Californians, Chinese Scooping Up Farmland in Washington State

Farmers from drought-parched California are finding greener pastures in the Pacific Northwest. And so are buyers from China.

"We're getting a lot of interest where they want to move out of California into Washington, Oregon and Idaho," said John Knipe, president of Knipe Land Co. in Boise, Idaho. "Often they have to sell the California property to do that."

Knipe said water availability is seen as "a very big factor" when potential investors are looking at farmland.

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A Reality Check On California's Drought

01:30

Portions of Washington, Oregon, Idaho and Montana are currently in severe or extreme drought conditions, according to the latest U.S. Drought Monitor. The Drought Monitor released Thursday stated that "the lack of mountain snowpack has contributed to record and near-record low-stream flows across much of the Pacific Northwest, with tinder-dry conditions resulting in the closing of the forests in northern Idaho."

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"The first thing people ask about is the water when they're looking to buy," said Knipe, a broker who specializes in farm and ranch properties. "We especially get a lot of Californians asking that question. Some say, 'My gosh it looks dry here, too.' Certainly not as bad as California but some of this country is in a water shortage."

Water concerns don't appear to be slowing interest in the Northwest region's farmland, however.

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"I personally don't see any big change because of the drought up here," said Kevin O'Rorke, a farmland and ranch property broker at NAI Tri-Cities in Kennewick, Washington. "Our ag prices are just going through the roof."

Statewide, Washington cropland increased in value by an average 5.8 percent last year compared with the year prior, and is up more than 36 percent since 2010, according to the U.S. Department of Agriculture's 2014 Land Values report, which will be updated next week. Oregon cropland was up an average 4.2 percent last year and has risen 13 percent since 2010. By comparison, California cropland increased an average 2.8 percent in value last year but lagged the growth in values from states in the nation's heartland.

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"Our droughts up here are more of a cyclical nature," said O'Rorke. "We got lots of water still in the Columbia River. That's still millions of gallons that still go past — right out my window. Even though we had a low snowpack in the mountains, that feeds the little streams."

Michael Butler, chairman and CEO of Seattle-based investment bank Cascade Capital, said the out-of-state farmland buyers are driving up prices and making it tougher for the state's resident farmers to expand. "What I'm seeing is a lot of them sitting on the sidelines now. It's more expensive for them to buy land."

Chinese buyers move in

Some buyers are farm owner-operators, while others are looking to operate some land and rent out a portion of it to others, according to experts.

Other buyers in Washington are from China. Those individuals are said to be looking primarily at investment property that they can lease out. Some, however, are looking to move their families to the United States. Chinese buyers are also showing interest in farmland in South America, Australia and New Zealand.

The Washington State Department of Natural Resources reports seeing more interest from out-of-state entities looking to lease state-owned ag lands. The state offers irrigated leases that have typically been used for growing corn, wheat, barley, alfalfa, hay, potatoes, beans and other crops.

Washington leases or permits the use of about 1.1 million acres of land to farmers and ranchers for agricultural and grazing production, according to Sandra Kaiser, a spokesperson for the state Department of Natural Resources. The state is seeing "some interest from California with producers who lease from us, but not from folks who want to farm themselves."

One property recently for lease in Washington was a vineyard that attracted interest from a Chinese investor, according to a person familiar with the property. Besides irrigated land, the investors from China are looking for range ground and timber properties.

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China's economic slowdown and recent stock market decline don't appear to be slowing their appetite for agricultural property in the U.S.

"We just did an offer for some Chinese investors for about 200,000 acres of timber ground in the Northwest," said Knipe. "We're not seeing a slowdown — maybe even a pickup in interest. You're seeing people with serious money who want to move it out of China."