Custom Rates - June 5, 2022 - Amy Timmerman, Extension Educator
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- [0:01] This is Amy Timmerman with this weeks Extension Update.
- [0:03] There are various resources or guides available to assist custom machine hire
- [0:07] and service providers in figuring rates in Nebraska.
- [0:11] The Nebraska Custom Rates Report is a popular biennial publication,
- [0:15] now updated for 2022.
- [0:18] Information provided in the report is from survey data
- [0:22] gathered on 136 different custom operations and services
- [0:26] from 193 survey respondents providing those services in Nebraska.
- [0:31] The report provides market rates and is an informational source
- [0:34] for those providing custom work and their potential customers.
- [0:38] The report provides common charges, or a range of rates charged
- [0:42] in their area and for Nebraska.
- [0:44] Agricultural custom rate charges can vary across the state; therefore,
- [0:48] the Nebraska Custom Rates Report provides rate details from survey
- [0:52] responses grouped by Nebraska Agricultural Statistics Districts.
- [0:58] Several factors contribute to rate differences
- [1:00] reported by survey participants, including field and job sizes,
- [1:04] soil conditions, and the number of responses for the various operations.
- [1:09] Some operators may charge lower than market rate prices to
- [1:12] neighbors or relatives.
- [1:14] Rates may change from year-to-year due to expense differences and
- [1:18] local market forces.
- [1:19] Determining appropriate charges for custom machine hire and
- [1:22] agricultural services may include consideration of various elements
- [1:26] including current market rates as reported in the custom
- [1:29] rates survey report, market demand in the area
- [1:33] for specific types of custom work, and availability of services.
- [1:37] Fuel cost is a key expense when operating machinery and
- [1:41] can fluctuate dramatically which has certainly been the case this year.
- [1:45] 2022 custom rates survey data was received primarily
- [1:48] during the first quarter of 2022.
- [1:52] The average expected farm delivered diesel fuel rate per gallon
- [1:56] in 2022 reported by survey participants was $3.05.
- [2:03] Since then, the diesel price rate has gone up
- [2:06] nearly $5 per gallon for on farm delivered diesel.
- [2:10] Custom service operators should adjust the reported rates,
- [2:13] to accommodate higher fuel prices.
- [2:16] For example, let’s assume the price has increased $2.00 per gallon and a
- [2:20] machine with a diesel consumption rate of 0.80 gallons per acre is utilized.
- [2:25] In this scenario, $1.60 should be added to the per acre custom rate to factor
- [2:31] in the fuel rate increase which is $2.00 diesel price increase x 0.80 = $1.60.
- [2:41] Another way to determine custom rate fees is to calculate actual machine
- [2:45] ownership and operation costs, plus a desired profit margin may be added.
- [2:49] The University of Nebraska-Lincoln Center for Agricultural Profitability
- [2:54] developed the ABC program to assist producers in determining
- [2:57] their cost of production for their enterprises which include
- [3:00] machinery and equipment used in their agricultural operations.
- [3:04] Custom operators can utilize the online program at
- [3:07] agbudget.unl.edu to enter their machinery
- [3:11] and equipment information such as purchase value,
- [3:15] length of anticipated ownership and other key information,
- [3:18] along with their actual fuel prices, labor costs and estimated
- [3:22] annual repair expense for each machine to determine
- [3:24] operation costs per acre.
- [3:27] Fuel, repair, and salvage value cost factors and calculations from the American
- [3:32] Society of Agricultural and Biological Engineers are utilized in the ABC program.
- [3:38] The ABC machinery cost calculations for machinery and equipment ownership
- [3:41] and operation costs, combined with the Nebraska Custom Rates Report data,
- [3:46] should assist custom operators in setting charges that are comparable
- [3:49] in the marketplace while covering all costs.
- [3:53] Determining a rate to charge for agricultural custom services should
- [3:56] be no different than establishing prices for other industry services.
- [4:00] Operators should consider current market prices,
- [4:03] as provided in the Nebraska Custom Rates Report or other resources
- [4:07] that provide such information, their total costs as figured using
- [4:11] the ABC program or by other means, and then if desired,
- [4:15] add an extra amount or profit margin to the price charged.
- [4:19] To access the 2022 Nebraska Farm Custom Rates Report
- [4:23] go to cap.unl.edu/customrates
- [4:29] To also access the Agricultural Budget Calculator or ABC
- [4:33] go to cap.unl.edu/abc
- [4:38] This has been Amy Timmerman with Nebraska Extension.