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AN AGRICULTURAL FEASIBILITY STUDY FOR A PARCEL OF LAND
NEAR BATIQUITOS LAGOON
Prepared for:
SMIS PROPERTIES 2653 Camino Del Rio North #lo0 San Diego, CA 92108
Prepared by :
CIC RESEARCH, INC. 1215 Cushman Avenue San Diego, CA 92110 (619) 296-8844
July 5, 1985
1111
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ...................... ii
LIST OF FIGURES AND TABLES ................. iv
INTRODUCTION ........................ 1
PURPOSE OF THE STUDY .................. 1
CLIENT ......................... 1
REPORT ORGANIZATION .................. 2
PHYSICAL RESOURCES ..................... 3
LOCATION AND DESCRIPTION ................ 3
TOPOGRAPHY ....................... 3
CLIMATE ........................ 5
WATER ......................... 8
SOILS ....................... 10
CROP SUITABILITY .................... 14
COASTAL ACT AND AGRICULTURAL RESOURCES ......... 15
SUMMARY ........................ 17
ECONOMIC VIABILITY ..................... 18
FARMING HISTORY .................... 18
ECONOMIC ANALYSIS ................... 20
INVESTMENT ANALYSIS ................. -31
CONCLUSIONS . COASTAL ACT AND AGRICULTURAL FEASIBILITY . 35
ii
TABLE OF CONTENTS - (CONTINUED)
Paae
LAND USE ISSUES AND RECOMMENDATIONS. . . . . . . . . . . . . 39
AGRICULTURAL IMPACTS ON URBAN LAND. . . . . . . . . . . 40
URBAN IMPACTS ON AGRICULTURAL LAND USES . . . . . . . . 41
PARCEL-SPECIFIC IMPACTS . . . . . . . . . . . . . . . . 42
RECOMMENDAT IONS . . . . . . . . . . . . . . . . . . . . 44
iii
LIST OF FIGURES APTD TABLES
Page
FIGURES
1. LOCATION AND TOPOGRAPHY OF THE STUDY PARCEL . . . . . . 4
2. SEASONAL PRICE PATTERN FOR STRAWBERRIES 26
TABLES
1. ANNUAL TEMPERATURE DATA . . . . . . . . . . . . . . . . 1
2. MONTHLY AVERAGE TEMPERATURE AND PRECIPITATION
DATA FOR AREA- AND PLANTCLIMATE ZONE I, 1.0 . . . . . . 7
4. SAN DIEGO COUNTY STRAWBERRY PRODUCTION. . . . . . . . . 23
5. SAN DIEGO SUMMER SQUASH PRODUCTION. . 24
6. FARM REVENUE FOR STRAWBERRIES AND SQUASH,
SAN DIEGO COUNTY. . . . '27
7. STRAWBERRY PRODUCTION COSTS, NET OF LAND RENT . . . . . 29
8. PRODUCTION COSTS FOR SQUASH, NET OF LAND RENT . . . . . 30
9. FARM INCOME DETERMINATION . . . . . . . . . . . . . . . 33
10. FARM OPERATION SUBSIDY - FIRST YEAR OF PURCHASE . . 38
iV
- 1111
PURPOSE OF THE STUDY
INTRODUCTION
This purpose of this study is to assess the feasibility of
continued agricultural operations on two adjacent parcels of land
in Carlsbad, California. This assessment is made on a parcel-
specific basis with respect to the California Coastal Commission
regulations (Sections 30241, 30242, and 30243 of the California
Coastal Act) pertaining to conversion of agricultural land to
urban uses.
The methodology employed derives from a prior study
by CIC Research, Inc. (formerly Copley International Corporation)
of 108 acres inclusive of the 60.13 acres presently under
consideration.* In general, the analysis begins with an
examination of the agricultural resources and progresses to an. '
economic assessment of the crops that would most likely be grown
on the property. Then,additional factors which relate to the
geographic location of the land and trends affecting the economics
of production are examined. However, the data, analysis, and
interpretations of findings in this report reflect an up-to-date
assessment of the study parcel and the factors influencing
continued agricultural viability.
*A Study to Assess the Agricultural Viability of a Parcel
Of Land Near Batiquitos Lagoon in Terms of Sari Diego County
Regulations, Copley International Corporation, 1980
1
CL I ENT
This study was conducted at the request of Sammis Properties.
The results of the study represent the independent findings of CIC
Research, Inc. Therefore, the findings and interpretations pre-
sented in this report may not necessarily be shared by Sammis
Properties.
REPORT ORGANIZATION
There are four remaining sections of this report. In the
next section, the site's physical resources are described in
detail and compared to Coastal Act definitions of prime
agricultural land. In the third section, the economic viability
of farming is evaluated. The fourth section provides a land-use
perspective to the long-term viability of agriculture by
identifying and analyzing trends in such areas as production costs
and urban growth that will continue to impact operations. The
final chapter presents the important conclusions of the study and
CIC's determination of feasibility of continued agricultural
production.
2
PHYSICAL RESOURCES
LOCATION AND DESCRIPTION
The study parcel consists of 60.13 acres of land within the
City of Carlsbad, California.* It is west of Interstate 5 and
east of the Atchison, Topeka, and Santa Fe Railroad tracks. The
northern border is bounded by the Lakeshore Gardens Mobile Home
Park. Batiquitos Lagoon creates the southern boundary. Figure I
shows the location of the parcel with respect to Batiquitos
Lagoon.
TOPOGRAPHY
The study site lies on the gently sloping edge of a marine
terrace. It has a slope of 2 to 7 percent and generally faces
southwest. Steeper slopes south of the site of 30 to 40 percent
drop into Batiquitos Lagoon along the southern edge of the parcel.
A slight drainage swale runs north and south down the middle of
the parcel.
The topography of the site has an effect on the need for
certain cultural operations. Slope of a parcel makes it necessary
for tilling operations and irrigation/drainage water flow to be
guided along the contours. However, on this particular parcel,
and for the crops historically produced, topographic character-
*Although the study site technically consists of two legal
parcels, i.e. lots 216-140-12 and -14, it is considered to be a
single property for the purpose of this study.
3
Figure 1
LOCATION AND TOPOGRAPHY OF THE STUDY PARCEL
tems. The gentle slope and rapid infiltration rate of the soil on
the parcel reduce erosion hazard. Crops are planted in rows per-
pendicular to the slope. Sprinklers (currently in use) or drip
irrigation should effectively control erosion. The parcel has a
fairly even surface that is uninterrupted by ditches and canyons.
However, service roads bisect fields, and operating irrigation
lines are installed along the edges of service roads. In
addition, even topography allows microclimate conditions to be
more uniform over the entire crop, reducing growth rate dif-
ferences and ensuring a more homogenous harvest.
CLIMATE
The study site is located in the Maritime Climate zone.*
This zone lies in a continuous strip of land a few hundred yards
to six or eight miles wide along the coast of California. It is
dominated day and night, all year long, by ocean conditions.
Seasonal and diurnal temperature changes are narrow and humidity
is high. Coastal fog will affect the parcel in spring and Summer
months and usually dissipates by morning. Tables 1 and 2 present
annual and monthly temperature data, respectively. In Table 1 the
coastal influence is demonstrated by an eight degree varia-
tion in mean maximum and minimum temperatures from the annual
*Climates of San Diego County--Agricultural Relationships, University of California, Agricultural Extension Service,
November 1970.
5
Table 1
ANNUAL TEMPERATURE DATA
Annual TemDeratures (Deurees F.)
Study Site Data Areaclimate I
Plantclimate 1.0
Highest of Record
Mean Maximum
Mean
Mean Minimum
Lowest of Record
32 Dearee Davs and Niuhts
107
69
61
53
29
Days between median dates 36 5
Probability of Freeze
32 degrees 50%
28 degrees 23
24 degrees -0 -
Source: Climates of San Diego, County University of California
Agricultural Extension Service, et al., 1970.
6
... ,
Table 2
MONTHLY AVERAGE TEMPERATURE AND PRECIPITATION DATA FOR AREA- AND PLANTCLIMATE ZONE I, 1.0
TEMPERATURE (Degrees F.) - JAN FER MAy JUN JUL OCT NOV DEC TOTAL
Mean Maximum 62.9 63.3 64.6 66.1 68.1 69.7 73.3 74.6 74.3 71.6 68.9 65.2 69
Mean 54.0 54.7 56.4 58.9 61.4 63.8 67.4 68.6 67.3 63.6 59.4 55.9 61
Mean Minimum 45.0 46.1 48.2 51.6 54.7 57.8 61.4 62.6 60.2 55.7 49.8 46.6 53
-"
U
PRECIPITATION (Inches) 2.07 1.96 1.63 1.05 0.22 0.06 0.03 0.05 0.19 0.56 0.84 1.77 10.44'
*The sum of monthly data does not equal the total due to rounding. .
Source: Climates of San Diego County, University of California Agricultural Extension Service, et al., 1970.
average. Extreme temperatures are rare, and there is a low pro-
bability of even mild freezes. Temperature data at the top of
Table 2 indicate the seasonal influence of coastal proximity.
Temperatures are moderate throughout the year.
In terms of bringing in an early spring crop such as
strawberries, the Maritime Areaclimate differs little from the ad-
jacent Coastal Areaclimate. Mean maximum and minimum temperatures
differ by less than 3.5 degrees between January and March, and the
average temperature varies less than one degree indicating the
direct coastal proximity, in general, would not significantly re-
tard growth or maturation at this time.
Precipitation occurs primarily from October to April and
averages approximately 10 inches annually. Most coastal food and
flower crops require an additional three acre-feet of irrigation.
WATER
Irrigation water is currently being supplied to the parcel by
the Costa Real Water District (formerly the City of Carlsbad Water
District). This water is a blend of Colorado River water and
Northern California State Project water and comes directly from
the Lake Skinner reservoir. Water quality varies depending upon
the blend which sometimes reaches a 100 percent Colorado River
water content, thereby lowering the quality for irrigation use.
Table 3 presents measurements of electrical conductivity '(in
millimhos), cloride, and total dissolved solids (TDS) for the 12
months ending in February 1985. Each indication of salinity is
within tolerable limits for most crops. However, the upper range
of electrical conductivity above 1,000 (1.0 EC) is high enough to
8
Factor or Constituent
Table 3
WATER RATING FOR IRRIGATION USE
Rating Skinner Treatment Plant March 1984 - February 1985
Sui table Marginal* Inferior Average Range
Electrical Conductivity
Cloride (Cl), ppm Less than 175 175 - 350 Greater than 350 66 59 - 82 Total Dissolved Solids (TDS) -" -" -" 544 460 - 657
(EC X at 25 C) Less than 1,500 1,500 - 3,000 Greater than 3,000 877 755 - 1,022
*The term marginal is regarded as possibly being harmful for certain crops under certain conditions ' of soil or climate, particularly in higher ranges of the class.
Source: Comprehensive Water Quality Control Plan for the San Diego Basin, State Resouorces Board, Regional Water Quality Control Board, San Diego Region, July 1975.
Metropolitan Water District. CIC Research, Inc.
reduce strawberry yields by as much as 10 percent. Most other
crops that would be grown at the site would not be affected by the
quality of water treated at the Lake Skinner Reservoir.
The agricultural water rate in the Costa Real Water District
is $280.96 per acre-foot. Notwithstanding the $43.56 per acre-
foot rebate for interruptible agricultural water service, water
prices have risen 15 percent annually since May, 1980. By com-
parison, the average annual rise in the Consumer Price Index
(National CPI) from May 1980 to May 1985 has been 5.6 percent. No
scheduled increase in water rates is planned for the remainder of
1985. Future rate increases by the Metropolitan Water District,
the prime purveyor of water in Southern California, are
anticipated to be between 8 and 10 percent annually through
2000. *
so I LS
This study is concerned only with legal parcels 216-140-12
and -14 which do not extend into the Terrace escarpment soil unit
located on the north bank of Batiquitos Lagoon and included for
consideration in the 1980 study. Therefore, the only soil mapping
unit present at the study site is Marina loamy coarse sand with 2
to 9 percent slopes.
This soil can be viewed as a valuable agricultural resource
in San Diego County. It is labeled as "Unique Farmland'' by the
United States Soil Conservation Service, and is part of one of
* The Need for Major Additions to Metropolitan's Distri-
bution System, Abridged Report No. 949, Metropolitan Water Dis-
trict of Southern California, July 1983, pg. B-87.
10
two areas designated as such in the San Dieguito Coastal Zone. On
the other hand, it should be noted that these soils do not meet
County or State Coastal Commission soils criteria for Prime
Agricultural land.
Soil Rating Systems
TWO soil rating systems are used to describe soils in detail.
The Soil Capability rating system and the Storie Index rating
system both describe physical characteristics of a soil and make
inferences regarding the potential that a soil has for certain
uses. The Soil Capability rating system usually gives a clearer
indication of the agricultural potential of a soil than does the
Storie Index rating system. The Storie Index rates a soil on the
basis of a defined standard, and must be broken down into its
components to obtain specific information about the soil.
Soil Capability Rating System. The Soil Capability system
shows, in general, the limitations of a soil when cultivated for
field crops and the way the soil responds to management practices.
All soil mapping units are grouped at three levels: Capability
Class, Subclass, and Unit. Classes are indicated by Roman
numerals, with Class I soils having few limitations that restrict
their use for agriculture. Progressively greater limitations are
indicated by larger Roman numerals, with Class VI11 soils being
restricted to recreation or wildlife habitat uses. Subclasses
denote particular risks associated with a soil unit. Risk of
erosion is symbolized by a small letter - e added to the Class
numeral. Risk or limitations due to soil surface characteristics
11
are indicated by a small letter - s added to the Class numeral.
More specific management requirements for a soil unit are denoted
by Arabic numerals after the Subclass letter. The Capability
Unit assigned to the soil on the study parcel is designated by the
Arabic Numeral 4. This indicates that texture requires special
management techniques to be employed for crops grown on the soil
unit.
Storie Index Rating System. A second method used to estimate
the agricultural potential of a soil is called the Storie Index.
This index expresses numerically the relative suitability of a
soil for general intensive agriculture. Profile characteristics,
soil surface texture, slope, and other miscellaneous conditions of
the soil are assigned percentages, with the most agriculturally
favored condition being 100 percent. These percentage factors are
multiplied together and the final Storie Index rating results.
Ratings can be grouped to define Agricultural Land under the
PrOViSiOnS Of the California Land Conservation Act. Agricultural
Land includes soils in Capability Classes I through IV, and soils
with a Storie Index of 20 percent more. Of course, greater
management is necessary for soils with a low Storie Index or with
a Capability Unit near IV.
Agricultural soils can be further grouped to be called Prime
Agricultural Land. This category includes soils with a Storie
Index of 80 percent or more, or those in Capability classes I or
11.
12
Soil Evaluation: Marina Loamy Course Sand*
This soil is more than 60 inches deep. The surface layer
ranges from brown to yellowish brown in color, from loamy coarse
sand to loamy sand in texture, and from six to 14 inches in depth.
The next layer (B horizon) is 27 to 47 inches in thickness, has
the same texture characteristics, and is light brown to strong
brown in color. Fertility is medium and permeability is rapid.
Corresponding to the somewhat excessively drained nature of the
soil, the available water holding capacity is four to five inches.
Runoff is slow to medium, and the erosion hazard is slight to
moderate.This soil is used for avocados, citrus, flowers, and
.truck crops.** The Capability unit is 111s-4 and the Storie
Index rating is 54. The coarse, sandy texture is responsible for
the moderately low agricultural rating.
Crop choice is affected by coarse soil texture. Some crops,
such as tomatoes, are more productive on soils with a finer
texture and a higher clay content. But coarse soils are suitable
to other agricultural crops. Citrus, avocado, flower, strawberry,
and other truck crops are suited to the soil.
*The soil description is from Soil Survey, San Diego Area,
California, Parts I, 11, and 111, U.S.D.A. Soil Conservation
Service,et al., 1973 and 1975.
**Although the Soil Survey (previous footnote) lists tomatoes
as a crop typically grown on this soil, the Same Survey (Part 111)
states that the soil is not rated for tomato production.
13
Irrigation/drainage management is also affected by soil texture.
Furrow irrigation is not appropriate for coarse-textured soils,
but drip and sprinkler irrigation can be.used. These management
requirements have an additional effect on crop choice for this
parcel in that some crops produce poorly if irrigated with
sprinklers.
Slope is not a limiting factor on this soil. The average
slope of the Marina soil on this parcel is less than 3 percent.
There are few, if any, restrictions on mild slopes when either
drip or sprinkler irrigation systems are used.
CROP SUITABILITY
On a basis of soil characteristics only, a variety of crops
are suited to the study parcel. The Marina soil unit is rated
good for citrus, avocados, and flowers, and rated fair for truck
crops. It is not rated for tomato production.* The properties
affecting suitability for truck crops are slope and texture.
However, this parcel's slope is not a significant restriction.
Tomatoes are not suited to the soil because of the texture (loamy
coarse sand).
From a climatic perspective, avocados and citrus are not well
suited to the parcel. The frost levels of the Coastal and
*Suitability ratings are obtained from the Soil Survey, Part
111, (Soil Interpretation Manual), U.S.D.A. Soil Conservation
Service, et al., 1975. Crop suitability is given in three rating
categories: good, fair, and not rated.
14
Transitional areaclimates (located east of the site) indicate the
lower boundary of favorable citrus and avocado producing regions.
However, lemons are adapted to the Maritime areaclimate; while
oranges can be produced there but are usually less sweet than
those grown in warmer portions of the County.
Of all the crops analyzed, flowers have the best rating for
suitability to the physical resources on the study parcel. The
sandy soil supplies better drainage to the crop roots and allows
bulb growth to be less hindered than in more compact soils. The
slope of the parcel is gentle enough so that only minimal erosion
control management would be necessary. Truck crops, in general,
will also grow well on the study parcel. The only limitation that
the Marina soil will place on climatically suited truck crops is
its requirement for sprinkler or drip irrigation. The slope of
this soil unit is not limiting to truck crop production on this
parcel.
COASTAL ACT AND AGRICULTURAL RESOURCES
Those sections of the Coastal Act which are concerned with
preservation or conversion of agricultural land with respect to
the property's physical characteristics are concerned with the
rating of soils as prime or nonprime, the productivity of soils,
and parcel size. Because parcel size primarily affects the
efficiency of production in terms of operating costs and volume of
production, this topic will be considered subsequent to the
economic analysis in the next section of the report.
Determination of prime agricultural land derives from
criteria set forth in the California Land Conservation Act
15
(Williamson Act). The Act defines prime agricultural land as
f 01 lows :
... an area of land, whether a single parcel or contiguous
parcels, which: (i) has not been developed for a use other
than an agricultural use and (ii) meets any of the qualifications:
Land which qualifies for rating as Class I or Class I1 in the Soil Conservation Service land use capability classification:
Land which qualifies €or rating 80 through 100
Storie Index Rating:
Land which supports livestock used for the pro-
duction of food and fiber and which has an
annual carrying capacity equivalent to at least
one animal unit per acre as defined by the
United States Department of Agriculture;
Land planted with fruit or nut-bearing trees,
vines, bushes or crops which have a nonbearing
period less than five years and which will normally
return during the commercial bearing period on an
annual basis from the production of unprocessed
agricultural plant production not less than two
hundred dollars ($200) per acre:
Land which has returned from the production of un-
processed agricultural plant products in annual gross value of not less than two hundred dollars
($200) per acre for three of the previous five
years.
Land which is used to maintain livestock for
commercial purposes.
Section 51201 of the Government Code Cas amended by Stats.1982,
C. 43, P. 109, 5 5.1, urgency, eff. Feb- 17, 19821 has superceded
the Williamson Act definition by essentially removing subparagraphs
(e) and (f) from the definition. Thus, the study parcel is not con-
sidered to be prime agricultural land as currently defined.
16
Section 30243 of the Coastal Act states that the productivity
of soils is to be protected. Although the study parcel soil is
not considered prime, the soil has been and is currently quite
productive for field flower cultivation. According to generalized
soil survey and climatic information, the parcel should also be
considered "productive" for strawberries and other truck crops.
SUMMARY
In general, the physical resources of the study site are
conducive to agriculture. Soil characteristics, water quality and
availability, and climate are suitable for truck crops and field
flower production. Although the parcel does not qualify as prime
agricultural land by any definition of the term, the land's dernon-
strated productivity for flower production and implied potential
to produce truck crops would allow the land to be "protected" from
conversion to urban use. However, productivity of the physical
resources alone is not sufficient to determine whether the land
will or should remain in agricultural use. Unless the economics
of production and additional land use issues are also considered
favorable, agriculture will not be pursued and protection of the
physical resource would be unwarranted by any application of the
Coastal Act.
17
ECONOMIC VIABILITY
The examination of the site's physical resources indicated
suitability for production of flower and truck crops. But
resource suitability alone is not sufficient to conclude that the
parcel could be farmed successfully. In addition to the presence
of certain physical characteristics, favorable economic conditions
must prevail before agricultural land can be considered to be
commercially viable. In this section the past farm history of the
parcel is presented and flower production is evaluated for
continued viability. An alternative farm plan is also developed
to assess the feasibility of producing food crops on the parcel.
Both assessments consider the substantial impact on the opera-
tion's feasibility if the land were farmed by an owner/operator
rather than a tenant farmer.
FARMING HISTORY
Current Production
At the present time, John Frazee of Frazee Flowers is grow-
ing ranunculus on the study parcel. The flowers are grown in
raised beds running perpendicular to the parcel's mainly westward
slope. A set, yet movable sprinkler system is used for
irrigation. There are no structures built on the praperty.
Aproximately 74 acres is currently employed in the production
of ranunculus tubers (bulbs), including acreage between the study
parcel and Interstate 5. An additional + 25 acres southeast of -
18
the study parcel is fallow. This acreage has similar soils and
slopes as the 74 acres under cultivation but is not needed for
this year's production and marketing plan.
Prior Agricultural Use and Background Information
Frazee Flowers has employed the study parcel in its
operations since 1958. Both ranunculi and gladioli have been
Frazee Flowers is loca-ted in Oceanside, California, and is
the only remaining grower of gladiolus in San Diego County. Mr.
Frazee's crops represent approximately 75 percent of the gladiolus
market, and 100 percent of the ranunculus bulb production in the
entire United States.
In a recent interview with Mr. Frazee, it was clear that the
tomato crop on the site. The crop failed due to the moist, cool
air conditions in the Maritime climate zone. In addition, loamy
coarse sand was not well suited for tomatoes. Zucchini squash,
which was planted as green fertilizer crops by Mr. Frazee, did not
have adequate yields or quality for harvest as food crops.
19
ECONOMIC ANALYSIS
Flower Production
Production of field flowers is a highly specialized business
in which there are very few operators. Therefore, little
published information is available concerning operating costs and
revenues. The only prior study containing such economic data
relied mainly on voluntary grower information.* In June, 1985,
Mr. John Frazee again provided general financial data to CIC
Research. As the only producer of ranunculus, Frazee Flowers sets
its own price. Revenues are stated to be $10,000 an acre. All
production and harvest costs total $7,000 to $9,000 per acre.
Yield data in terms of bulbs or other quantity measure per acre
are not available.
Because there are no buildings or easements obstructing
cultivation, net income can be computed on the entire - + 60 acres.
Thus, ranunculus bulb production should generate $60,000 to
$180,000 before taxes on the study site.
Cropping Program
An alternative to flowers is production of strawberries, the
best suited high value crop for the site. And, although zucchini
has historically not done well at the site, an intensive use
scenario will include this crop on a rotation basis.**
*An Economic Analysis of Agriculture in San Diego County, Copley International Corporation, 1978.
**Reuse of drip lines after strawberry harvests, as opposed to
using sprinkler irrigation, would increase the viability of
zucchini which is typically rotated with strawberries in coastal
San Diego County.
20
Land use of strawberries is from October through June: zucchinis
can be produced from July through September. It should be
understood that the proposed farming plan is meant to be
representative of one developed to make the best use of the land.
Since this analysis is a test of the economic viability of the
subject parcel, it is appropriate to assume an aggressive effort
on the part of the farmer whose livelihood is at stake.
However, the profitability of either strawberry or squash
production may decline substantially in the future. Relative
increases in certain operating costs, increased competition,
shifts in market demand or changes in marketing methods may
substantially reduce the viability of a crop. For example,
competition (mainly from Mexico) has caused harvested tomato
acreage in San Diego to decline from 6,593 acres in 1981.to 2,928
acres in 1984. Returns. to growers fell from $89 million to $38
million in the same period. Therefore, the continued feasibility
of individual crops cannot be predicted for many years into the
future. Because the physical properties of certain growing areas
such as the study site, are often suited to a few special crops,
the continuation of feasible agricultural enterprises on these
fields is uncertain.
The potential to experience increased profitability is not as
profitability, such as rising market demand or technological
advances leading to increased productivity, would be recognized by
other growers who would produce more of the commodity and cause a
decline in prices. Thus, the coastal agricultural resources
provide certain advantages but cannot reduce risk much below
21
levels faced by farmers in other regions. Therefore, the one-year
rotation schedule used in this example is both a hypothetical
example and proxy for the probable best-case truck crop operation.
Strawberries are planted in late October: harvest begins in
late January or early February and continues through May or June,
depending on prices. After removing plants and rolling up drip
lines, zucchini squash are planted in July for a September
harvest.
The financial analysis presented below seeks to determine the
economic viability of farm operations under conditions that could
be expected based upon revenues, costs, and yields experienced in
the last five or 10 years. The analysis primarily relies on
published data for the crops under study with adjustments required
by the specific location, cultural practices, and harvest dates
for the parcel.
Production and Yields
Tables 4 and 5 present historical production values for
strawberries and summer squash, respectively. Table 4 indicates
that harvested strawberry acreage has increased nearly 50 percent
since 1976. From 1976 to 1983, an average of 58 percent of
production was sold to fresh market suppliers. This is lower than
the state average of approximately two-thirds of annual
production, and has the effect of lowering growers' returns.
Yields in total are rising: the average yield for the last five
years is 26.6 tons per acre.
Harvested acreage for summer squash production, which is
22
1984
1983
1982
1981
1980
1979
1978
1977
1976
Acreage
1,086
1,220
1 , 004
969
915
734
820
630
735
Table 4
SAN DIEGO COUNTY STRAWBERRY PRODUCTION
Yield--
Tons
Per
Acre
24.5
24.7
29.0
32.9
22.0
20.0
14.0
22.3
21.0
Total Yld-Tons
Fresh Process
20,707 5,900
21,020 9,114
11,895 17,221
13,276 18,604
12,587 7,543
8,780 5,900
8,580 2,860
7,305 6,745
9,555 5,880
Total Value
Price Per Ton Fresh &
Fresh Process Process
$791 $380 $18,621,000
947 641 25,748,000
725 681 20,352,000
846 348 17,705,000
851 485 14,370,000
650 520 8,775,000
577 340 5,923,000
647 444 7,721,000
590 491 8,524,000
Source: Agricultural Crop Report, County of Sari Diego, Dept. of
Agriculture, 1976-1984.
CIC Research, Inc.
23
Table 5
SAN DIEGO SUMMER SQUASH PRODUCTION
Yield- Total Tons Per Yield Price Total
Acreage Acre (Ton5 ) Per Ton Value
1984 543.5 5.2 2,826 $387 $1,094,000
1983 540 8.4 4,536 484 2,195,000
1982 1,020 7.9 8,058 426 3,433,000
1981 850 6.2 5,270 517 2,725,000
1980 529 7.0 3,703 374 1,385,000
1979 441 10.1 4,454 392 1,746,000
1978 496 8.5 4,200 342 1,436,000
1977 540 7.4 4,000 373 1,492,000
1976 520 9.2 4,785 347 1,660,000
1975 490 .8. 6 4,200 317 1,331,000
Source: Agricultural Crop Report, County of San Diego, Department of Agriculture, 1975-1984.
24
predominantly zucchini (Italian) squash, has typically ranged from
440 to 540 acres except in 1981 and 1982 when plantings
approximately doubled. Yields in the last 10 years averaged 7.9
tons per acre (see Table 5).
Revenues
Variability of market prices and yields affect the viability
of agricultural production by increasing risks. Price fluctua-
tions for strawberries are mainly caused by changes in the volume
of supply which is affected by weather in local and other growing
regions. San Diego growers typically begin harvesting in late
January or early February when prices are near their highest
levels of the year. Figure 2 illustrates the seasonal price
trend for strawberries from the last two weeks in January through
the end of June. Adjusted to 1984 dollar values, the five year
average price in late January of approximately $20 per tray falls
rapidly to a low of approximately $6.40 in May and recovers
slightly in June. The variability of prices is indicated by the
standard deviations from the mean of high and low weekly prices.
Note that during the c.ritical high-price period early in the
season the range of expected prices is $12 per tray (crate), but
is closer to $5 late in the season.
When combined with yields, prices (revenue per acre) regain
some stability. Exhibited in Table 6 are revenues per acre for
both strawberries and squash in San Diego County. Average
revenues per acre for strawberries and squash in the last 10 years
have been $19,271 and $4,291, respectively. The coefficient of
variation, which is computed by dividing the standard deviation by
25
FIGURE 2
SEASONAL PRICE PATTERN FOR STRAWBERRIES
LOS ANGELES WHOLESALE MARKET
(5 year average; 1984 constant dollars)
+ Std.
Mean
- Std.
Dev.
Dev.
4 *
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Source: Los Angeles Wholesale Market Prices,
~~ ~
Federal-State Market News Service 1980-84
26
Table 6
FARM REVENUE FOR STRAWBERRIES AND SQUASH
SAN DIEGO COUNTY
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
Revenue Per Acre
Nominal Dollars
Strawberries Squash
$17,146 $2,013
21,105 4,065
20,271 3,366
18,271 3,206
15,705 2,618
11,955 3,959
7,223 2,895
12,256 2,763
11,597 3,192
10,512 2,716
Average:
Coefficient of Variation:
Revenue Per Acre
Strawberries Squash
1984 Dollars
$17,146
22,013
21,812
20,865
19,804
17,108
11,499
21,007
21,164
20,288
$19,271
17%
$2,0131983
4,240
3,622
3,661
3,301
5,665
4,609
4,736
5,825
5 , 242
$ 4,291
27%
Source: Agricultural Crop Report, County of Sari Diego, Department
of Aqriculture, 1975-1984.
Consimer Price Index (CPI-U), U.S. Department of
Commerce. CIC Research, Inc.
27
the mean price, for squash is significantly higher than for
strawberries indicating a higher level of risk.
costs
Technological advancements in growing practices and rising
water costs have made strawberry production in Southern California
a highly specialized and expensive endeavor. In Table 7 the
cultural and harvest costs for the study site have been estimated
to be approximately $17,000 per acre. This is based on the
average County yield of 26.6 tons per acre in the last five
years.
Production costs for squash are substantially less than for
strawberries. Table 8 indicates that costs per acre, using the
same drip system and tape as for the strawberry crop, would be
approximately $3,700 for squash.
The cost of irrigation water at $281 per acre-foot
substantially raises costs for either crop. Zucchini grown in
Imperial Valley is irrigated with water costing less than $10 per
acre-foot ($35 compared to $984 for .3.5 acre-feet). For strawber-
ries, farms in Orange County with wells are able to irrigate
strawberry fields for $40 to $60 per acre foot ($663 to $723 per
acre below Costa Real Water District rates). However, high water
costs are balanced by higher yields for squash compared to
Imperial County production, and an earlier market window for
strawberries than is experienced by Orange County.
One of the primary effects of high water rates for the
purpose of this study is the downward pressure placed on land
rents. The cost of water is a major factor determining rental
28
I tem -
Table 7
STRAWBERRY PRODUCTION COSTS, NET OF LAND RENT
Cost Per Acre
Remove old plastic @ $3.35/hr,12 hrs. $ 40 - Disc, plow, level 6 times, chisel 4
Grade stake
Fumigate (contract)
Plant: labor, $3.35 x 60 hrs
times, furrow, harrow
plants
tractor and driver
Fertilize: pre-plant furrow and post-plant
Weed 3 times, remove runners 2 times,
Polyethelene bed mulch, application and train
Pest Control, 5 times, custom Equipment repair
Miscellaneous overhead
Pre-harvest production cost net of rent
Investment: depreciation
Irrigate, 3 acre-feet
prune old leaves
plants through poly, replacements (10%)
interest
Investment cost
Total pre-harves t cost
Harvest cost: (58% fresht 42% process) Fresh market, per tray: Baskets, wire tray
Picking
Misc. labor at 10%
Cooling
Commission
of picking cost
Cost for 2,571 trays (12 pounds)
Processed Fruit,
1,596 trays (14 pounds) @ $.ll/lb.,
including supervision
Harvest cost, 26.6-ton crop
Total pre-harvest and harvest costs
126
18
769
201
2,040
71
400
843
67
227 10 9
98
75
$ 5,084
334
272
606
5,690
1.00 ea.
1.20
.12
.58
.56
3.46
8,896
11,354
$17,044
Source: "Fall-planted Strawberry Production Costs, Ventura County 1981", Richard L. Baldwin, and "Fall-planted
Strawberries Sample Production Costs" (Orange County),
Harold W. Otto, University of California Cooperative
Extension Service.
Costa Real Water District
CIC Research, Inc.
29
. Table 8
PRODUCTION COSTS FOR SQUASH
NET OF LAND RENT
Item
Cultural Costs: -
Subsoil
Disc & Roll (2X)
Fertilize Disc (2X)
Shape Beds and Plant
Irrigate (. 3 ac.-ft. 1 Polination Thin
Cultivate ( 2x1
Fertilize
Weed
Irrigate (3 ac.-ft.)
Pest Control
Total Cultural Costs
Overhead
Depreciation
Interest
Total Overhead
Total Pre-harves t Costs
Cost Per Acre
Harvest Pick, haul, grade, pack and sell:
785 boxes/ac.
Total Cost
$ 10 12
45
12 46
85
17
50
30
41
38
843 70
111 41 -
152 -
1,451
2,241
$3,692
CIC Research, Inc.
rates. If water prices increase at a rate of 15 percent annually,
this essentially usurps any possible increase in rental income.
For the subject property, this is demonstrated by the land rental
of $200 per acre annually that has not changed since 1980.
Development costs are not considered to be a major factor in
this analysis of "continued or renewed agricultural use". The de-
preciation item listed as an investment cost for both truck crops
(Tables 7 and 8) represent the amortization of capital equipment.
parcel. However, the conversion of the operation to truck crop
production with the installation of a drip irrigation system would
require approximately $850 to $900 per acre in development costs
for the new system. This is accounted for by including $85 to $90
back into the evaluation. Three alternative methods for including
land cost are used: each is then assessed in light of its
investment value or potential.
31
either the flower or truck crop operation is minimal, as shown in
Table 9. Flowers or truck crops could still return $108,000 or
$156,000 to the grower before taxes. However, the investor or
landowner would experience a net loss and negative return on his
invested capital because property taxes (in 1984) exceeded the
cash rent by an average of $12.84 per acre.* With rising water
prices negating future possible rental increases and the potential
for property tax assessments to increase by up to 2 percent
annually, the only investment alternative would be to sell the
property. For a landlord, the purchase price would have to be
less than the average assessed value of $19,100 per acre to
possibly reduce property tax obligations and minimize the invest-
ment base in the parcel.
Land Purchase for Agricultural Use
Due to the lack of coastal land sales in San Diego County
for agricultural uses, an income approach was employed to derive
an agricultural land value. By capitalizing operating income
after property taxes at 5 percent, hypothetical agricultural
values of $2,000,000 and $2,800,000 are obtained for flower and
truck crop operations, respectively.** The investment potential
of such a purchase, however, would not justify the acquisition.
32
Table 9
FARM INCOME DETERMINATION
Operating Income __
Revenue Operating Costs
Flowers
$ 600,000
480.000*
Margin Before Land Cost $ 120,000
Land Cost
Agricultural Land Rent $ 12,000
Hypothetical Ag. Land Purchase** $ 160,000
Land Purchase, Urban Value*** $1,444,000
Farm Income Before Tax
Strawberries
and Squash
$1,413,000
1,245,000
$ 168,000
$ 12,000
$ 225,000
$1,444,000
Agricultural Land Rental $ 108,000 Hypotehtical Ag. Land Purchase** ($ 40,000)
Land Purchase, Urban Value*** ($1,324,000)
$ 156,000
($ 57,000)
($1,276,000)
* $8,000 per acre or $480,000 is the average of stated
operating costs
** Includes property tax
*** Excludes property tax
Source: CIC Research, Inc.
33
Table 9 indicates that if financing were obtained at a 12
percent interest rate with a favorable 30-year term, operating
income would be insufficient to carry annual debt service of
$160,000 (flowers) or $225,000 (truck crops) on the capitalized
value of the land, assuming a 35 percent down payment. At current ,
interest rates, a buyer would have to take a 49 percent (truck
crops) or 65 percent (flowers) equity position for debt service to
equal operating income. Therefore, a down payment greater than
the $1,296,000 or $1,361,000 required to break even is needed in
order to generate even a minimal return on investment.
Considering the amounts of capital, and the risks inherent in
agricultural markets, no farmer or other investor would undertake
such an acquisition.
Land Purchase - Urban Value
To determine an approximate urban development land value, it
was assumed that property would be used for condominiums. This
assumption was made because of similar existing and approved de-
velopment adjacent to the property and nearby (east of 1-51, and
in light of the parcel's specific location.
Land for condominium development in coastal San Diego County
typically sells for $20,000 per unit and above. The sale of 35.41
acres on Paseo del Norte (parcel 211-040-13) in Carlsbad in Jan-
uary, 1985, for $5,927,000 or $21,790 per unit (272 condom.inium
units) exemplifies such market values. With a density of 15
dwelling units per acre, as is approved by the City of Carlsbad
for the parcel directly east of the study site, the 60 acres could
34
be conservatively valued at $300,000 per acre or $18,000,000 in
total. Again assuming a favbrable 30-year term and a 12 percent
interest rate, debt service would amount to $1,444,000 annually.
Since this amount is approximately 10 times the annual income from
farm operations, it is certain that agriculture would be
infeasible by using an urban land value in the analysis.
CONCLUSIONS - COASTAL ACT AND AGRICULTURAL FEASIBILITY
When a property that is considered for conversion from
agricultural use does not qualify as "prime agricultural land",
the Coastal Act states that conversion can take place if
agricultural use is not feasible. Section 30242 of the Act is
interpreted in this part of the report as referring to economic
feasibility. The Section states:
All other lands suitable for agricultural use shall not
be converted to non-agricultural uses unless:
(1) continued or renewed agricultural use is not
feasible, or (2) such conversion would preserve prime
agricultural land or concentrate development consistent
with Section 30250. Any such permitted conversion shall
be compatible with continued agricultural use on sur-
rounding parcels.
The findings of the investment analysis. clearly demonstrate
that continued or renewed agricultural use is not feasible for a
farmer/landowner. At the current assessed valuation, a
hypothetical agricultural transfer value, or for an urban
development value, the operation could not produce a sustainable
positive net income. Without a positive net income determination
of return on investment is not possible. It is sufficient to
establish that for the rental scenario a loss is incurred because
property taxes exceeds rental income. The bottom of Table 9
35
indicates that under favorable financing arrangements both
purchase scenarios at agricultural and urban land values would
produce severe losses for the farmer. These losses (before income
taxes) range from $40,000 under the agricultural value assumption
to $1,324,000 annually assuming an urban land price. Therefore,
continued or renewed agricultural use for the site would be
infeasible under any possible ownership scenario, whether the
owner leased the land to a tenant farmer or managed his own
operation.
Feasibility of Agriculture - Tenant Farmer Position
From the perspective of a tenant farmer the availability of
coastal land allows potentially high rates of return. Despite
high water costs, current farming of either flowers or truck crops
would be profitable, albeit at the landowner's expense.
Although the investment position of a flower grower remains
undisclosed, an investment value can be estimated for a truck crop
farmer .
For the study parcel, a farmer who uses his own capital to
finance 50 percent of operating costs ($622,500) and owns his
equipment and irrigation system (half costs: $91,000 and $26,000,
respectively) would have $739,500 invested in the operation.
After adding back depreciation to net income before taxes and
subtracting land rent, the operation's cash flow of $182,700
would represent an estimated 25 percent return on investment for
the one-year crop plan. It may be possible for a landowner to
increase the rent slightly to benefit from the profitability of
such an enterprise. However, most farmers rent on an annual basis
and could relocate if land costs were raised.
36
As noted above, agricultural operations continue at sites
such as the study parcel at the landowner's expense. Table 10
illustrates that under the four scenarios evaluated throughout
this section, a tenant farmer at the study parcel would be
subsidized by no less than $173,000 annually, assuming the 1984
assessed value, and up to $2.5 million annually if the developed
urban value of the land in considered. By comparing the
$173,000 land subsidy to the highest income generated before land
cost in Table 9 of $168,000, it is apparent that under no
ownership or rental situation could agricultural operations be
conducted feasibly.
The extreme contrast of economic postures (between the farmer
and landowner) represents expectations of alternate uses of the
land by either land use market segment. The common practice by
farmers of land-banking their property as a form of retirement
plan is built into capitalization rates that would be applied in
an appraisal of the study site for purchase for agricultural use.
Therefore, neither the real estate investor nor the agricultural
market segments should be expected to purchase or hold the study
site solely for agricultural purposes.
37
...
Return on Equity @ 15%
Table 10 FARM OPERATION SUBSIDY - FIRST YEAR OF PURCHASE
Agricultural Land Valuation
Cash Rent Flowers Truck Crops
$172,000* $105,000 $343,000
First Year's Interest Expense " 156,000 218,000
Property Tax 13,000 20,000 28 , 000
Less: Rental Income 12 , 000 12,000 12,000
I Subsidy to Farmer $173,000 $269,000 $577,000
Subsidy per Acre $ 2,880 $ 4,480 $ 9,620
Urban
Land Value
$ 945,000
1,402,000
180,000
12,000 .
$2,525,000
* Assumes 100% equity at the 1984 assessed valuation
** Except for the Cash Rent scenario, equity is assumed at 35% of the purchase price
Source: CIC Research, Inc.
$ 41,920
LAND USE ISSUES AND RECOMMENDATIONS
LAND USE
The Coastal Act identifies certain situations in which
conversion of agricultural land could be allowd due to land use
factors (impacts) or development trends. Although the study
parcel does not specifically meet the criteria set forth in
Sections 30241 and 30242 of the Act, it is possible that impacts
will develop as urbanization continues to draw up to the study
site's east and west boundaries.
The City of Carlsbad has approved development of 600
condominium units directly east of the site on 40 acres. West of
the site and the Atchison, Topeka and Santa Fe tracts is a planned
5.7 acre visitor-oriented commercial project (the zone change has
been approved by the City of Carlsbad), and a 354 unit hotel and
residential complex (approved by the City of Carlsbad). To the
north and west of the Lakeshore Gardens Mobile Home Park which
abuts the study site, is an approved 146-unit senior hotel.
Therefore, agricultural operations can be expected to be
restricted by urban closeout.
In light of the apparent adjacent land use, it should be
noted that an agricultural operation can include activities that
conflict with urban land uses. Conversely, nearby urbanization
may result in contraints on cultural practices in the field.
These impacts appear to be more severe when relatively small agri-
cultural sites are involved.
AGRICULTURAL IMPACTS ON URBAN LAND USES
Agricultural activity is often the source of adverse impacts
on population within urban land uses. These adverse impacts
include:
o dust
o noise
o odor
o health hazards
o traffic
Dust and noise impacts normally result from the use of farm
machinery. Since farm machinery is used in response to the needs
of the crop, these impacts do not always occur at times convenient
to the urban dweller. Similarly, farm odors from fertilizers and
pesticides occur in relation to the needs of the crop.
The most severe problem appears to arise from pesticide drift
which may have health hazards. Although farmers attempt to apply
pesticides to the crop at optimal times, hazards to nearby urb-an
areas exist. The current field flower operation employs an
airplane to apply insecticides. Although no impacts have been
experienced by residents of the adjacent mobile home park, the
reduction in field size and planned urban development on three
sides will require the grower to change this practice in favor of
a ground spray rig.
Traffic and parking problems impact urban populations at
particular times such as planting and harvest. The exception to
the rule appears to be greenhouse operations adjacent to
residential communities. Since labor is a major and continuing
40
need of the greenhouse operator, traffic and parking problems tend
to be continuous.
URBAN IMPACTS ON AGRICULTURAL LAND USES
Needless to say, urban populations impact agricultural
activities. Probably the greatest impact to the farm activity is
the neighborhood response to dust, odor, noise, and pesticide
drift. Besides directly complaining to the farmer, residents have
been known to protest these impacts with the Agricultural Commis-
sioner who is responsible for determining appropriate pesticide
use.
These complaints directly impact the method of farming.
Examples include:
0 Use of ground spray rigs rather than airplane
or helicopter application or pesticides
o Nonoptimal field configuration in order to
minimize dust
0 Use of slower-acting nitrate fertilizers rather than longer-acting organic fertilizers in order to minimize odor
0 Adjusting work starting and quitting times to more closely coincide with residential popula-
tion habits
0 Transporting labor to the field in buses to
minimize traffic and parking problems
In each case, the production costs tend to increase for the
farming activity.
Another major area of urban impact deals with vandalism and
machinery, and support equipment. In addition, some urban
activity such as using a farm site as a dump, impact farm
operating costs directly.
41
Not all urban impacts on farming are purposeful. For
example, automobile headlights at night degrade flower quality of
poinsettias. Thus, the marketability of these plants is
diminished by inadvertent actions of the urban population.
Probably the most important unintentional urban impact on a
farming operation is urban closeout. As fields become surrounded
by residential land use, the farmer has difficulty obtaining
casual labor, i. e., undocumented workers.
PARCEL-SPECIFIC IMPACTS
The above generalized assessment of the impacts associated
with farming in an urban area will be experienced to some degree
if the agricultural use is continued at the study site. In order
to obtain another perspective on this matter, the current farmer
was asked to assess the continued viability of his operation
within a urbanized setting.
Mr. Frazee stated that he could expect to continued growing
flowers at the site without impacting or being significantly
affected by, adjacent urban land uses. There have been no
problems associate with crop dusting by airplane: a public
relations program instituted by the pilot has been effective to
the point where Mr. Frazee states that no conflicts have arisen
with the adjacent mobile home park. If the parcels to the east
and west of the study site are developed, he expects that
insecticide applications (by a ground spray rig) and other farming
operations could be continued indefinitely without serious impacts
to or from adjacent development.
42
However, Mr. Frazee acknowledged that the land rent was quite
favorable but that under moie competitive market conditions he
could be unable to feasib1.y continue growing ranunculus. At the
present time, there is no direct competition. That is, 100
percent of domestically sold ranunculus bulbs are produced by
Frazee Flowers. If in addition to the competition (substitution)
other floral species provide Frazee Flowers had to compete
directly with other ranunculus growers, he would lose the ability
to set his own prices and would possibly be forced to relocate or
discontinue operations.*
The future availability of water is another issue which may
impact continued flower production. In addition to price
increases expected at 8 to 10 percent, agricultural concerns face
the prospect of interrupted service as Southern California's
population expands. Agriculture is classified as an interrupt-
able use by the Metropolitan Water district (MWD). The MWD's
Admnistrative Code states that after a one year notice period and
following elimination of supplies for groundwater replenishment
and reservoir storage, service to agriculture may be interrupted.
Within the classifications of interruptible agricultural uses,
field, nursery, and row crop operations would be shut down first,
ahead of tree and vine orchards, and livestock producers. With
Southern California's expected growth and available water.sup-
plies uncertain, a field flower operation risks being one of the
first users of district water to have water service discontinued.
*The relocation would be to an area where costs and yields
provide a competitive advantage.
RECOMMENDATIONS
A review of study findings indicates that continued
agriculture at the study site is infeasible. Although the
physical resources are suited to flower and truck crop production,
farm income is insufficient to cover all costs. Agriculture is
subsidized by the landowner by no less than $173,000 annually. If
the land were sold for agricultural or at an urban land value, the
annual subsidy to the farmer would be $269,000 to $2,515,000,
annually. Because farm income could not support the purchase of
the land even at an agricultural land value, the land should be
converted to an alternative use.
This conclusion is supported by recognition of impacts
expected as urban development grows to surround the site on three
sides. Although the current tenant farmer feels capable of
continuing operations from a production standpoint, the entry of
one additional grower into the ranunculus bulb market could
suddenly cause the operation to become infeasible. Questions
concerning the future availability of irrigation water increase
the operation's sensitivity to probably change.
44