Machinery Chatter

University of Nebraska Publishes New Custom Rates Survey

Dan Miller
By  Dan Miller , Progressive Farmer Senior Editor
Custom rates rose in Nebraska, but not as much as might be expected given increases in fuel and labor costs. (DTN/The Progressive Farmer file photo)

The cost for custom work in Nebraska has increased over the past two years. But it is a bit surprising that custom rates have not risen more, said Glennis McClure, farm and ranch management analyst for the Department of Ag Economics, University of Nebraska, Lincoln.

"Overall, it is pretty amazing how close we are [in some categories] compared to 2016," said McClure, discussing the University of Nebraska's 2018 Custom Rates Survey. McClure compiled the new report with Jim A. Jansen, an agricultural economist at Nebraska.

Nebraska's every-other-year Custom Rates Survey notes, for example, that the average diesel price (on-farm delivery) rose from $1.68 per gallon in 2016 to $2.46 per gallon this year. Labor rates have risen 6% from 2016 to $18.85 per hour. Going back two more years to the 2014 custom work survey for context, diesel prices averaged $3.39 and the per hour labor rate averaged $15.58.

Yet between 2016 and 2018, the average charge for custom drilling soybeans with a no-till drill went up just more than 1%, to $18.02 per acre in the 2018 survey from $17.76 per acre in 2016. The survey revealed that combining irrigated corn using a flat rate per acre averaged $38.22 in the 2018 survey. That is $1.00 to $3.00 per acre higher than previously reported.

Charges for some custom operations went up more steeply. For example, the custom charge for planting row crops with row cleaners went up 11%, from $18.91 per acre in 2016 to $21.12 per acre in 2018.

"The concern," said McClure, "is that custom operators take into account the cost of machinery, fuel and labor. They need to make sure they cover their costs."

Defining a cost, or defining a charge for a custom operation, includes at least three factors, says McClure. First are ownership costs, including interest, taxes, depreciation and the cost of housing or sheltering equipment. Second are operating costs, such as the cost of fuel, labor, parts, maintenance and repairs. Third is profit margin -- not only covering labor costs, but a factor that allows operators to actually pay themselves.

Among custom operations in Nebraska, harvest work and haying appear to be the most consumed custom services.

Custom operators reported more work in 2018. For example, the 2018 survey documented an increase of 100 hours of custom work performed, on average, per custom operator over 2016. Average hours worked per operator in custom operations was 480, according to the 2018 survey. But from top to bottom, the range was large -- from 4,200 hours of custom work performed on the high end to 20 hours performed on the low end.

Custom operators also worked significantly more ground, comparing 2018 with 2016. The average custom operator covered 2,809 acres in 2016. In 2018, custom operators booked an average 4,852 acres. The range from top to bottom was even more stark than hours worked. Custom operators reported working anywhere from 250,000 acres down to just 70 acres in the 2018 survey.

Here's a sampling of the services covered in the 2018 Custom Rates Survey. The columns name the operation performed, the average rate charged per acre for that work, the most common charge among custom operators answering the survey and the price range recorded from among all the responses collected. All are charges per acres, unless otherwise noted.

Note the price spread under the range column. McClure says this is partially a result of involvement in the business -- for example, an operator who performs work at little profit for their neighbors compared to an operator who runs a custom operation full time. Expenses also vary across the state of Nebraska as demand and the availability of labor vary.

Operation

Ave. Rate

Most Common

Range

($/acre)

($/acre)

($/acre)

Strip till

18.73

20

12-25

No-till beans

18.02

18

12-28

Planting (w/coulters, w/band applicators)

19.7

20

13-30

Mowing (hay)

14.28

10

10-20

Baling (large round, w/net wrap)

14.13

15

10-24

Anhydrous (knife w/coulters)

15.18

15

9-25

Spraying (weed control, boom)

6.84

7

4.75-10

Combine (irrigated corn)

38.22

35

18-95

Combine (dryland corn/bushel)

0.24

0.25

0.08-0.37

Combine (soybeans)

35.4

35

20-66

Combine (sorghum, w/out pickup header)

34.4

35

20-45

Hauling grain (from combine with tractor, grain cart)

5.27

6

2-10

While the Custom Rates Survey report serves as a guide, farmers and ranchers should use their own judgment and consider their costs when negotiating custom operation rates, McClure said.

A total of 151 custom rates on machinery operations and related services were reported as part of the 2018 survey with 227 survey participants providing information on the various rates. Custom rates reported include charges for the use of necessary equipment, fuel, labor and supplies, such as baling wire or twine, provided by the custom operator. Seed, fertilizer and chemical costs are not included.

For anyone interested in learning more about Nebraska's custom rates, McClure will be hosting a webinar on July 24 at 12:30 p.m. (Central Daylight Time). The webinar is free to view and can be accessed at go.unl.edu/custom-rates.

A summary of the 2018 Custom Rates Survey report is published as Nebraska Extension Circular (EC) 823 and is available online at go.unl.edu/custom-rates.

For a more detailed report, including a breakdown for custom charges in each of Nebraska's eight Agricultural Statistics Districts go to: http://extensionpublications.unl.edu/…

(AG)

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