In this article I will be focusing on valuing permanent crops, and the different factors that valuers take into consideration when compiling such a valuation report.
The factors that influence the value of permanent crops can be categorized under area of location, crop type, plant population, orchard establishment, irrigation, location on the farm, yield history and the condition of the orchard.
The area in which the farm and crops are located is the first value factor to consider. Although most crops are able to grow in most areas, the yield performance of the crops differ from area to area. The climate of an area is the single most important factor that determines whether a particular crop is adapted in an area and produce well. Other area specific factors to consider are the distance to the market, the surety and stability of irrigation water and lastly, the perceptions about the best area for a crop.
Different crop types have different values, and the same crop type’s values also differ from area to area. Individual orchards on a farm are also valued separately. According to Pienaar (2013), in general terms the order of values from the highest to the lowest is table grapes, deciduous fruit, citrus, macadamia, avocados, bananas, pecan nuts, guavas and so forth. Permanent crops also differ in value according to age and cultivar.
Plant population influences orchard values in two ways. Plant population at time of establishment and plant population due to plants missing when mature. If an orchard is planted at high density the leaf area exposed to the sun is high, when the trees are still young. This means higher yields per hectare, and a higher orchard value. The extent of missing plants influences the value of an orchard by negatively influencing the production of the orchard.
There are not many areas in South Africa where permanent trees or vine crops are planted under rain-fed (dryland) conditions. Most are planted under irrigation. The factors that influence the irrigation values are the specific water allocation per Hectare, and the type of irrigation. Irrigation was discussed in more detail in the previous two articles.
The type of soil is a major factor in the success of any orchard. Different crops favour different soil types, while almost all irrigated crops require well drained soils with no layer in the subsoil that inhibits root development, and cause water logging.
The location of orchards on a farm influences the value of each individual orchard, and therefore the total value of the farm. Orchards next to busy dirt roads are negatively influenced by dust pollution, while theft is a challenge next to any busy road, especially if not properly fenced. The distance to pack houses is a factor with fruits that bruise easily, for example bananas.
Orchards are usually established to be in production for at least 20 years, therefore the quality and thoroughness of the establishment process is very important. The soil must be properly prepared through cultivation, fertilization and levelling. The favored direction of the slope of the soil is important, and differs between crop types. Other factors to consider are the incline of the soil, ridging, row direction, trellising and crop covering.
Each crop and cultivar has a theoretical yield potential that is related to age as well as area. Because orchards are valued individually, it is wise to evaluate the yield history of each orchard. Any progressive farmer should be able to submit such information.
Lastly, the physical condition of the orchard also influences its value. Diseases in an orchard inhibit production and influences the value negatively. Pruning and developing is a continuous process, which is crop- and cultivar-specific. Sometimes trees are manipulated to be relatively small for easier picking of the fruit, and is the cause not poor growth or a lack of proper management. Deficiency symptoms is a cause of concern though, and need to be properly assessed. Most deficiencies can be rectified quite easily by applications of the correct nutrient, although the time of recovery would differ per situation. If the pH of a soil was not rectified before planting however, it is difficult to rectify afterwards and larger quantities of nutrients are required.
To summarize, the value allocated to every individual orchard on a farm should include the value of the land, the water entitlement, the trellising, the in-land irrigation system and the value of the plants. The value of the crop on the land is however not included in a normal fixed property valuation report, and is negotiated separately between a buyer and a seller.