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Arizona land prices creating In crowd

There is a new “In” crowd among Arizona farmers. However, it is far more inclusive than exclusive.

It is the “In Escrow” crowd.

“I don't know of a farm around here that is not in escrow,” said Coolidge, Arizona producer Greg Wuertz. And that includes perhaps the most well known farm in all of Arizona, the Wuertz family's Sundance Farms in Pinal County.

Howard Wuertz and his family are known worldwide as innovators, being the first in the West to produce row crops on subsurface drip irrigation and developing a line of tillage tools to farm drip-irrigated cotton and other annual crops. This is just one of the many innovations from Sundance.

Yet, the 3,500-acre Wuertz home farm has been sold to land speculators/developers. One day soon the entire farm will be engulfed by of thousands of homes where cotton, alfalfa, wheat, melons and other crops now grow.

“It was the hardest thing for dad to sell out, but he figured it was time to make the move with the prices like they were offering and the water shortages looming in Arizona,” said Greg Wuertz.

It is the same story everywhere for developable privately owned Arizona land. Much of Arizona is federal or Indian lands, making private ground scarce and expensive in a state of 5 million people continuing to grow rapidly.

An insatiable appetite for land in the fastest growing state in the nation is fueled by Internal Revenue Code 1031 that shelters capital gains for investors and others who sell land and invest proceeds in similar land purchases.

Toss huge checks

Land speculators are tossing huge checks for $15,000 to $30,000 and more per acre for thousands of acres at farmers in Pinal County and other farming areas of Arizona.

What is happening is that open land bought, for example, for $20,000 per acre near Phoenix just a few years ago is now selling for as much as five times that. Under 1031 tax code, those sellers can avoid capital gains taxes by buying similar property elsewhere, like Pinal County, now the largest cotton farming area in Arizona with 100,000 acres annually, roughly half the state's cotton acreage.

At one time that distinction belonged to Maricopa County where just eight years ago there were more than 100,000 acres of cotton. In 2003 that had dipped to just 40,000 and it may soon be just 20,000 acres. Maricopa once logged 200,000 acres of cotton. The development craze that enveloped much of the farmland in Maricopa is now consuming Pinal.

An investor sells 50 acres for $5 million in Phoenix, turns around and spends $5 million for 200 acres in Pinal County, and avoids capital gains taxes under IRS code 1031.

“It's crazy,” said Greg Wuertz. However, with the cost of farming and the increasing scarcity of water in the desert, Arizona farmers figure they would be fools not to take the money now. Prices likely will go higher. However, farms have seen bubbles burst. Who blames them for taking the cash while the offer is still on the table. Farming is not going to get any easier or less expensive.

Lease back

However, just because a farmer sells out does not mean he must stop farming the land. Many farmers like the Wuertz family are leasing back their own farms.

Adding fuel to this crazy bidding war for farmland are cities buying farmland for the water. People who will live in all those new houses and apartments are going to want water and that water will come from agriculture, either well water or surface water projects like the Salt River Project or the Central Arizona Project that farmers now rely on for irrigation water. Adding to this water rush is the recent settlement of federal water rights which gave Indian tribes control over 42 percent of the CAP water in the state. Indian tribal members represent 2 percent of the state's population, yet control 42 percent of the federal water supplies.

Some tribes say they are going to use the water to develop new farmland. Others, however, believe the tribes will eventually sell the water to thirsty cities for big bucks.

Back to the farmland. It may be years before all of the farmland is developed or water diverted from agriculture. However, for some land, the wait for development may not be long. That is the case for about 1,000 acres of Sundance where developers are already taking core samples in preparation for roads and homes soon to be built in fields of wheat to be harvested this summer.

While some farmers are taking the cash and getting out of farming, others like the Wuertz family want to stick with what they have done all their lives. They are professional farmers and want to continue to meet the challenges of desert farming and hopefully continue to make money.

Greg and David Wuertz are third generation farmers and hope their children can become fourth generation producers as well. It will not be easy or inexpensive. It also likely will mean farming land with short-term leases.

Leasing from city

That is the situation the Wuertz family finds itself in leasing about 1,400 acres of ground owned by the city of Mesa. It is basically a replacement for the 1,000 acres soon to be developed at Sundance.

The city-owned ground had been farmed since the 1980s when Mesa bought it on a long-term lease, but the farmer let it go back when Mesa reduced the lease term to just two years with a one year renewal, raised the lease rate and revised the pump maintenance agreement to put more of the financial responsibility for pump water on the lessor/farmer. Wuertz assumed the lease.

The previous tenant had farmed only about 700 acres of it, however, most of it has a farm history.

“It is a big contiguous farm, and they are hard to find. That is why we were willing to lease it on a short term basis,” said Wuertz. The lease is $200 per farmed acre.

“I have a good friend who farms 1,200 acres in blocks of 160, 320 and 80 acres 20 and 30 miles apart. That is expensive. It takes extra equipment and labor. You are always chasing from one block to another, chasing fuel or parts or people,” said Wuertz.

To make the leased ground profitable, Wuertz understands he must reduce costs from what he now figures it costs to raise cotton, $1,000 per acre. His goal is to produce 3 bales of cotton using 3-acre feet of water at a cost of about $600 per acre. “My goal is to raise cotton for 60 cents per pound. I have to reduce a lost of costs from fuel to labor and still get the yields to achieve that 60-cent goal,” he said.

New consideration

The simplest thing to do would be to do what Howard Wuertz started doing 20 years ago; install a buried drip irrigation system.

However, with a short-term lease, that is too risky financially. The lease could be terminated before the buried drip system could be amortized.

Greg has decided to borrow a page from fellow Arizona producer Ron Rayner of Goodyear, Ariz., to get costs down. Rayner is successfully farming irrigation basins using no-till to reduce costs.

“Ron and I are on the Calcot board and I have been talking to him about what he is doing and decided to give it a try, with some modifications for my water situation,” said Greg Wuertz.

Rayner grows a crop of wheat or barley; harvests it; shreds the stubble and plants cotton into the stubble. It is strictly Midwest no-till in the middle of the Arizona desert. It has taken Rayner eight years to perfect the system, and Wuertz is going to school on Rayner's education.

Wuertz is putting up borders to plant cotton on 30-inch rows after a winter green manure crop of barley or perhaps a legume.

Cotton in stubble

“My plan is to pre-irrigate and plant the green manure crop, but not harvest it. It will survive on the pre-irrigation or whatever winter rainfall it receives. Then in the spring, I will come in and burn it down with Roundup and plant cotton directly into the grain stubble,” said Wuertz.

Rayner harvests his grain crop and does not plant cotton before May 15. Wuertz said he has only about 3 to 3.5 acre feet of water available to him, and he cannot afford the water cost take a grain crop to maturity. Rayner, said Wuertz, uses about 6-acre feet for both the cotton and grain crops.

“Water is the biggest issue with me — cost as well as physical availability. I tried irrigating with borders and no-till last year on 40-inch rows on 200 acres last year, and it just took too much water. My yields went way up with this system, but my water use was too high. I am switching to 30-inch cotton for the 700 acres I am doing this year. My ditches and water supply are not big enough to handle big heads of water to get across the field without using too much water.”

Wuertz is putting in permanent borders with a Trimble equipped GPS guidance on a Deere rubber track tractor. The width between borders will be determined by field fall. The borders will be spaced to handle a 30-inch no-till planter and six-row 30-inch Deere spindle pickers.

“Some guys in Arizona have gone to strippers to save money. I am not ready to go that far,” he added.

He will plant his cotton the middle of April, using Deltapine 449BR. “It is a full season cotton that I have had pretty good luck with. I may be able to shorten the season a bit if it works out that way and make 449 a more medium maturity variety,” he added. He will not cultivate the cotton crop, using glyphosate to kill the weeds in the herbicide-resistant cotton.

The Wuertzes long ago abandoned deep tillage with permanent drip systems, some of which have been in the ground for 20 years, therefore, it is not a stretch for Greg to continue the no-till regime. However, this is the first try at no-till and flood irrigation.

Greg has another motive for trying the no-till flood irrigation. In the future, he is convinced farmers will be paid to practice conservation tillage.

Expects payments

“I think we are going to start getting government payments, for conservation tillage — not ripping or plowing. It may take me two or three years to figure out this new border irrigation system and no-till, but I want to be ready when that starts,” he said.

Wuertz said he is the cotton man on the Sundance operation, but admits that a finite supply of water for farming will drive Central Arizona producers to produce more high value crops on less land.

“We have to stretch the water even more than we already are in Arizona, and that is what I am trying to do with the system I am borrowing from Ron to try to stay in the cotton business,” said Wuertz.

Howard achieved a 95 percent water efficiency when he went to buried drip irrigation. That will be difficult to duplicate with flood irrigation and no-till, but Wuertz said he must strive for that goal if the third and fourth generations of Wuertzes are to remain Arizona producers.


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