PHOENIX (AP) - When Gary Wood opened a shrimp farm in the desert nine years ago, people told him it couldn't work.

Today, Wood has partly proved his early critics wrong. Consumers have touted the desert-raised shrimp's flavor and freshness, while scientists have commended the farm for practices friendly to the environment.

But as local shrimp farmers have gained their footing, the growth in shrimp farming worldwide has also caused prices to drop and exports to increase. To compete, Arizona farmers are trying to appeal to other markets with what they tout as a superior product.

Wood, the manager of Desert Sweet Shrimp, phased out his wholesale business last year. Instead, he is selling his shrimp as gourmet products to the restaurant at Phoenix's Royal Palms Hotel and to AJ's Fine Foods, as well as to specialty food stores in Los Angeles. Wood's shrimp sell for $3 to $15 per pound.

Other Arizona shrimp farmers have also looked at different niches, such as Asian restaurants and markets that specialize in live seafood. Those that continue to compete in the wholesale market tout their shrimp as containing no chemicals, preservatives or additives.

"Just like any farmer in the U.S., you have to have a better product, and that's what they have," said Kevin Fitzsimmons, a University of Arizona professor and an aquaculture specialist for the state. "The guys in Arizona have done a good job to differentiate their product and work directly with restaurants that select really fresh, high quality locally grown shrimp. … This is where their niche is."

Wood said shrimp raised on his farm near Gila Bend - one of the state's hottest and driest areas - can be harvested and delivered to businesses the same day. Imported shrimp, he said, may have been sitting outside for hours at a time and treated with chemicals.

But while Wood's shrimp have gained fans, it hasn't been enough to make a profit this year.

"I don't see very much of a future," Wood said. "I'm discouraged consumers don't know the type of shrimp they're getting in grocery stores."

Still, it's too early to tell whether consumers will warm up to the idea of paying more for locally grown shrimp, Fitzsimmons said.

As a whole, Arizona's four shrimp farms have suffered. Shrimp prices have dropped from about $6 a pound in 2001 to about $3 a pound this year.

In 2002, the state's shrimp farms harvested about 544,000 pounds of shrimp, bringing in about $2.2 million. In 2003, Arizona produced 313,000 pounds of shrimp, bringing in $1.3 million.

Prices aren't expected to improve as production increases around the world, especially in Mexico, China and Vietnam, Fitzsimmons said.

Having a commercially profitable shrimp farm had always been uncertain, even in the mid-1990s when Wood became the first shrimp farmer in Arizona, Fitzsimmons said.

Today, Wood has 25 manmade ponds, from one to two acres each, on his farm. The ponds contain slightly salty well water that stays warm in the summer - ideal for growing shrimp and the algae they feed on.

When shrimp season begins in May, Wood buys week-old postlarvae shrimp from hatcheries. The shrimp will be full grown by October.

For the baby shrimp to acclimate to fresh water, they are first put into tanks of salty water that is slowly diluted with fresh water until the shrimp can thrive in the outdoor ponds. The process takes about two to three weeks.

"From a technical standpoint, it looks very good, it's a very environmentally sustainable situation," Fitzsimmons said. "It's a case of simple economics - local farmers competing with worldwide farmers."

Even with high labor costs and a climate that doesn't allow year-round shrimp farming, Arizona offered enough incentives for Josh Wilkenfeld to pursue this experiment four years ago.

Wilkenfeld is the manager of Arizona Mariculture Associates, a farm that raises shrimp near Hyder.

He points to the state's inexpensive land and underground aquifers with salty water from the Gila and Colorado rivers that are conducive to shrimp farming.

A federal labeling law taking effect next year that will require supermarkets and larger retailers to tell consumers where their fresh and frozen seafood comes from could benefit Arizona's shrimp farmers, Fitzsimmons said.