Calculate costs carefully before contracting custom farm work

Numerous Ohio farmers hire workers to complete machinery operations and other farm related work due to lack of equipment, time or expertise.

Many farm business owners do not own equipment for every possible job they encounter in the course of operating a farm. Instead of purchasing the equipment needed, they seek out someone with the proper tools.

Rates

The cost for this specialized service, referred to as custom farm work, is negotiated by both parties and can vary based on the nature of the job.

The custom rates reported are based on a statewide survey conducted in 2010 of 242 farmers, custom operators, farm managers and landowners. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine etc., and the labor for the operation.

Costs should be calculated carefully before determining the rate to charge or pay. Some custom rates published in this article have a wide range. Possible explanations are the type or size of equipment used, the value of labor, the mix of labor and equipment used, and different income needs of full-time custom operators versus farmers supplementing their income.

Savings

Some custom operations are provided at bargain rates due to family relationships or because custom providers may secure the custom farmed farmland in a rental agreement. Charges may be added if the custom provider considers a job abnormal such as distance from the operator’s base location, difficulty of terrain, amount of product or labor involved with the operation or other special requirements of the custom work customer.

Publications are available that may help in calculating total costs of performing a given custom operation. Some online resources available include: Farm

Machinery Cost Estimates at: www.apec.umn.edu/faculty/wlazarus/documents/machdata.pdf

Machinery Economics at farmdoc: www.farmdoc.illinois.edu/manage/index.asp

Estimating Farm Machinery Costs at www.extension.iastate.edu/agdm/crops/html/a3-29.html

Job details

Before entering into an agreement, details of the specific job should be discussed. Fuel prices have an impact on custom rates and rates may fluctuate based on large movements in fuel prices. The approximate price of diesel fuel at the time of this survey was $2.50 per gallon for off-road (farm) usage.

For the custom rates reported in this article the average is the simple average of all the survey responses. The “Low” and ‘High” rates represent plus or minus one standard deviation around the average. (Standard deviation is a measure of the variability of the survey responses and one standard deviation both above and below the average includes approximately two-thirds of all survey responses.)

See example at http://www.farmanddairy.com/wp-content/uploads/2010/07/preview-d-excel.pdf

About the Author

(Barry Ward is the leader of production business management in the Ohio State University Extension’s department of agricultural, environmental and development economics.) More Stories by Barry Ward

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