This paper presents analysis of the cost structure for a medium-sized sod producing operation in Texas and results of a mail survey providing information on the production economics and marketing of sod in Texas. Results are compared with findings from previous studies conducted in Florida and Alabama.Crop Production/Industries,

Falconer, Lawrence L.

English

Research Papers in Economics

Economic Analysis and Impact of Sod Production in Texas 
 
Lawrence Falconer, Texas Cooperative Extension. 
 
Selected Paper prepared for presentation at the 
Southern Agricultural Economics Association Annual Meetings 
Orlando, Florida, February 5-8, 2006 
 
Author’s Address: 
Lawrence Falconer 
Texas A&M Research and Extension Center 
10345 Agnes 
Corpus Christi, TX 78406-1412 
e-mail : L-falconer@tamu.edu 
 
Copyright 2006 by Lawrence Falconer. All rights reserved. Readers may make verbatim 
copies of this document for non-commercial purposes by any means, provided that this 
copyright notice appears on all such copies. 
 
Abstract: This paper presents analysis of the cost structure for a medium-sized sod 
producing operation in Texas and results of a mail survey providing information on the 
production economics and marketing of sod in Texas. Results are compared with findings 
from previous studies conducted in Florida and Alabama. 
Key Words: sod, production, costs, marketing 
 
JEL Classification: Q190 Economic Analysis and Impact of Sod Production in Texas 
 
Introduction 
 
  Little formal applied research has been done on the structure of the sod producing 
industry in Texas. The industry has become concerned that increases in input prices and 
recent proposals at the state level related to changes in tax policy and water regulation 
will have an adverse impact on the industry. The industry feels the need to collect and 
analyze data to support sound policy decision and farm management decision making. 
 
Previous Research 
 
  Haydu, et al. have carried out a series of studies on the Florida sod industry. 
These studies include information on production, employment, marketing, and product 
quality and price since 1992. The 2003 study by Haydu et al. indicated that in Florida, 
harvested sod accounted for 68 percent of the sod in production and medium-sized farms 
harvested the highest percentage of their production acres (82%). The in-field value for 
all varieties totaled $405 million, while harvested sod was valued at $307 million. The 
2003 survey showed that 96 percent of all Florida producers expected to maintain or 
increase current sod production, indicating optimism about future demand. 
 
  Cain, et al . carried out a study to analyze the costs associated with beginning and 
operating a turfgrass farm in Alabama. This study explored start-up costs, including new 
equipment, variable and fixed costs, and labor needs and costs. The Cain et al. study also 
evaluated marketing and production practices based on a producer survey to determine 
trends in the industry. 
   Lard et al. published a study that estimated the economic impact of sod 
production in Texas on that states economy. The industry was broadly defined to include 
sod production, lawn maintenance, landscape contractors, as well as retailers and 
wholesalers of turfgrass and ornamental horticulture. 
 
  Beddow et al. carried out a survey of turfgrass professionals in Virginia to inquire 
about past, present and future trends in turfgrass production and management in that 
state. The Beddow et al. study concluded that the Virginia turfgrass production industry 
was changing due to increased quality expectations, labor costs and regulatory issues. 
Methodology 
 
  The mailing list for the survey was constructed from two sources. A list from the 
Texas Turfgrass Producers Association of all known sod producers in Texas, including 
both members and non-members was the primary source. In addition, Texas Cooperative 
Extension agents provided information on firms producing sod in the state. Two mailings 
were made at a four week interval starting in November 2005 with a reminder sent to 
non-respondents two weeks after the first mailing (Dillman). The questionnaire was a 
modified version of the instrument used by Haydu et al. and was divided into sections 
related to production, marketing, product quality, and firm and industry problems. The 
data from the returned questionnaires were entered into a Microsoft Access database for 
validation and compilation, and then exported to Microsoft Excel spreadsheets for 
analysis. 
 
  A three member panel of producers who were willing to provide information on 
cost of production was identified through the Turfgrass Producers of Texas. Variable and fixed costs were estimated using data from these representative producers. Capital 
investment costs ere estimated by obtaining asset complements and related prices for the 
different equipment items and facilities used by turfgrass producers. Enterprise budgets 
were developed using the Mississippi State University Budget Generator (Laughlin and 
Spurlock). The Mississippi State Budget Generator is a computer program designed to 
calculate costs and returns for individual crop and livestock enterprises and whole farm 
plans on an annual basis. 
 
Results and Discussion 
 
  One hundred-forty-seven firms were identified and included in the initial mailing, 
compared to 139 firms for the Haydu et al. study in Florida and 150 firms in the Cain et 
al. study in Alabama. Forty-six surveys were returned and two respondents indicated they 
were no longer in the sod producing business for an adjusted response rate of 31.7%. This 
compares with 59 responses in the Haydu et al. study and 31 responses to the initial 
survey in the Cain et al. study. 
 
  For comparison purposes, the Haydu et al. methodology was followed and all 
farms were grouped into four size categories based on acres in production. The Small 
category ranges from 0–499 acres, with Medium ranging from 500–999 acres, Large 
ranging from 1,000–1,999 acres and Very Large greater than or equal to 2,000 acres. 
 
  Results by size of operation are shown in Table 1. The results of this survey of 
Texas producers shows some interesting differences with respect to the Haydu et al. study 
regarding size of operation. The forty-one useable responses indicated that 78.1% of 
Texas producers fall into the Small category, compared with 52.5% of the Florida producers surveyed. Twenty-five percent of the Florida producers were classified as 
medium sized as opposed to 12.2% of Texas producers. The Large and Very Large 
categories totaled 9.4% of Texas producers that responded compared with 22% of the 
Florida producers responding. These results indicate that the Texas sod producing 
industry is comprised of smaller sized operations relative to the Florida sod production 
industry. 
 
Table 1. Acreage reported and respondents with useable data and by size of farm, 2005. 
   Acreage Number of Percent by
Size of Farm   Reported Respondents Size
Small        6,188  32 78.1%
Medium        3,475  5 12.2%
Large        4,142  3 7.3%
Very Large        2,800  1 2.4%
Grand Total      16,605  41 100.0%
 
  To estimate total acreage in sod production in Texas, the average acreage in 
production by size of farm was calculated, as shown in Table 2. The projected number of 
Texas sod farms by size was then calculated by applying the respective percentage of 
respondents by size shown in Table 2 times the total number of farms identified in Texas. 
Total acreage estimated to be in sod production in Texas based on this 2005 survey is 
60,710 acres, compared with 21,515 acres in 1993 (Lard, et al.). These results can be 
compared with the estimate made by Haydu et al. of total 2003 sod acreage in Florida of 
92,990 acres. 
Table 2. Projected total acreage in sod production by size of farm in Texas, 2005. 
   Average Acreage Projected # of Farms Projected Acreage
Small           193  113          21,809 
Medium           695  18          12,510 
Large        1,381  11          15,191 
Very Large        2,800  4          11,200 
Grand Total    146          60,710 
   Survey results for employment in sod production by size of farm are shown in 
Table 3. These results are based on forty-one useable responses.  
 
Table 3. Employment reported by size of farm in Texas, 2005. 
   Full Time Part Time Seasonal
Small 125 24 70
Medium 66 16 49
Large 93 20 22
Very Large  64 2 0
Total 348 62 141
 
  Survey results by employment type and by size of farm are shown in Table 4. 
These results are based on forty-one useable responses. As would be expected, the 
average number of full time employees increases across size of farm, with very large 
farms less dependent on part time and seasonal labor. 
Table 4. Average reported employment by type of labor and size of farm, Texas 2005. 
   Full Time Part Time Seasonal
Small 3.9 0.8 2.2
Medium 13.2 3.2 9.8
Large 31.0 6.7 7.3
Very Large  64.0 2.0 0.0
 
  To estimate total employment in sod production in Texas, the average 
employment in production by size of farm was calculated, as shown in Table 4. The 
projected number of Texas sod farms by size was then calculated by applying the 
respective percentage of respondents by size shown in Table 2 times the total number of 
farms identified in Texas. Total employment estimated to be in sod production in Texas 
based on this 2005 survey is 1,276 full time workers, 224 part time worker and 504 
seasonal workers. 
 Table 5. Total projected employment by type of labor and size of farm, Texas 2005. 
   Full Time Part Time Seasonal
Small           441            85          247 
Medium           238            58          176 
Large           341            73            81 
Very Large           256              8             -  
Total        1,276          224          504 
 
  The results from the enterprise budget development effort for sod production for a 
mid-size farm in Texas are shown below. Table 6 shows the budgeted expenses by major 
category for the establishment of bermudagrass sod. Machine hire is comprised of the 
original dirt work related to drainage and shaping the sod fields, as well as custom 
application charges. Other expenses are comprised of miscellaneous supplies, pickup 
related expenses, insurance, taxes, utilities and spot spraying. Repair and maintenance 
includes not only field equipment but irrigation equipment as well. Initial land cost is 
projected at $1,500 per acre, with sales value at the end of a 15 year production life of 
$900 per acre. This results in an annual land charge of $155.43 per acre. Other durable 
input values with initial values, useful lives, and breakdown of annual and direct costs are 
shown in Table 7. The costs shown in Table 6 are specified as an annual cost recovery 
item in the sod production expense budget shown in Table 10. Table 6. Total projected expenses per acre for the first year of Bermuda sod 
establishment for mid-size farm, Texas 2005. 
ITEM                     UNIT     PRICE   QUANTITY   AMOUNT   
                                 dollars            dollars      
DIRECT EXPENSES                                                         
  Fertilizer             acre    130.90     1.0000    130.90  
  Herbicides             acre     44.73     1.0000     44.73  
  Other                  acre    208.35     1.0000    208.35  
  Machine Hire           acre    521.50     1.0000    521.50  
  Seed Stock             acre    390.00     1.0000    390.00  
  FOREMAN                hour     16.00    10.0000    160.00  
  LABOR                  hour      7.00    25.1405    175.98  
  DIESEL FUEL            gal       2.20    86.6961    190.74  
  GASOLINE               gal       2.50     2.2488      5.62  
  REPAIR & MAINTENANCE   acre     60.50     1.0000     60.50  
  INTEREST ON OP. CAP.   acre    110.92     1.0000    110.92  
                                                   ---------  
TOTAL DIRECT EXPENSES                                1999.24  
TOTAL FIXED EXPENSES                                  649.21  
                                                   ---------  
TOTAL SPECIFIED EXPENSES                             2648.45  
 
Table 7. Single durable inputs: estimated purchase price, useful life, total direct, fixed 
and total cost per year projected for the establishment of Bermuda sod for mid-size farm, 
Texas 2005. 
 Unit  of Purchase Useful Total  Total
Item Name  Measure Price Life Direct  Fixed Cost
   dollars years $/yr  $/yr $/yr
1/4 Mile Wheel Move  each 8,000  20 248   869  1,117 
Barn  each 75,000  15 750   9,304 10,054 
Land  acre 1,500  15  -   155  155 
Lay Down Pipe-3"  each 28,800  30  -   2,761  2,761 
Linear Canal  each 40,000  30  -   3,893  3,893 
Linear Irr System  acre 85,000  20 1,063   9,062  10,125 
Main Line Pipe  each 10,000  30 167   973  1,140 
Pump+Gearhead  ac-in 15,000  20 11,250   1,643 12,893 
Relift Pump  ac-in 15,000  20 750   1,629  2,379 
Reservoir - 2.5 acre  each 20,000  30  -   1,947  1,947 
Road & Loading Pads  each 15,000  15 150   1,861  2,011 
Well  each 85,000  25 850   8,654   9,504
 
  As shown in Table 7, total initial investment in durable inputs other than land for 
the 500 acre farm is $396,800. Initial land value is $750,000. As shown in Table 8, the 
mid-size farm requires an initial investment of $205,000 in tractors and self-propelled 
equipment. The initial investments in implements required for the farm is $72,500 as 
shown in Table 9. Total projected investment for the 500 acre farm is $1,424,300. This 
estimate is slightly below the estimate of $1,838,914 for the 550 acre farm in the Cain et al. study. However, the Cain et al. study included $457,000 for investment in delivery 
equipment, while this study’s cost estimates were made on an FOB basis. Exclusion of 
delivery costs from the estimate in the Cain et al. study would put the average per acre 
investment at $2,512 per acre for an Alabama farm starting up in 2001, while this study 
estimated the initial investment at $2,848.60 per acre for a Texas farm starting up in 
2005. This difference would be expected based on a four year difference in the estimates 
and a 10% differential in acreage. 
Table 8. Tractor and Self-propelled machines: estimated purchase price, size, annual use, 
useful life, and direct and fixed cost per hour for the mid-size Bermuda sod farm, Texas 
2005. 
    Purchase  Annual  Useful Total   Total 
Item  Name  Size  Price  Use Life  Direct  Fixed Cost 
    dollars  hours  years $/hour $/hour $/hour 
Large  Tractor  150  30,000  350  10 25.65 11.38 37.03 
Mid-Size  Tractor  80  28,000  800  14 16.30  3.82 20.12 
Small  Tractor  55  22,000  1000  14 13.19  2.61 15.80 
ATV  20 5,000  600  5 12.99  3.00 15.99 
Fork  Lift  80 37,500  2200  10 237.73  30.12 267.85 
Fork  Lift-2  80 37,500  2200  10 237.73  30.12 267.85 
Sod  Harvester   45,000  1800  20 246.70  21.51 268.21 
   The residual expenses shown in Table 10 include insurance, taxes and utility 
charges. Total expenses per acre of $2,402.55 imply that at an annual yield of 4,000 
square yards per acre a FOB price of $0.60 per square yard must be obtained before all 
expenses are covered.  
Table 9. Implements: estimated purchase price, annual use, useful life, and direct and 
fixed cost per acre for the mid-size Bermuda sod farm, Texas 2005. 
 Purchase  Annual  Useful  Total  Fixed Total 
Item  Name  Price  Use  Life  Direct  Implement P.U. Cost 
  dollars  hours  years $/acre  $/acre $/acre $/acre 
Aerator  7,500  200  20 4.38  0.99 0.95 6.33 
Disc  5,000  15  20 5.38  6.03 1.89  13.31 
Drag  2,500  25  20 10.05  4.17  4.37 18.61 
Haul  Out  Trailer  4,000  400  20 0.25  0.01 0.11 0.38 
Mower  -  Large  17,000  800  7 1.22  0.32 0.21 1.76 
Mower  -  Small  5,500  800  7 2.25  0.22 0.43 2.91 
Planter / Plugger  20,000  20  30  46.88  64.89  7.58  119.35 
Roller  3,500  800  20 27.16  0.79  6.37 34.33 
Shredder  2,500  250  7 5.36  0.77 1.04 7.18 
Sprayer  -  Boom  3,500  200  20 2.38  0.19 0.38 2.95 
Utility  Trailer  1,500  50  30 28.19  2.92  2.61 33.72 
 
Table 10. Summary of estimated costs per acre for the mid-size Bermuda sod farm, Texas 
2005. 
ITEM                     UNIT     PRICE   QUANTITY   AMOUNT   
                                 dollars            dollars   
DIRECT EXPENSES                                               
  Fertilizer             acre    224.90     1.0000    224.90  
  Herbicides             acre     81.58     1.0000     81.58  
  Pallets                acre    255.00     1.0000    255.00  
  Other                  acre    137.35     1.0000    137.35  
  Machine Hire           acre     50.00     1.0000     50.00  
  Insecticides           acre     13.00     1.0000     13.00  
  FOREMAN                hour     16.00    10.0000    160.00  
  MANUAL LABOR           hour      7.00    77.5771    543.03  
  DIESEL FUEL            gal       2.20   161.3547    354.99  
  GASOLINE               gal       2.50     1.4992      3.75  
  REPAIR & MAINTENANCE   acre     45.36     1.0000     45.36  
  INTEREST ON OP. CAP.   acre     35.81     1.0000     35.81  
                                                   ---------  
TOTAL DIRECT EXPENSES                                1765.27  
TOTAL FIXED EXPENSES                                  539.28  
                                                   ---------  
TOTAL SPECIFIED EXPENSES                             2304.55  
 
TOTAL RESIDUAL EXPENSES                                98.00  
 
TOTAL EXPENSES                                       2402.55 
 Conclusion and Need for Further Research 
 
The results of this study found that the Texas sod industry was composed of smaller 
farms than found in recent studies in Florida. This study estimated that sod production 
acreage in Texas for 2005 was 60,710 acres, compared with 21,515 acres in 1993 (Lard, 
et al.). Total employment estimated to be in sod production in Texas based on this survey 
is 1,276 full time workers, 224 part time worker and 504 seasonal workers. This study 
estimated that an initial investment at $2,848.60 per acre was required for the startup of  a 
medium sized sod farm in Texas. Given projected costs and an annual yield of 4,000 
square yards per acre, this study estimates that a FOB price of $0.60 per square yard must 
be obtained before all expenses are covered. Further research will include estimates of 
economic multipliers to estimate the impact of the sod production industry on the Texas 
economy.  References 
 
Beddow, J., E. Jones, D. Lamie, K. Mundy and D. Chalmers. “The Economics of Turfgrass 
Production in the Commonwealth of Virginia.” Bulletin 01-2, Virginia Agricultural Experiment 
Station, Blacksburg, VA. December, 2001. 
 
Cain, J. J., J. L. Adrian, P. M. Duffy, and E. Guertal. “Turfgrass-Sod Production In Alabama: 
Economics And Marketing.” Bulletin 653, Alabama Agricultural Experiment Station, 
Auburn, AL. October, 2003. 
 
Dillman, D.A. Mail and Telephone Surveys. New York, NY: John Wiley and Sons, 1978. 
 
Haydu, J.J., L.N. Satterthwaite and J.L. Cisar. “An Economic and Agronomic Profile of 
Florida’s Sod Industry in 2003.” Food & Resource Economics Department, Agricultural 
Experiment Stations and Cooperative Extension Service, Institute of Food and 
Agricultural Sciences, University of Florida, Gainesville 32611, April 2005. 
 
Lard, C.F., C.R. Hall and R.K. Berry. “The Economic Impact of the Texas Turfgrass 
Industry.” Department of Agricultural Economics, Texas A&M University, College 
Station, TX. Horticultural Economics Research Report #96-9. September 1996. 
 
Laughlin, D.H. and S.R. Spurlock. “User’s Guide for the Mississippi State Budget 
Generator Version 6.0 for Windows.” Department of Agricultural Economics, 
Mississippi State University, Starkville, MS. March 2004. 
 
White, Robert W., John L. Adrian, and Ray Dickens. 1991. “Alabama’s Turfgrass-Sod 
Industry.” Alabama Agricultural Experiment Station, Auburn University. Bulletin 610. 
 

Economic Analysis and Impact of Sod Production in Texas

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