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Lemons, wine grapes big winners in Arizona

Lemons, wine grapes big winners in Arizona

The 2013-2014 growing season for desert-grown lemons set a record price of $12-$15 per field box ($3 per box is profitable). Interest in wine grape plantings continues to escalate in Arizona with an estimated 1,000-plus acres in grapes now.  

Arizona lemon growers with fruit to sell during the just ended fall-winter harvest season received phenomenal financial returns – “one of the best years ever” – says rural appraiser Scott Halver of the Ganado Group, Inc.

“The net returns per field box (about 76 pounds) for Yuma-grown lemons this season were $12-$15 per box,” said Halver who has tracked the Arizona citrus industry for 25 years.

He says Arizona lemon growers can make a small profit at $3 per field box. Add another $9 or more return per box and the grower can receive an extra $9 or more to bank or reinvest in the orchard.

“This season we had good yields and phenomenal prices for those growers who had product to sell,” Halver said.

He discussed Arizona citrus during the 19th annual Arizona Ag Forum held in Tempe, Ariz. this spring, sponsored by the Arizona Chapter of the American Society of Farm Managers and Rural Appraisers (ASFMRA).

Why the surge in lemon prices? Supply and demand.

On the supply side, there are about 5,000 fewer acres of lemons grown in low-desert areas including Yuma and Phoenix, largely tied to urban development which has uprooted groves to plant subdivisions and retail.

In addition, lemon production fell in the Yuma area from two catastrophic freezes over the last five years – the coldest winter weather in 30-40 years. Some lemon groves suffered major crop losses and tree damage while others were slightly damaged. In some cases, the difference between the two extremes was only a couple of miles.

Meanwhile, consumer demand for lemons has remained strong.

Desert lemons, wine grapes

As with the lemon growing areas in California and Mexico, the Arizona lemon industry has a niche time frame to bring citrus to the market to gain the best prices - late August through early November in the desert.

Yuma lemons are grown for the fresh market destined for grocery stores.

U.S. lemon acreage totaled about 55,000 acres in 2012-2013. Back in the mid 1970’s, Arizona lemon production covered about 16,000 acres, and has fallen to about 11,000 acres today. About 75 percent of the state’s lemon crop is grown in Yuma County.

Halver was one of a dozen speakers at the ASFMRA event discussing how specific commodities fared in Arizona in 2013 and trends in farmland prices and rental rates.

Another crop which fared well last year in Arizona was wine grapes. Vine plantings are hot in the high desert areas, including Cochise County – the southeastern most county which borders New Mexico and Mexico. 

“Wine intelligent people are coming here,” chuckled Mark Finley of Finley Appraisal Services, Willcox (Cochise County). “The majority of the people getting in the wine grape business here know what they are doing.”

Finley says grape folks have studied the environmental factors of the area - the hours of sunlight, the average mean temperature, the length of the dry season, rainfall, soil acidity, and others.

“They say these components match up to some of the best wine growing regions in France and Italy,” Finley said.

An Arizona grape industry source estimates statewide vineyard acreage at about 1,000 acres, and growing.

Traditionally, Cochise County producers grow alfalfa, cotton, vegetables, and grain. In recent years, thousands of acres of pistachio trees have taken root. Finley says those buying ground for pistachios include investor groups from California; many tied to the medical field.

“People here say the pistachios grown in this area taste as good as or even better than pistachios grown in California,” Finley said. “In addition, the production costs here are lower.”

More alfalfa, less cotton ground

Looking at other Arizona commodity trends, farm appraiser Shawn Wood of Western AgAdvisors, Buckeye, shared a lackluster outlook for cotton acreage this year due to two major factors – changes made in the new federal farm law’s cotton provision and increasing alfalfa acreage in the Grand Canyon State.

“Cotton doesn’t rise to the top this year,” Wood told the group.

She cited lower profit margins for cotton compared to alfalfa where prices continue to increase due to a strengthening western dairy industry linked to surging milk prices.

Wood says several valleys in the state are 80-percent planted in new alfalfa. Some growers pulled out 3-4 year-old alfalfa stands, decided against crop rotation, and planted alfalfa again.

Speaking of dairy, Tom Van Hofwegen of Farm Credit Services Southwest, Tempe, shared a bullish forecast for the Arizona dairy industry. Milk prices have risen since the second half of last year due to world production issues and a global powdered milk shortage.

“2014 is expected to be a very good year for the dairy industry,” said Van Hofwegen whose own family milks cows. “Obviously it will be a cyclical situation but we hope it lasts a long time.”

On the Arizona crop land sale and rental prices forefront, the overall message from regional rural appraisers was prices for crop land are stable but increasing across the southern half of the state.

Land and rent prices in the greater Phoenix area are higher tied to urban development. Water costs are headed north.

“Most Maricopa County farm land is priced at levels that cannot be supported solely by ag production,” said Charlie Havranek, broker and appraiser with Southwest Land Associates.

Yuma land-rent prices

Land prices and rents are also edging higher in Yuma County and neighboring Imperial County, Calif. where about 80 percent of the nation’s supply of winter vegetables are grown.

“There are parties actively looking for produce land,” said Bill Moody of Robert J. Moody Appraisers, Yuma. “There is a lot of activity and land prices are trending upward.”

He added, “Produce drives the market in the Yuma area.”

Winter produce growers had a very good fall-winter season in terms of crop production but horrible consumer demand. Severe cold weather in the East and Upper Midwest greatly reduced consumers’ appetites for salads.

“No one wants to eat salad when it’s cold out,” Moody said. “The local term is they go for ‘soup over salad’ so fewer people bought fresh produce.”

In the North and South Gila valleys – about 8,000 acres total - land prices are also trending higher.

“In 2012, several farms in these valleys (good produce ground) sold for about $32,000 per acre,” the appraiser said. “I am aware of cash rents as high as $850 and trending higher. These valleys are an absolute place where produce people want to farm.”

In neighboring Bard Valley, Calif. (Imperial County), land prices for Medjool date palm trees can run $50,000 - $100,000 per acre, depending on the age and condition of the trees.

Moody said, “Date fruit can be very profitable but it’s a long-term investment.”

In 2008, Moody says a 10-acre date palm tree parcel sold for $130,000 per acre with the trees later sold for landscaping. The demand for ornamental date palm trees fell substantially with the economic recession.

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