Sacramento Valley rice, almond and walnut farmers see prices bloom

A drive in the country can do wonders for your economic outlook.

While the real estate meltdown is draining billions of dollars from the capital region's urban economy, area fields and orchards are yielding some of the richest harvests in decades.

It's the flip side of the rising cost of food: As global trends ranging from the weak dollar to the modernization of Asia drive up prices in supermarkets, they also boost the value of each pound of walnuts and sack of rice harvested in the Sacramento Valley.

The strong prices haven't fixed all of the rural Valley's economic troubles. Unemployment remains high, and local government budgets are thin.

Still, the strong farm sector is injecting new money into small-town economies: Tractor dealers are smiling. Walnut-tree nurseries are sold out. Farmland prices are up.

And for Colusa-area walnut farmer Tyson Schmidt, it's time to expand.

"We were waiting for a good opportunity," he said on a recent drizzly morning as he walked the dirt track out to the 50-acre orchard he planted this winter. Rows of saplings, little more than stakes in the ground at this point, ran across the muddy field.

Before this winter, Schmidt hadn't added any new trees to his orchard 10 miles north of Colusa since 2001. But in the past year, the price he gets for his walnuts surged 35 percent, to roughly $1.10 a pound.

"That's great for us," said Schmidt, a broad-shouldered 36-year-old with a degree in Spanish from Vermont's Middlebury College. Roscoe, his Australian blue heeler, ran circles with excitement.

While rising costs of diesel and fertilizer have been eating into his bottom line, Schmidt said he expects his walnut returns to more than keep pace.

He also got a financial break courtesy of the real estate bust. As the Federal Reserve lowered interest rates to goose the economy, he cut his monthly payments by refinancing his debt.

Walnuts are the third-largest crop in the Sacramento Valley. Together with rice and almonds, they accounted for more than $1.2 billion in revenue to the region's farmers in 2006. Final returns for 2007 likely will be higher: To go with the jump in walnuts, rice prices are up roughly 20 percent, while almonds held steady.

Experts point to several factors behind the strong prices for the three crops, and farm commodities in general.

• The weak dollar benefits export-oriented crops like walnuts, almonds and rice by making them cheaper for foreign buyers.

• Aggressive marketing by the almond and walnut industries has opened up new markets abroad.

• A drought has slashed rice production in Australia, a competitor with California in the international rice markets.

• Modernization in India, China and other countries is driving up demand for meat and dairy products, taxing corn and soy supplies already stretched by the growing demand from the biofuel industries and, in turn, tightening supplies of other grains like wheat and rice.

"For the near term, the fundamentals are very sound," said Pat Daddow, who runs California Rice Exchange in Yuba City. "It's a good time to be a dirt farmer."

The same general economic forces have raised food prices in supermarkets, which last year rose at the fastest rate since 1990. As of January, grocery prices were 5.8 percent higher than a year earlier, according to the U.S. Department of Agriculture. The agency predicts grocery prices will rise a further 3.5 percent to 4.5 percent this year.

Schmidt hasn't been immune to the global economic winds. He splits his time between his Colusa-area walnut groves and a business in Chile that produces cucumber, melon, lettuce and squash seeds.

In Chile, he said, the high price of corn and wheat has driven up land rents, and the weak dollar has shrunk his margins for the Chilean-grown seeds he sells to U.S. seed companies.

In Colusa County, the strong farm economy has helped to make agricultural land an excellent investment. Brand-new orchards line many stretches of Highway 45 between Colusa and Schmidt's farm, a sign of the demand for land.

About the writer:

• Call The Bee's Jim Downing, (916) 321-1065.