Economy & Market Forces

As Economy Struggles, Some Land Slated for Development Returns to Farming

From CronkiteNewsOnline.com, Elvina Nawaguna-Clemente, Cronkite News, 22 Nov 2011.

A worker harvests sorghum on a tractor at Jason Perry's farm in Chandler. This land was previously set for development. Photo by Elvina Nawaguna-Clemente

A worker harvests sorghum on a tractor at Jason Perry's farm in Chandler. This land was previously set for development. Photo by Elvina Nawaguna-Clemente

CHANDLER, AZ – On a late November afternoon, tractors with side chutes harvest sorghum from a small roadside farm, spitting it into a truck riding along. The grain is milled and sold as feed to a nearby dairy.

About a year ago, this land was set for development. But the owner went bankrupt, another developer bought it at an auction and leased it to farmer Jason Perry.

“A lot of our land is in that situation,” Perry said.

Rick Gibson, University of Arizona county extension director and agriculture agent in Pinal County, said the real estate crash has farmland once sold to developers finding its way back into agriculture, especially in Maricopa and Pinal counties.

“Some are buying or coming back to them when the buyers defaulted on payments,” he said.

For the developers the land might have dropped in value or may not be worth developing at present, he said.

In the meantime, Arizona farmers are happy to take the extra land and increase acreage for commodities like cotton, wheat, alfalfa hay and corn that are enjoying high prices amid increasing demand.

For instance, Arizona’s cotton acreage rose from 136,000 acres in 2008 to 261,000 acres this year according to the National Agricultural Statistics Service.

“Farmers have to be businessmen,” Gibson said. “They watch the trends and make financial decisions based on those trends.”

Perry, a fourth–generation farmer who set out on his own 12 years ago, leases all his farmland from several owners in Gilbert, Chandler, Mesa and Queen Creek. He also grows alfalfa, corn, oats and Bermuda grass.

In the last couple of years, several developers have offered him their land to lease because they either could no longer afford to develop it or didn’t think it was worth much at a time like this. Sometimes he approached them.

“A lot of times the owners were interested because instead of paying somebody to go pick up the weeds twice a year, by having us there the land would have presence on it,” he said.

About 250,300 acres of Arizona farmland was converted to development land between 2002 and 2007, the most in the nation after Texas, Florida and California, according to the Farmland Information Center, a partnership between the Natural Resources Conservation Service and American Farmland Trust.

Although statistics showing what’s happening nationally won’t be available for another three years, Jennifer Dempsey, director of the Farmland Information Center, said ultimately that development may continue when the real estate market rebounds.

“I feel like it’s forestalling something but not necessarily changing the underlying dynamic,” she said.

Jason Perry leased this farm land after another developer bought the land at auction because of bankruptcy by the owner. Photo by Elvina Nawaguna-Clemente

Jason Perry leased this farm land after another developer bought the land at auction because of bankruptcy by the owner. Photo by Elvina Nawaguna-Clemente

Jeannette Fish, the Maricopa County Farm Bureau’s executive director, said the price of land shot up during the mid 2000s when the real estate industry was booming, and farmers cashed in.

“A fairly large amount of property was sold to developers at that time,” she said.

Fish said many of the farmers included in their sale agreements provisions to regain the land if buyers fell behind on payments.

Harold Crist, who’s both a farmer and real estate developer, is caught in between.

“The land that we’re farming today is land that we were planning to use for development,” he said.

He’d already changed the titles for a 930-acre piece of land in Florence and another 150 acres in Eloy.

“As the market fell, we returned that to agriculture, primarily because we don’t see the market coming back as quickly as we’d like or as everybody anticipated,” Crist said.

He’s using the extra land to grow more alfalfa and vegetables like squash, tomatoes and spinach.

As a developer, Crist has seen the value of his land drop drastically with the recession. At its peak, his Florence land was worth about $40,000 an acre.

“Today, we’d be fortunate to get $10,000 an acre if you could find a buyer,” he said. “That’s a dilemma that people holding land have and it’s part of what drives it back to agriculture.”

Steve Barker, state resource conservationist with the U.S. Department of Agriculture’s Natural Resources Conservation Service, said that developers often lease land to farmers to keep their taxes low as they wait for the right time to develop. Agricultural land has a lower tax rate than commercial or housing property.

“So as long as you can keep the land in that category you don’t pay as much tax,” he said.

While the downturn hurts the real estate market and related jobs, from a food–production standpoint the availability of that land serves the state well, Barker said.

“It’s a good thing because it keeps agriculture alive and healthy on some of our best lands in Arizona,” he said.

Source: CronkiteNewsOnline.com, “As economy struggles, some land slated for development returns to farming” by Elvina Nawaguna-Clemente, Cronkite News, 22 Nov 2011.

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