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HomeMy WebLinkAbout; Agriculture Committee (1985); Program Report; 1985-07-05>- 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