Economic Analysis of Turfgrass-Sod Production in Alabama

Abstract

Turfgrass has been a profitable alternative to more traditional agricultural enterprises for many years. However, the situation changed with the depressed housing market and tough competition in the sod industry. A major purpose of this study was to conduct an economic analysis to determine whether there is a competitive advantage existing for turfgrass-sod production, compared with conventional agricultural enterprises. The study also examined how different turfgrass prices and diesel prices affect sod producers’ profits. To accomplish these objectives, turfgrass-sod and row crop budgets were developed first. Corn, cotton, peanut, and soybean were taken as key row crops in Alabama in this study. Bermudagrass was chosen to represent the 2012 sod production in Alabama. Current budgets were developed for each enterprise. Next, price sensitivity analysis was conducted to examine the competitive advantage of turfgrass-sod production. Under current sod markets, sod producers may experience more risks than row crop producers. Varying sod prices, diesel fuel prices, and holding length have significant effects on net returns. If expected returns for sod operation drop below the expected returns for alternative row crop rotations, decreasing sod acres in operation and taking traditional agricultural enterprises as an alternative may be an effective way to get more profits.