What’s the right custom rate?

What is the right custom rate for field operations? Purdue Extension has a resource that can help farmers who are looking to do a little custom work, and they need your input now for an update to this resource.

I get the question from farmers on custom rates several times each year. Farmers generally ask what the “going rate” is to perform custom field operations. Typically, I find that the farmer simply wants to charge a fair rate, and they need a place to start, or at least some data to get them in the ballpark for good-faith negotiations.

Purdue Extension has a publication entitled, “2013 Indiana Farm Custom Rates.” It is Purdue Extension’s most recent publication on custom rates, and it can be found at extension.purdue.edu/extmedia/EC/EC-130-W.pdf. Alan Miller, Purdue Extension farm business management specialist (ret.), is the author. The publication gives figures on average per acre rates for various field operations, and a range or variation of rates charged by operators. The variation was computed based on the average rate minus or plus one standard deviation, which means approximately two-thirds of the reported rates used to compute the average rate are between these two numbers.

For example, let’s say your neighbor needs help with primary tillage. You have a field cultivator you can operate with your own tractor. In the 2013 publication, the average per acre rate for field cultivating was $12.69. The variation, in which approximately two-thirds of responses fell within, was $9.14 to $16.25. Unless otherwise stated in the publication, the rates reported include payments made for fuel, operator labor and machinery ownership costs.

In Indiana, Miller said custom work is often done by farming neighbors after they complete their own work. In these situations, the custom operator may charge a custom rate that is well below the full cost of owning and operating their farm machinery either to build goodwill, or to more fully utilize their machinery capacity. For that reason, readers of the publication should not interpret the average rates as indicative of the total cost of completing these operations. Custom operators who do large amounts of custom work should estimate the full ownership and operating costs of their services before agreeing to work for the “going rate” in their area.

Miller also wrote that because 38 percent fewer surveys were collected for the 2013 publication than were collected for the previous year’s publication, fewer custom farming activities appear in the report. Readers were advised to refer back to the 2012 Indiana Farm Custom Rates for a wider variety of operations: extension.purdue.edu/extmedia/EC/EC-130-2012-W.pdf.

By now, you notice from the date on the publication that it is due for an update. That is where we need your help. We need farmers performing custom operations to respond to a survey with current rates so that an updated publication may be produced. You may request a survey from your local county’s Purdue Extension office, or submit your figures in an online survey at one of the following links: purdue.qualtrics.com/jfe/form/SV_9AZiJkicusmPjmt or tinyurl.com/purduecustomratesurvey. The online survey is mobile friendly, making it easy to fill out using a smartphone, tablet or computer. Michael Langemeier, from Purdue’s Center for Commercial Agriculture, is conducting the survey for the updated publication. Purdue Extension Educators may also be passing out a written copy of the survey for completion at various Extension programs.

Of course, the more responses, the more accurate the publication can be in truly reflecting what is happening in local farm communities. Thanks in advance for your input.

— John Woodmansee is an Extension Educator in Whitley and Noble counties.

Leave a Reply

Your email address will not be published. Required fields are marked *