Turfgrass industry seeing green

The 23,000 acres of Bermuda, centipede and zoysia grass harvested on Alabama sod farms last year generated close to $200 million in revenue, rivaling cotton as the state's top cash crop.

That's proof positive that turfgrass-sod production, which 25 years ago claimed less than 3,000 acres of Alabama cropland, has come into its own as a profitable alternative to row crops and has developed into a highly viable industry in the state, said Auburn University agricultural economist John Adrian.

“The growth of the industry has been impressive,” Adrian, head of the College of Agriculture's Department of Agricultural Economics and Rural Sociology, noted. “In 1978, Alabama had 26 sod producers, with an average farm size of 110 acres. Today, there are at least 89 producers, and the average farm size is 315 acres.”

Those statistics were among the findings of an Alabama Agricultural Experiment Station (AAES) study by Adrian and AU graduate research assistant Jennifer Cain to get a clearer picture of where Alabama's turfgrass-sod industry stands now and to forecast where it is headed. The study indicated that, after almost three decades of phenomenal growth, Alabama's turfgrass industry may have reached what Adrian called the “maturing” stage.

“Any increase in acreage from here on is going to be largely the result, not of new folks getting into the business, but of established producers expanding or merging their operations to take advantage of substantial economies of size and scale,” Adrian said. “Larger farms have lower costs per unit and higher returns per acre than smaller ones.”

The AAES study analyzed the startup and production costs for sod farms of varying sizes, from 100 acres to 1,200 acres, along with average market prices those farms receive for their product. The numbers confirmed the “large-farm” advantage, prompting Adrian to offer a strong word of advice to any prospective turfgrass-sod producers.

“Unless you have a guaranteed, established market right up front, don't get into the business today with less than 100 acres, because you can't be competitive, and you won't make a living,” he said.

Across Alabama, bermudagrass is the predominant species planted on turfgrass-sod farms. It claimed 38 percent of the state's 22,844 turfgrass acres in 2001, followed by centipede, which carpeted 34 percent of the sod acreage, and zoysia at 14 percent.

Bermuda is the top choice among growers because it is the most profitable turfgrass crop, Adrian explained. While slow-growing centipede and zoysia can be harvested only once every 14 to 16 months, Bermuda yields at least two crops annually — and, in some years, three — and its current average market price of $1.05 per square yard is 10 cents above the per-unit breakeven point for small operations and 28 cents over the large growers' breakeven prices.

What Adrian finds perplexing in light of the AAES research, however, is the prevalence of centipede on the state's turfgrass-sod operations, particularly its dominance over zoysia.

Adrian's statistics show that the average price growers get for zoysia is $2.37 per square yard, which is 9 cents above the breakeven price for small operations and 47 cents over cost of production on large sod farms. For centipede, on the other hand, the $1.41-per-square-yard market price comes up 21 cents below per-unit cost of production for large operations and a whopping 66 cents below the breakeven point for 100-acre farms.

“Our analysis shows that the only way an Alabama grower can ever make a profit with centipede is either to start charging significantly more per unit or drastically cut his production costs,” Adrian said. “A lot of growers argue with us on that, insisting that they are making money with centipede, and we're going to have to investigate that further. But our recommendation to new producers who want to make a profit would be to go with bermuda first, zoysia second and centipede third.”

Turfgrass-sod is harvested year-round in Alabama. In 2001, April and June were the peak marketing months, and January and February were the slowest. Three-fourths of Alabama's producers said that they advertised their product in some way, primarily in the phone directory's business listings and in their local papers — although one grower said he had found billboards to be an effective marketing technique.

Of the 20.7 million square yards of sod they harvested in 2001, Alabama sod producers sold more than half of that to professional landscapers, with homeowners, garden centers, institutions and golf courses among their other top customers. About 88 percent of the Alabama-produced sod was marketed in state; the rest went to customers in Georgia, Mississippi, Florida and Louisiana.

Among Alabama's 53 turfgrass-producing counties, Baldwin was tops in 2001, with 9,033 acres, followed by Lowndes with 1,342 acres; Chambers, with 1,232 acres; and Russell and St. Clair, with 980 and 896 acres, respectively. Sod farms ranged in size from 12 acres to 3,840 acres.

A look at investment costs illustrates the economies-of-scale advantages large sod farms have over smaller operations. For a 100-acre farm, startup capital investment averages $5,000 per acre, compared to $3,000 for a 1,200-acre operation; annual operating costs average $3,535 for the 100-acre farm, $2,718 for the 1,200-acre. Adrian said cash flow analyses indicate most small turfgrass-sod farms won't realize a profit until the sixth year of operation, while large operations typically generate a profit by the third year.

Adrian noted that the study's 2001 crop statistics are based only on the responses of the 89 sod producers who were identified by and who participated in the study. Because some producers chose not to participate, the 2001 figures should be viewed as conservative, he said.

As for the future of Alabama's turfgrass-sod industry, Adrian and Cain predict that, in the coming years:

The sod market will remain strong.

Competition among the state's turfgrass-sod farms will intensify.

Larger farms will increase their acreage, often by purchasing smaller operations.

Small farms that don't officially merge with larger ones will contract to grow sod for the bigger operations.

More producers will turn to contract truckers to transport their sod instead of maintaining fleets of 18-wheelers and licensed truck drivers.

Harvesting equipment will become more specialized, thus reducing the number of laborers needed and the high labor costs.

More farms will begin experimenting with specialized varieties of turfgrass that could bring higher prices.

More farms will establish their own brand or trademark to differentiate their turfgrass-sod from the rest.

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