In the 1920s the Caywoods joined thousands of other Texas and Oklahoma families escaping the Dust Bowl on the great trek west. They came to settle in arid central Arizona, grew cotton and watched with pride as the desert flowered with abundance.

Now, more than half a century later, Tom Caywood, 56, born and bred in Arizona, has been forced, like his Texas forebears, to sell off land as his water supplies diminished beneath the rich, dry soil.

"It used to be fun to farm around here," Caywood, a slight, bespectacled man, says as he points to dying fields, a few pathetic stems of cotton plants rising in the brown wasteland. "But with my water costs and all, I just didn't think I could keep it up. Damn, I would have preferred to farm - I enjoyed watching those plants grow and see what the hell they were going to do next."

Tom Caywood is not the only farmer giving up his land this year in the rich farming areas of Pinal County, 50 miles south of Phoenix. Since 1960 nearly 100,000 acres - more than one-third of the area's irrigated cropland - has gone out of production as ground water tables have dropped an average of 10 feet a year. With electrical rates soaring, the cost of bringing this water to the surface has increased as much as 600 percent since 1973 on some farms.

In Arizona and throughout the West today, water - "the testicles of the universe out here," one Utah planner called it - is becoming an increasingly scare commodity, fought for and bid on by competing interests. In the struggle for the precious fluid, agriculture - traditionally the user of more than 80 percent of all western water-finds itself unable to gain new supplies or even maintain current allotments against the rising needs of the region's burgeoning metropolitan areas and energy developments.

To men like Tom Caywood, diminishing agricultural water supplies because of the end of an era of massive, subsidized development schemes means the end of their dreams of keeping the desert blooming. But many in Washington, including top officials in the Interior and Agriculture departments, see the demise of western agriculture as inevitable as scarce water resources seek their true, freemarket price.

"The victory of the [administration's water project] 'hit list' was a Pyhrric victory," says Colorado Gov. Richard Lamm, whose state lost more than 300,000 acres of farmland last year due to mushrooming urban and energy growth. "These projects represent our last, best chance to save some water for something other than energy and metropolitan development. We were going to grow crops. It could have been wheat fields rather than a coal slurry pipeline."

Lamm's fears are borne out by a report late last year by the United States Water Resources Council, an interdepartmental federal water planning group, which predicted large increases in western water use by cities, manufacturing and energy developments. Only agriculture was slated to cut back from current consumption.

The water future already is closing in on farmers from California's fertile San Joaquin Valley to the high plains of West Texas. Throughout the West, ground water tables are dropping dramatically, while surface water supplies are diverted increasingly to urban, industrial and energy uses.

In Arizona, for instance, the Central Arizona Project, due to be completed in 1985, was designed largely to replace the diminishing ground water supplies in places such as Pinal County. Now, the project, which will deliver more than 1 1/2 million acrefeet (325,000 gallons equals one acrefoot) to the state from the Colorado River, will mostly end up quenching the thirsty, fast-growing metropolises of Phoenix and Tucson.

According to Arizona Water Commission estimates, the state could lose nearly one-third of its approximately 1.4 million acres of irrigated cropland in the first 15 years after completion of the water project, a fact that embitters many farmers.

Similar ground water problems, coupled with an inability to gain new supplies of government-imported water, are also afflicting farmers in California's San Joaquin Valley, which is currently pumping ground water faster than it can be replaced, at a rate of more than 1 1/2 million acre-feet a year.

Recently, the California state government has tried to force farmers to regulate their ground water pumping in the interests of future generations. Agricultural interests, which are battling the proposed regulations in the legislature, claim a move to restrict their pumping would result in the immediate loss of more than 600,000 acres of fertile land with a net value of nearly $1.6 billion.

California Gov. Edmund G. (Jerry) Brown Jr. has warned the valley's growers that if they don't accept ground water controls their whole region could end up in "the dustbin of history." State officials claim the growers have yet to understand that no public official, whether he is Jerry Brown or President Carter, is going to spend billions of dollars to subsidize agriculture's water needs in the post-Proposition 13 era.

Perhaps the nation's most ominous ground water shortage is looming far to the east along the high plains of Texas, Oklahoma, New Mexico, Kansas, Nebraska and Colorado. For years this fertile region, covering some 98,000 square miles, has drawn its sustenance from the massive underground Ogallala aquifer, which, many experts in and out of government believe, is now being depleted to the crisis point.

There is widespread concern that, if pumping of the Ogallala continues unabated, the nation's largest irrigated area, which produced more than $1 billion last year in crops and livestock, could be gravely affected. In the Texas portion alone, according to state estimates, about half of the current 6.4 million acres of irrigated cropland could go out of production within 20 years.

Deeply concerned about the impact of so drastic a potential economic debacle, the Commerce Department recently initiated a $6 million, three-year study of the problems facing the Ogallala-fed regions of the West. But many farmers in the region believe the only help they need is the development of new water schemes that could eliminate the drain on their aquifer.

Among the favorite proposed water projects in the High Plains region is a water pipeline from the Mississippi or Arkansas rivers. There is even some wistful enthusiasm for a $120 billion scheme by the Ralph Parsons Co. of Pasadena, Calif., that calls for the delivery of water to the dry Southwest from the frigid, but water-logged, wilderness of British Columbia, the Yukon and Alaska.

But despite the farmers' pleas, many western states already have accepted the idea that water is far too valuable a commodity to "waste" on farming. This is particularly true in fast-growing, energy-rich states such as New Mexico and Utah where water once used for irrigation is finding its way to power plants and new subdivisions.

Indeed, estimates by the Western States' Water Council, a regional, 11-state planning group, are that new energy developments-including nuclear plants, coal gasification, electrical generating and slurry pipelines as well as oil shale projects-will eat up an additional 2.3 million acre-feet of water by 1990, enough to irrigate close to 1 million acres of farmland.

Says Reed Searle, director of Utah's State Energy Office: "Everybody knows energy can pay the higher price. It's something which occurs with industrialization."

Many Utah residents believe they saw the shape of things to come when a California utility, building a large-coal-fired power plant in agricultural south central Utah, paid local farmers $1,750 per acre-foot for water this year. Farmers in the past had paid less than $25. By removing some 45,000 acre-feet from the land, the plant, known as the Intermountain Power Project, will take 15,000 irrigated acres in the area out of production.

As Utah continues to develop its abundant coal reserves, some observers believe agriculture, which has been declining in the state since the early 1960s, will become anachronistic in the land settled by the hardy followers of Brigham Young.

"If you follow our calculations," says Frank Davis, vice president of Utah Power and Light Co., the state's top utility, "you would end up with our projected energy requirements taking all the rest of the water we have. There wouldn't be anything left over for anything."

Interior Department officials insist that reclamation projects have served their purpose-the settling of the West.

"We have created an artificial agricultural economy," claims a top Interior official. "We have to start subjecting it to honest competition in the marketplace."

Such an assessment of their worth is hotly contested by some western farmers who claim the federal government is being totally short-sighted in its view of irrigated agriculture in their states. Irrigated farmland in the western region in 1974 accounted for $18 billion, or nearly one-quarter, of the nation's agricultural production, according to Agriculture Department figures.

Much of this production, western farmers point out, is sent abroad and helps relieve the nation's chronic balance-of-trade deficit. In 1976, for instance, California exported more than $1.8 billion in agricultural goods, while Arizona, which sends more than 60 percent of its cotton crop overseas, shipped more than $300 million worth of farm products to foreign markets.

Despite howls of protest from farmers and western governmental officials, there seems little prospect of any real change in current federal policy toward agriculture in the region. "People here have no sympathy for these western farmers," says one high-ranking Agriculture Department official. "In the East, where the government is run, the bias is completely against wester agriculture. We don't even talk about the products they produce out there."

The federal tilt against western farmers is so great, according to some observers, that Washington is virtually incapable of providing assistance to them on even basic soil conservation problems. These observers point out that federal officials refuse to come up with the money and assistance to help solve the region's fast-growing salinity problem, a condition caused by salts left in the soil after irrigation.

On recent study, for instances, conducted by reserchers at Montana State University, claims that federal crop policies - designed for eastern-type farms - have led to "saline seepage" across wide areas of the Dakotas and Montana, running the productivity of 25,000 acres of cropland. Other major salinity problems are plaguing farmers from the Rio Grande Valley of Texas to northern Utah.

But perhaps the most serious salinity is taking place in California's San Joaquin Valley, where 400,000 acres are suffering production losses as a result. by the year 2000, according to recent state estimates, nearly 700,000 acres will be severely damaged - enough to cause an estimated $320 million in cropland losses unless a major new federal and state effort comes along to correct the problem.

In some areas, yields have fallen dramatically, and tomatoes, poisoned by salt, have ripened a ghastly yellow color on the vine.

Some academic and governmental experts in the West fear that the falling water tables, the dried-up fields, the salt piles growing amid the crops, are signs of growing tendency toward desertification of the entire region. They argue that, as water, which made the land explode with production,is taken away to feed thirsty cities and power plants, the land will return to its natural, barren condition.

Huey Johnson, secretary of California's State Resources Agency beleives the West is drifting toward a sort of ecologically caused decline in the land, which, he maintains, led to the fall of such ancient civilizations as Mesopotamia and Rome. He claims the western region's soils already have deteriorated to a point reminiscent of the great dust bowls that afflicted the midwest in the 1920s and 1930s.

The great Arvin, Calif, windblow, which occurred at the end of the severe western drought of 1975-76, could be just a dress rehearsal of worse horrors to come, Johnson Believes, unless strict controls are placed on water usage and soil policies. In those dark days in December 1977, residents of the San Joaquin Valley watched in terror as soil, left fallow from prolonged drought, rose in big, brown waves across the sky. The blowing dust tore the bark off trees, and cattle were buried alive in seas of dirt.

A year and a half later, local irrigation officials in the windblown area still are cleaning up the damage to canals and grass cover. With more land apparently doomed to go out of production in the future, and a growing amount of salt-infested wasteland, Johnson predicts that even greater disasters may soon sweep across the broad lands of the West.

"We have the landscape but we simply don't have the growing. Sure, we can do it in a wet year, but in another dry period, the winds are going to come along and blow all the topsoil from Colorado to Wyoming. It happened to us in 1977 and it's happening now. The classic symptoms are repeating themselves." CAPTION: Picture 1, Tom Caywood of Casa Grande, Ariz., kneels on the fertile desert soil he is being forced to leave because of the scarcity of water for irrigation. By John McDonnell- - The Washington Post;Picture 2, A dry paper drinking cup lies in the foreground as the Central Arizona Project canal, left, makes its way to Phoenix 1000 miles away.; Map 1, Overdraft of Ground Water,