Spring 2013 Newsletter
Sod Prices Rebound
After years of stagnant and in some cases declining prices for sod, the turf industry began to rebound in 2012 and prices continue to increase as the Spring 2013 season preparesto take off. Widespread shortages of harvestable turf are sending the message that the surplus turf inventory resulting from the housing market collapse and fragile economy is gone.
There have been many reports of Tifway 419 shortages. For years Tifway 419 was the cheapest sod that a contractor could purchase. Sod growers in South Carolina have long been burdened with meeting the demand for 419 at a low price as there seemed to be an endless supply of 419 in Georgia that depressed the market. The large surplus in Georgia was mostly the result of the collapse in the Atlanta market due to severe drought and the subsequent water shortages as wells as the general decline in the economy felt by everyone. Many of the surplus Georgia acres are now producing other agricultural crops such as cotton, corn, peanuts, soybeans, renewable fuel, etc. Additionally the cost of trucking has increased so dramatically that long distance shipments of sod are no longer feasible. It looks like the old saying that the cure for low prices is low prices is ringing true in the Tifway 419 market. Prices that were once around 20 cents per square ft delivered declined to around 15 cents per square ft over the last few years. Now as we enter 2013 the price for 419 seems to be around 25 cents per square ft delivered. This is netting the producer around 19 to 20 cents per square ft at the farm. Prices in this range are likely to stay and possibly strengthen as this more nearly reflect the current cost of production.
Centipede is popular for many home builders especially in the region of South Carolina located south of I-20 and east of I-95. Supplies of harvestable Centipede are currently tight right now. Many of the same dynamics that have led to strengthening of the Tifway 419 market have been in play for Centipede as well. The biggest difference is that the surplus inventory that drove Centipede prices down came from within the state of South Carolina. The few home builders active during the last few years have been able to find some real bargains on Centipede. The cheap prices on Centipede have disappeared in most areas since the surplus inventory has been harvested and the fields converted to other crops. Most sod farms in South Carolina significantly reduced Centipede acreage and some are simply no longer in the turf business.
SOD INDUSTRY COMES FULL CIRCLE
The sod industry in South Carolina has gone through enormous change in the 21st century. During the housing boom that occurred from 2000 thru the 06/07 time frame, most producers did not have to worry about selling sod as it was all about getting it grown in to meet the demand. It took minimal effort to sell sod at a reasonable profit. When the housing market plunged, producers faced a perfect storm with large inventories of harvestable sod and weak demand. With a record supply and anemic demand, prices for turf were pressured downward. In a nutshell, sod producers sold less sod at a lower price. As producer margins vanished and losses mounted, many acres were not replanted or maintained. During these difficult few years, most sod growers have kept the doors open by reducing inputs, using old equipment and reducing staff to a minimum. Now that supply seems to be closely in line with demand, sod prices have rebounded. Prices still have a ways to go to get margins back where needed in order to update equipment and keep fields properly maintained. Fortunately,prices are headed in the right direction for the first time in a long time.
LOOKING TO THE FUTURE
The cost of production is continuing to soar. Labor, fuel, power, insurance, taxes, parts, repairs, equipment, trucking, seed, pesticides, fertilizer, land, etc. are cost that have increased at an alarming rate. In order to meet the challenges that lie ahead, sod producers are going to have to be careful to avoid the same mistakes made in the past. Avoiding these mistakes will require producers to know the real cost of production and shipping. Although the magic number for each farm may slightly vary, the trend of increasing cost is similar for everyone. This upward trend is no different than with other materials used in construction and landscaping. The surviving sod producers have done so by reducing inputs to a minimum and slashing costs anywhere possible. There are no production costs left to cut and in some cases there is no grass either. The sod producers that will survive in the future will be the ones that sell at prices above the actual cost to produce the next crop. Some key questions that all producers must ponder include: (1) What is my total cost to produce and deliver turf? (2) How do I avoid the temptation to cut prices and sacrifice profit just to make a sale? (3) How can I work together with fellow producers to create and maintain a profitable and sustainable market place?
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