VALUATION OF A FRUIT FARM
(with application to a citrus farm)
The purpose of this session is to follow up on the lecture of Mr Veldman to complete the whole picture on the valuation of a citrus (or fruit) farm, namely to round off the discussion of value forming attributes with some practical notes on valuation.
However, before we tackle the practical problems of valuation, I, on behalf of the Institute wish to address a matter of concern, namely that of
- unprofessional conduct among some of our members, and specifically
- the undertaking of valuations by valuers without the necessary competence (training and experience) for the type of valuation undertaken;
- under-charging that inevitably results in inferior work (and the over- charging which may result in an embarrassing investigation of your account by the Institute).
“It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you Iose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it for. The common law of business prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest tenderer it is well to add something for the risk you run, and if you do that, you will have enough to pay for something better.” John Ruskin (1819 – 1900).
I hope to illustrate that farm valuations are not easy and that it is a time-consuming exercise requiring a proper fee to compensate for your time and expertise.
In this session an attempt is made to assist farm valuers with some practical advice in an effort to ease the process of valuation and to uplift standards by tackling some of the daunting issues that sometimes confront us, as well as by providing sources of information that may be useful.
Attending this session will not qualify you for the proper execution of farm valuations and if you do not want to land in trouble, sufficient training and experience will be required.
The value forming attributes of fruit farms have been splendidly addressed by Mr Veldman and I will not repeat these attributes except in some passing comments. In this session we will be looking at the following:
- The necessary information to be gathered before inspection is undertaken;
- The process of inspection of the subject property and the comparable sales;
- The method of valuation with reference to all three of the valuation methods, namely the cost, income and comparable sales approaches, with specific reference to the valuation of potential and improvements, and
- The conclusion of the valuation
INFORMATION GATHERING ON INSTRUCTION
The first step on receiving an instruction to value a farm is obviously to calculate how much money you are going to make (quotations or otherwise).
On taking instruction you will obviously enquire about the nature of the farm and will therefore be aware that, for example, you are dealing with a citrus farm. It is wise at this point to request the following information from the farmer (to be faxed or e-mailed to you prior to inspection):
- Soil tests;
- Plantation population (spacing and production models), tree ages, cultivar and rootstock compilation;
- Production figures;
- Water rights and irrigation equipment;
- List of improvements
Next you will require the following:
- 1:50,000 maps of the This is necessary for the following reasons:
- identification of subject farm and comparable sales (compilation):
- determination of topography and
- Deed search (Aktex, long-search, )
- a list of all sales must be compiled from this; and
- eliminate non-comparable sales, to
- narrow sales worth inspecting which must be
- Climatic information can be obtained from weathersa.co.za.
- Required for:
- Comparison of climatic areas;
- Assessment of suitability;
- Other (crop prediction )
- Land Type, Soil Profile and Climate information can be obtained from the Agricultural Research Council (ARC/LNR) at arc-iscw.aqric.za as well as a map of ‘Generalised Soil Patterns of South Africa — 1997’ referred to as “Land Type Survey Staff, 1997” — Institute for Soil, Climate and Water.
- This soil map is based on the land type series of which there are also maps (1:250,000) and memoirs
- Memoirs on soil classification —a taxonomic system (classification according to natural relationships, g. horizons) which can be useful in determining soil potential.
- Vegetative information that can be obtained from:
- Vegetation of South Africa, Lesotho and Swaziland together with a companion memoir by Barrie Low and A. (Tony) G. Rebelo, 1998; and
- Veld Types of South Africa with accompanying memoir by P.H. Acocks,.3’d Edition.
- Note that all veld types are currently being reviewed and that these two maps will hopefully soon be replaced by new
- Useful to read publications such as Standard Bank AgriReview at standardbank.co.za , Farmers Weekly etc. for an overview of economic conditions in the farming sector.