal fisheries if fishermen didn’t report their catch?

Central to Oregon’s water law is the “prior appropriations” seniority system that allocates water to senior water rights (established long ago) before more junior water rights (established more recently). Determining the “interference” of a junior water right on a senior water right is relatively easy with surface water (we observe stream diversions and know which way water flows). But knowing which junior groundwater right has interfered with a given senior groundwater right (or with a surface water right) is effectively impossible for purposes of regulation.

Interference among surface water irrigators occurs entirely within a given growing season. In the case of groundwater pumping, however, there is both within-season interference as well as longer-term aquifer depletion. But regulators don’t have sufficient information about the underground hydrological connections between specific wells to have a strong basis for knowing which junior water right should be shut off to protect more senior water right holders, so regulation is almost never used. This puts senior water right holders in overallocated basins at risk, where some water rights having seniority dating back more than 100 years are degraded from the interference of newly approved groundwater rights.

We can’t be sure if a new permit will impact existing groundwater rights and capacity, but given that Oregon’s surface waters are fully- or over-appropriated, there is a strong argument for erring on the side of caution. The current OWRD proposal seeks to establish a quantitative test to ensure that groundwater levels are “reasonable stable” and that a given aquifer is not “overdrawn.” Do water levels show declines of more than 0.5 feet per year? Do water levels show total declines greater than 25 feet or 8% of saturated thickness of the aquifer? A “yes” to either of these questions would trigger a finding of “water is not available.” And if there is insufficient data to evaluate these tests, then a precautionary finding of “water is not available” is also applied.

Oregon’s seniority water law system places emphasis on protecting existing rights above the approval of new, additional water rights. But the risks of unsustainability are high due to two factors:  the lack of an effective or operational enforcement mechanism to adjust to within-season or long-term declines in groundwater supply, and the implied permanence of a new groundwater right — there is no way to fine-tune the amount of pumping allowed (no two-way adjustment mechanisms as in the case of a catch-share fishery where the total allowable catch can be revised up or down, year-to-year).

The revisions currently being considered by the groundwater RAC represent an important step, but more changes will be needed to better manage Oregon’s groundwater resources. There is an urgent need for more and better data, such as requiring groundwater right holders to measure and report water use and well levels. And we need to find policy mechanisms to adjust groundwater demand in response to changes in our understanding of groundwater supplies.

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What does the EPA Vulnerable Species Pilot Project mean for Oregon agriculture?

Posted on August 28, 2023 by Tim Delbridge

Tim Delbridge and Dan Bigelow

As the Capital Press and other outlets have been reporting over the last month, there is a draft plan from the EPA to protect a number of endangered and threatened species through new restrictions on pesticide applications. One of the protected species, the Taylor’s Checkerspot Butterfly, is found here in the Willamette Valley as well as in western Washington. The EPA’s proposed mitigations call for a near-total prohibition on applications of herbicide and insecticide use for non-residential uses in the affected “avoidance area”.  That is, if this EPA plan is implemented as currently drafted, farmers and forest managers will not be able to use pesticides on slightly more than one million acres of the Willamette Valley and more than 3.5 million acres of Washington. In addition to the proposed pesticide bans in the avoidance area, looser regulations on pesticide use are proposed for a smaller “minimization area” around its periphery. A well-produced interactive map along with information on the Taylor’s Checkerspot Butterfly can be found here.

EPA map of proposed pesticide avoidance and minimization areas in Oregon

This short blog post will outline a few general conclusions that we can come to about the potential economic impacts of the EPA’s plan. We will then use the USDA Cropland Data Layer (CDL) to estimate the acreage of each crop that would be affected in Oregon and Washington. Note that these statistics apply to the avoidance area subject to the strictest proposed pesticide use regulations, which understates the true number of acres that will be impacted. We then provide some early idea of the degree of impact that we might see in different commodity markets.

In general, the EPA plan will remove insect and weed management tools from farmers. The degree of impact will vary by crop and location. Where the restrictions are binding, they will increase production costs, reduce yields, and, consequently, reduce operating profits. The restrictions will make some production systems unprofitable and lead to changes in land use and crop choice. We can be confident that:

  1. At least in the short term, agricultural land values in the affected areas should fall relative to nearby unregulated areas. It is difficult to anticipate the severity of the potential land value declines. To the extent that farmers will generate less annual net revenue under the EPA restrictions, lower purchase prices and cash rental rates will result. Over a longer time horizon, as producers adjust (see next two bullets), land values and rents may rebound accordingly.
  2. Many individual farms would suffer financial losses and increased expenses associated with switching production to new crops and/or cropping systems that are less dependent on pesticides. These short-term adjustment costs are in addition to the sustained reduction in profits that could be expected under the new cropping choices. The adjustment costs could be larger for perennial crops, such as blueberries or hazelnuts, that are costly to establish. Note that these adjustment costs include both the tangible financial cost of changing how a farm operates, as well as the investment in learning how to grow something new, which is harder to quantify.
  3. Organic acreage would increase in the affected areas. High rates of organic adoption (either by existing farms or new buyers/tenants taking advantage of falling land values) in this area could lead to significant increases in overall organic acreage in the PNW. While this might sound positive to advocates of organic agriculture, we could expect some volatility in regional organic markets and downward price pressure on organic crops that are well suited for the affected area. Furthermore, this may be the first example of farms in US being so strongly guided towards pursuing organic adoption, and it is not clear how their success will compare to existing organic farms that chose to transition voluntarily.
  4. Prices of some of the most affected crops will increase in response to the potential fall in production. Some of these price changes may be tempered as production eventually shifts out of the affected areas. Farms outside of the EPA mitigation zones are likely to benefit financially from the higher crop prices, at least in the short term. Because the regulated areas represent a small fraction of the production land base for most commodities, the price effect will only be noticeable for crops for which the impacted area represents a significant portion of regional or national acreage (e.g. blueberries, grass seed).

By overlaying the EPA maps of proposed avoidance areas on the satellite imagery from the USDA CDL, we have generated a list of crops grown in both Oregon and Washington and the average acres planted in each over the past five years. You can access the full list for both states in a google sheet here. While these estimates are not perfect (and are particularly challenging for crops/forest types that look the same from space) they give us a pretty good sense of which crops would be most affected by the EPA plan. In addition to the agricultural uses listed in the table, note that sizable amounts of forest, wetlands, and developed land also fall in the areas that would be regulated.

In Oregon, grass seed looks like it will be among the most impacted crops. The “Sod/Grass Seed” category from the CDL includes more that 115,000 acres within the EPA avoidance area. That is roughly 25% of the grass seed acreage in the entire state of Oregon, where a vast majority of grass seed is produced. If these grass seed farms were no longer able to use pesticides we would see significant disruption and financial losses for individual farms and a large increase in farm-gate prices for grass seed, at least in the short term. In Washington, more than 7,000 acres of blueberries and 2,000 acres of caneberries fall within the avoidance area, representing about 20-30% of statewide acreage for these crops.

The ultimate fate of the EPA’s proposed pesticide regulations remains to be seen. A unique aspect of the discussion around the proposed rules is that disparate groups of stakeholders, including producers, environmental groups (such as the Center for Biological Diversity), and the USDA, all seem to agree that the regulations go far beyond what is necessary to provide adequate protection for the Taylor’s Checkerspot Butterfly. If implemented as proposed, the impacts of this EPA policy will be far-reaching and will affect farmers and landowners in complex ways. The impacts will be felt beyond the geographic area targeted in the mitigation plan and farmers across the region would be wise to consider them when planning future investments and cropping systems.

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Per latest USDA estimates, most categories of farmland value in Oregon continue to rise

Posted on August 9, 2023 by Dan Bigelow

On August 4th, the US Department of Agriculture (USDA) released its latest state-level data on farmland values. The data come from the USDA’s June Area Survey, which asks a rotating panel of producers to estimate the market value of their land. Responses from surveyed farmers are then weighted and extrapolated to generate estimates for entire states. The survey-based estimates are broken down into four categories of per-acre land values: (1) farm real estate, measuring the value of all land and buildings on the farm, (2) non-irrigated cropland, (3) irrigated cropland, and (4) pastureland.

In Oregon, the per-acre value of farm real estate is $3,180 in the most recent data (see Table 1), representing a $140 (4.61%) increase in nominal terms over the past year. Note that this is in nominal terms, meaning that it is not adjusted for inflation. Economists typically examine trends in farmland values over time using real (or inflation-adjusted) values, which account for shifts in values relative to incomes and the prices of other goods. After adjusting for inflation using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator, the change in farm real estate value is more muted, but still positive, amounting to a $46 (1.46%) increase in 2023 dollars. When compared to its most recent 5-year average, farm real estate values are up $134 (4.41%). These changes indicate that the value of Oregon’s farm real estate has outpaced inflation in recent years, as it has for much of the last several decades (see Figure 1).

Figure 1: Farm real estate (land and buildings) value, Oregon, 1998-2023

Non-irrigated cropland value, at $2,600/acre, is down slightly over the past year in real terms, representing a decline of -$81 (-3.01%). Compared to its 5-year average, the change is a much smaller decline of -$3 (-0.11%). The value of irrigated cropland, on the other hand, is up to $6,600/acre in 2023, a $53 inflation-adjusted gain of 0.81%. Irrigated cropland value is up even more, by $203 (3.18%), relative to its 5-year average. Pastureland value, at $950/acre, experienced the largest gain of any specific land category, increasing by $22 (2.38%) compared to 2022 and $41 (4.49%) against its 5-year average. Despite the recent drop in the real value of non-irrigated cropland over the past year, the values of all categories of Oregon’s farmland have generally more than kept up with inflation in recent history (see Figure 2).

Figure 2: Inflation-adjusted farmland values for different land uses, Oregon, 1998-2023

With aggregated state-level data on farmland values, it is difficult to tease out any direct cause of the observed trends or year-to-year changes. One thing that is clear, however, is that the increases in interest rates seen over the past couple of years have not yet translated into large decreases in the value of farmland. When interest rates go up, we generally expect the value of land to go down, as debt payments for land purchases go up and landowners put a greater discount on the net income they expect to receive from the land in future years. It is plausible that this is why non-irrigated cropland values have started to come down and growth in overall farm real estate and irrigated values is lower than in the last couple of years, but note that pastureland value growth is actually slightly higher than it was over 2021-22. The contrasting trends between irrigated and non-irrigated land may also be related to the droughts that Oregon, and much of the west, continues to experience, which should place a premium on access to irrigation water.

Table 1: Summary of 2023 USDA farmland values for Oregon.

The fact that Oregon’s agricultural land has generally continued to appreciate in value has both pros and cons. Investors tend to be attracted to farmland because it generally keeps pace with inflation, which makes it an attractive and relatively safe asset class. For many reasons, having access to affordable farmland is key for producers, as real estate is the most common source of collateral in farm-related loans. Without owning farmland, it may be more difficult for producers to obtain the capital, on affordable terms, that allows them to make other investments in their operations. When land values increase, current landowners benefit, but it only makes it harder for renters and new and beginning producers to purchase the land they need to grow their operations.

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It has been a bad year for PNW cherry producers

Posted on July 25, 2023 by Tim Delbridge

Tim Delbridge and Ashley Thompson

The cherry industry is unique, even among specialty crops, in that the production period is brief, the crop (typically) has a very high value but has a short shelf-life, and a relatively small proportion of the crop is diverted to processing applications. This creates a significant amount of risk for growers, as their annual revenue is highly dependent on production and market conditions in a few short weeks of the early summer. For farmers in Oregon and Washington, the critical period is typically from mid June to early July. Growers further South, in the San Joaquin Valley of California, see production peak in late spring. The ideal outcome for cherry producers in the PNW is that California cherries are largely out of the market by the time that fruit is picked in The Dalles, the Yakima Valley, and Wenatchee.

Photo credit: John Byers; The Dalles, OR

This year, things did not go as planned. In fact, cherry prices have been near or below the cost of harvest this summer, leading many growers in OR and WA to leave fruit in the field rather than face the cost of hand picking the cherries and sending them to the packing houses. Financial losses will be severe for many cherry producers, and to a lesser extent the farm workers, packinghouse employees, and the communities that rely on the summer influx of economic activity during the cherry harvest. There remains considerable uncertainty regarding the future and whether this year’s market will become more typical.

The figure below shows weekly cherry volumes from the USDA-AMS movement reports. These data show that not only was California’s crop twice as large as it was last year, it was about 3 weeks later than it was in 2022, overlapping much more than usual with the WA/OR season. In 2022, total movement from CA was 47,270 tons whereas in 2023 it was 87,090 tons. There were an extra 40,000 tons of California cherries in the market during the critical period for PNW cherry producers.

Production in Washington is also much higher than last year. Through July 15th of this year, WA shipments totaled 112,155 tons compared to 70,340 tons in 2022. Together, shipments from CA, WA, and OR in the four weeks from mid-June to early July were twice as large in 2023 than in 2022 (56,290 tons in 2022 vs. 113,480 tons in 2023).

Some of the additional volume has gone to an increase in international exports. The figure below shows that during that same 4-week period – mid June to early July – exports of cherries from the three states combined went from 10,645 tons in 2022 to 35,075 tons in 2023. Despite the increased exports, there was a 50+% in cherry volume on the domestic market in this critical period. As of the time writing (7/25/23) cherry packers are continuing to source export quality fruit and large export volumes will continue to show on USDA-AMS data in the coming weeks.

Of course, it is the low prices rather than strong production that cause problems for cherry producers. The figure below shows shipping point prices over the course of the 2022 season and up until this point in 2023. The gray lines represent prices for production coming from California and the orange lines represent Washington prices. Dotted lines are 2022 and solid lines are 2023. Because of the cooler than normal spring in CA and the resulting delay in the cherry crop, the pricing data show that cherry packers needed to heavily discount their California inventory in anticipation of the PNW cherries coming on the market.

There are several questions that come to mind related to the future of the PNW sweet cherry industry. Will we see further increases in production in California, perhaps aided by the development of warmer weather varieties? Will climate change increase the probability of unusual shifts in the timing of regional harvests, leading to more volatility in fruit prices and availability? Can export markets or value-added uses be developed to provide an outlet for cherry production in years like this? Finally, will low prices and large financial losses this year lead to a reduction in cherry acreage in the PNW or in CA?

If you have thoughts on this, please feel free to share in the comments or with an email. You can also subscribe below to get new posts sent directly to your inbox.

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Forestland accounts for a majority of land conversion in Oregon

Posted on July 7, 2023 by Dan Bigelow

In my previous post, I showed that there is less land development in Oregon compared to Washington and California. Furthermore, I pointed out that development in all three states has declined considerably in recent decades. From a land conservation perspective, this may seem like a positive trend for our state, although some may still be alarmed by the fact that over 400 thousand acres of Oregon’s land have been converted from farm and forest uses since 1982. Depending on your perspective, rather than the total amount of land that has been converted, what may matter more is the types of land have been developed. This has implications both for the types of ecosystem services lost and the rural economic sectors directly impacted by the decline in its respective land base.

Here, using the same USDA National Resources Inventory dataset for Oregon, I’ll examine the pre-development distribution of land use for the land that was eventually developed. The figure below breaks down total land development into five-year increments over the 1982-2017 period. First, it is important to note that total development has declined considerably since its peak during the 1992-1997 period, although the most recent period shows a slight uptick in new development.

In nearly every period, forestland represents the highest share of land that has been developed. The lone exception is 1987-1992, when slightly more cropland than forestland was developed. Forestland’s share of pre-development land use has ranged from 34% (1987-1992 and 2002-2007) to 53% (1982-1987). In terms of acreage, the peak forestland conversion also occurred over 1982-1987 when about 44 thousand acres were developed. Recent totals of forestland conversion pale in comparison, representing less than 10 thousand acres in both the 2007-2012 and 2012-2017 periods. Overall, roughly 163 thousand acres of forestland has been developed in Oregon since 1982, accounting for 40% of all new development in our state.

Of the other major land uses, cropland or pasture generally comprises the second-largest source of new development. In terms of acreage, the peak cropland conversion occurred in 1987-1992, when 26 thousand acres were developed (34% of all development in that period), while the peak pasture conversion occurred over 1992-1997 when 30 thousand acres were developed (29% of all development in that period). Over the entire 1982-2017 period, similar amounts of Oregon’s cropland (103 thousand acres) and pastureland (104 thousand acres) have been developed, with each representing about 26% of all new development. Rangeland, the last major use included, generally accounts for a small share of total development (34 thousand acres; 8% of the total over the entire period), likely due to its concentration in the less populated parts of eastern Oregon. It may be worth noting, however, that rangeland conversion rates have nearly doubled between 2007-2012 (2 thousand acres) and 2012-2017 (almost 4 thousand acres).

In conclusion, recent patterns of land development in Oregon reveal a decline in overall development since the 1990s, with forestland being the primary type of land converted. While there has been progress in land conservation, the trends shown here suggest the need for continued efforts to strike a balance between development and preservation. Forestland provides timber and numerous ecosystem services, such as carbon sequestration, species habitat, and recreational land, while agricultural land (cropland, pasture, and range) provides food and its own set of ecosystem services. By understanding the patterns and types of land development, policymakers and communities can make more informed decisions surrounding the use of Oregon’s land resources for both current and future generations.

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Oregon develops far less forest and agricultural land than its neighbors

Posted on June 1, 2023 by Dan Bigelow

Oregon is well known for its comprehensive land use planning program. Initiated on May 29, 1973 under Senate Bill (SB) 100, the program marked its 50-year anniversary this week. SB 100 resulted in the development of 19 statewide planning goals that touch on various dimensions of land-related issues. Two foundational goals of SB 100 involve the preservation of agricultural and forest land. In practice, both are linked to a separate goal promoting the orderly expansion of cities through the establishment of Oregon’s well-known urban growth boundaries. Given the prominent role of land-use planning in Oregon, how do land development patterns in our state compare to our neighbors, Washington and California, in recent decades?

In this post, I’ll look at development patterns in Oregon and draw comparisons with neighboring states (Washington and California) over the 1982-2017 period, the most recent years available. To look at the development patterns of interest, I’ll be using microdata from the USDA’s National Resources Inventory, which is thought to be one of the most reliable sources of aggregate land-use information. As part of SB 100, municipalities in Oregon had to establish urban growth boundaries, most of which went into effect in 1980. The start of the 1982-2017 period thus broadly coincides with when Oregon’s land-use planning system really started to bind from an urban expansion perspective. However, it is worth emphasizing that the data presented below should not be interpreted as pointing to an impact of Oregon’s land-use planning system. For something like that, we would need a more rigorous statistical model (e.g., with data before and after the system was implemented and accounting for differences in land quality across states). Rather, the findings here simply describe land development patterns over most of the years since SB 100 was passed.

Land development (in 1000s of acres and as a percentage of starting undeveloped land) in Oregon, Washington, and California over 1982-2017.

The table above provides a five-year breakdown of land development for land that was originally in agricultural (including cropland, pasture, and range) or forest use over the entire 1982-2017 period. For each five-year period, the first number lists the acres of land developed (in 1000s) and the second (in parentheses) reports the developed acreage as a percentage of undeveloped land at the start of the period. A few things stand out. First, note that the amount of land converted in all three states increases over the first three periods before declining substantially in recent years. In other words, all three states are currently developing a fraction of what they had been in the mid-late 1990s. Oregon, for instance, developed 104,000 acres over 1992-1997, but just 21,000 over 2012-2017, amounting to a decrease of roughly 80%. In a recent publication, my coauthors and I highlight the widespread nature of this trend across the US, which we attribute to changes in commuting costs and household income levels. 

Second, development in Oregon has paled in comparison to Washington and California, in both absolute (acres) and relative (percentage) terms. With one exception, Oregon has developed less land than both its neighbors over each period. The lone exception is over 1982-1987, when Oregon developed 6,000 more acres than Washington. In total, the differences are stark. The 404,000 total developed acres in Oregon amount to 47% and 19% of total development in Washington and California, respectively, over this period.  As a percentage undeveloped land, Oregon’s development is also 47% of that in Washington and 33% of that in California.

Land development is a contentious public policy issue in Oregon. Once land is developed, it almost always stays that way, meaning that the loss of land that had previously been providing food, fiber, and forest products is generally irreversible. Private land-use decisions can involve difficult discussions among individuals that may have inherited land and cannot or do not wish to continue a family farm or forest operation, and I do not want to minimize these challenges. From a broader public policy perspective, however, context is important. As we mark an important milestone related to SB 100 and discussions regarding land use and housing supply in Oregon continue to unfold, it is worth keeping in mind we seem to have done quite well from a big-picture land conservation perspective.  

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