Gladstone acquires Michigan blueberry properties for $7.8m

The NASDAQ-listed farmland REIT’s expansion comes as blueberry markets face reduced California production and growing competition from Mexico, Peru and Chile.

Gladstone Land Corporation has acquired two blueberry farms in Michigan for approximately $7.8 million, expanding exposure to a crop currently facing near and long-term market challenges.

The two properties total 516 acres near South Haven, Michigan, and contain 383 acres of blueberry bushes and six acres of cranberries in addition to a blueberry processing facility and a fresh packing and cooling facility, according to a 5 June statement.

Gladstone, a farmland REIT listed on the NASDAQ exchange, entered into a 10-year triple net lease with an unidentified regional blueberry grower and processor.

In March 2018, Gladstone acquired another Michigan farmland property planted in blueberries for $2.1 million. Last month, chief executive David Gladstone said he expected as much as $200 million in farmland acquisitions this year, calling his firm’s deal pipeline “as strong as we’ve ever seen.”

Long-term blueberry market dynamics are being shaped by anticipation of a blue wave of plantings due to mature in coming years, a market source told Agri Investor. In the near-term, prices are likely to be impacted more by reduced production in California due to high levels of rainfall this year.

Because the industry is currently nearing the end of the season there, the source added, most producers do not yet have a definitive sense of exactly how much of their crop has been impacted, though it has been significant.

“The percentage that will go to fresh this year [as opposed to frozen or juice] is probably 10-35 percent lower than what it would have been had we not had such a traumatic wet period between February and March,” the source said.

In addition, the source said, domestic blueberry producers have been met with increased imports from Mexico, Peru and Chile during shoulder seasons.

Mark Williams, president of Value Midwest, a farmland services and appraisal firm and Peoples Company-affiliate based in Marlette, Michigan, told Agri Investor there are effectively two different markets for blueberry properties in the state.

“If you have the local market and you have a 40-acre tract of land, you might find somebody that buys that for an add-on parcel for an existing operation,” he said. “If you have a sizable unit, your buyer is probably a regional or a national buyer.”

Many of the blueberry plantings in Michigan, said Williams, are of older Jersey varieties that are thought to grow for a long time, albeit with lower yields than possible with other varieties.

“After 20 years, it all depends on plant maintenance. Have you kept out the invasive species of weeds and brush have you kept them trimmed?” said Williams. “If they are well-maintained, they are a long-term investment.”

In response, Williams added, many blueberry producers moved from low density plantings towards smaller trees that can be planted at a rate of 1,000 to 1,200 per acre.

CEO Gladstone told Agri Investor while oversupply in the blueberry market is possible, demand has expanded significantly and the only single sector where his company has seen production outstrip demand has been in Georgia. He added that new blueberry varieties produce larger fruit and have proved very popular with consumers, suggesting demand could continue to grow.

“There’s always challenges for everybody’s crop,” Gladstone said. “I don’t know where blueberries will eventually end up, but my guess is its going to take a lot to overcapacity the blueberry business.”

Because general practice in the blueberry industry is to replace individual bushes that have started to under-perform, Gladstone explained, its properties currently contain a mixture of old and new varieties.