Interpreting Ohio Farm Custom Rates

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment, lack of time or lack of expertise for a particular operation.

Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek someone with the proper tools necessary to complete the job.

This farm work completed by others is often referred to as “custom farm work” or more simply “custom work.” A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

What’s included

The custom rates reported in this publication are based on a statewide survey of 122 farmers, custom operators, farm managers and landowners conducted in 2012. 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.

There is no assurance that the average rates reported in this publication will cover your total costs for performing the custom service or that you will be able to hire a custom operator for the average rate published in this factsheet.

Calculate your own costs 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, size/shape of fields, condition of crop (for harvesting operations), the value of labor, the mix of labor and equipment used and the different income needs of full-time custom operators versus farmers supplementing their income.

Also some custom operations are provided at bargain rates due to family relationships between the parties or due to the fact that custom providers may see an increased probability of eventually securing the custom farmed land in a crop-share or cash 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.

Information

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

Farm Machinery Cost Estimates available at: http://faculty.apec.umn.edu/wlazarus/documents/machdata.pdf.

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

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

Before entering into an agreement, discuss all of the details of the specific job with the other party.

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 $3.75-$4 per gallon for off-road (farm) usage.

Average

For the custom rates reported in this publication the average is a 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.)

The Factsheet complete with all published Ohio Farm Custom Rates for 2012 is available at: http://aede.osu.edu/programs-and-research/osu-farm-management/publications.

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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