Custom Rates

Amy Timmerman, Extension Educator Author

11/21/2022 Added

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There are various resources or guides available to assist custom machine hire and service providers in figuring rates in Nebraska.

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[00:00:01.211]This is Amy Timmerman with this weeks Extension Update.
[00:00:03.961]There are various resources or guides available to assist custom machine hire
[00:00:07.921]and service providers in figuring rates in Nebraska.
[00:00:11.360]The Nebraska Custom Rates Report is a popular biennial publication,
[00:00:15.360]now updated for 2022.
[00:00:18.870]Information provided in the report is from survey data
[00:00:22.070]gathered on 136 different custom operations and services
[00:00:26.158]from 193 survey respondents providing those services in Nebraska.
[00:00:31.338]The report provides market rates and is an informational source
[00:00:34.638]for those providing custom work and their potential customers.
[00:00:38.528]The report provides common charges, or a range of rates charged
[00:00:42.360]in their area and for Nebraska.
[00:00:44.960]Agricultural custom rate charges can vary across the state; therefore,
[00:00:48.890]the Nebraska Custom Rates Report provides rate details from survey
[00:00:52.899]responses grouped by Nebraska Agricultural Statistics Districts.
[00:00:58.360]Several factors contribute to rate differences
[00:01:00.530]reported by survey participants, including field and job sizes,
[00:01:04.761]soil conditions, and the number of responses for the various operations.
[00:01:09.106]Some operators may charge lower than market rate prices to
[00:01:12.821]neighbors or relatives.
[00:01:14.476]Rates may change from year-to-year due to expense differences and
[00:01:18.110]local market forces.
[00:01:19.717]Determining appropriate charges for custom machine hire and
[00:01:22.787]agricultural services may include consideration of various elements
[00:01:26.877]including current market rates as reported in the custom
[00:01:29.587]rates survey report, market demand in the area
[00:01:33.267]for specific types of custom work, and availability of services.
[00:01:37.344]Fuel cost is a key expense when operating machinery and
[00:01:41.214]can fluctuate dramatically which has certainly been the case this year.
[00:01:45.664]2022 custom rates survey data was received primarily
[00:01:48.924]during the first quarter of 2022.
[00:01:52.476]The average expected farm delivered diesel fuel rate per gallon
[00:01:56.524]in 2022 reported by survey participants was $3.05.
[00:02:03.546]Since then, the diesel price rate has gone up
[00:02:06.336]nearly $5 per gallon for on farm delivered diesel.
[00:02:10.336]Custom service operators should adjust the reported rates,
[00:02:13.626]to accommodate higher fuel prices.
[00:02:16.143]For example, let’s assume the price has increased $2.00 per gallon and a
[00:02:20.463]machine with a diesel consumption rate of 0.80 gallons per acre is utilized.
[00:02:25.897]In this scenario, $1.60 should be added to the per acre custom rate to factor
[00:02:31.870]in the fuel rate increase which is $2.00 diesel price increase x 0.80 = $1.60.
[00:02:41.023]Another way to determine custom rate fees is to calculate actual machine
[00:02:45.203]ownership and operation costs, plus a desired profit margin may be added.
[00:02:49.653]The University of Nebraska-Lincoln Center for Agricultural Profitability
[00:02:54.037]developed the ABC program to assist producers in determining
[00:02:57.478]their cost of production for their enterprises which include
[00:03:00.470]machinery and equipment used in their agricultural operations.
[00:03:04.073]Custom operators can utilize the online program at
[00:03:07.553]agbudget.unl.edu to enter their machinery
[00:03:11.963]and equipment information such as purchase value,
[00:03:15.033]length of anticipated ownership and other key information,
[00:03:18.447]along with their actual fuel prices, labor costs and estimated
[00:03:22.104]annual repair expense for each machine to determine
[00:03:24.739]operation costs per acre.
[00:03:27.312]Fuel, repair, and salvage value cost factors and calculations from the American
[00:03:32.372]Society of Agricultural and Biological Engineers are utilized in the ABC program.
[00:03:38.028]The ABC machinery cost calculations for machinery and equipment ownership
[00:03:41.628]and operation costs, combined with the Nebraska Custom Rates Report data,
[00:03:46.132]should assist custom operators in setting charges that are comparable
[00:03:49.902]in the marketplace while covering all costs.
[00:03:53.242]Determining a rate to charge for agricultural custom services should
[00:03:56.928]be no different than establishing prices for other industry services.
[00:04:00.708]Operators should consider current market prices,
[00:04:03.357]as provided in the Nebraska Custom Rates Report or other resources
[00:04:07.017]that provide such information, their total costs as figured using
[00:04:11.558]the ABC program or by other means, and then if desired,
[00:04:15.558]add an extra amount or profit margin to the price charged.
[00:04:19.558]To access the 2022 Nebraska Farm Custom Rates Report
[00:04:23.559]go to cap.unl.edu/customrates
[00:04:29.390]To also access the Agricultural Budget Calculator or ABC
[00:04:33.920]go to cap.unl.edu/abc
[00:04:38.195]This has been Amy Timmerman with Nebraska Extension.

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