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Listen: Nebraska FARMcast
2024 Nebraska Custom Rates Webinar
Thursday, July 11, 2024, at noon CT
With: Glennis McClure, Farm and Ranch Management Analyst, UNL Center for Agricultural Profitability.
This webinar provides a summary of the newly released 2024 Nebraska Farm Custom Rates Report, with information on how the data might be applied.
RegisterThe 2024 Nebraska Custom Rates Report, which offers insights for agricultural producers and service providers, is now available through Nebraska Extension and the University of Nebraska-Lincoln’s Center for Agricultural Profitability. The report, published at cap.unl.edu/customrates, compiles survey data from 159 respondents, providing current market rates for 138 different custom operations and services across Nebraska.
This comprehensive resource serves as an essential guide for those offering and seeking custom agricultural services. While the report offers a detailed overview of market trends, custom service providers are encouraged to consider their own operational costs when determining their rates.
Agricultural custom rate charges can vary across the state. Therefore, the Nebraska Custom Rates Report provides rate details from survey responses grouped by Nebraska Agricultural Statistics Districts. Several factors contribute to rate differences reported by survey participants, including field and job sizes, soil conditions and the number of responses for the various operations. Some operators may charge lower than market rate prices to neighbors or relatives. Rates can change from year to year due to expense differences and local market forces.
Determining appropriate charges for custom machine hire and agricultural services includes consideration of various elements such as current market rates reported in the custom rates survey report, market demand in the area for specific types of custom work, and availability of services.
Adjusting custom rates for fuel costs
Fuel cost is a key expense when operating machinery and fluctuates over time. The 2024 custom rates survey data was received primarily during the first quarter of 2024. The average expected farm-delivered diesel fuel rate reported by survey participants was $3.26 per gallon. If fuel costs change, custom operators may adjust their rates accordingly. For example, if fuel (diesel) cost used in the power unit jumps to $4.20 per gallon, and the machine has a consumption rate of 0.85 gallons per acre, the additional rate can be figured using this equation: $4.20 - $3.26 = $0.94 diesel price increase x 0.85 consumption rate = $0.80. This 80-cent increase would be added to the per-acre custom charge to factor in the fuel rate increase.
Factoring in machinery and equipment to custom rates
Aside from the custom rates reported by Nebraska operators in the survey, establishing custom rate fees should involve calculation of machine ownership and operation costs, with a profit margin added if desired. The UNL Center for Agricultural Profitability developed the Agricultural Budget Calculator (ABC) program to assist producers in determining cost of production for their enterprises, which includes machinery and equipment costs used in agricultural operations. Producers and custom operators can utilize the online program, agbudget.unl.edu to enter their machinery and equipment information such as purchase value, length of anticipated ownership, and other key machinery information such as coverage rate, along with fuel prices, labor costs, and estimated annual repair expense for each machine to determine operation costs per acre. Fuel, repair, and salvage value cost factors and calculations from the American Society of Agricultural and Biological Engineers (ASABE) are utilized in the ABC program.
An example showing cost factors utilized in the Agricultural Budget Calculator (ABC) program for a no-till planting operation is provided in Table 1. Table 2 is a field operations cost report generated using ABC for the no-till planting example. Equipment size, list and purchase prices, age, anticipated ownership period, and annual usage can vary widely per power unit and implement.
| Fuel | $3.26 per gallon | ||||
| Labor | $27.98 per hour | ||||
| Power Unit | Implement | ||||
| Tractor | Max PTO HP: >150 | No Till Planter - 12R | |||
| List Price | $425,000 | List Price | $220,000 | ||
| Purchase Price | $275,000 | Purchase Price | $150,000 | ||
| Age of machine when purchased | 6 years old | Age of machine when purchased | 4 years old | ||
| Expected total years of ownership | 5 years | Expected total years of ownership | 6 years | ||
| Total tach on machine when purchased | 2400 | ||||
| Total hours usage per year | 450 | Total usage per year (acres) | 2000 | ||
| Estimated fuel used/hour | 8.76 gallons | Coverage rate (acres/hour) | 18 acres |
| Field Operations Costs /Acre | Labor | Fuel | Repairs | Depreciation | Opportunity Costs | Total/acre |
|---|---|---|---|---|---|---|
| Large Tractor | $1.71 | $1.82 | $0.50 | $3.70 | $0.74 | |
| No Till Planter | $6.25 | $5.08 | $1.79 | |||
| Total | $1.71 | $1.82 | $6.75 | $8.78 | $2.53 | $21.60 |
The labor rate used in the no-till planting example is $27.98. Diesel fuel cost is $3.26 per gallon.
Field operation cost per acre shown does not include taxes, housing, insurance, or licensing costs (THILM). These expenses are entered in ABC as overhead costs.
The $21.60/acre ownership and operational costs calculated plus, 2.5% for THILM ($0.54), equals $22.14/acre. Adding a 15% profit increases the rate to $25.46/acre, which compares with the $25/acre state average custom rate for a no-till planting custom operation reported in the 2024 report.
Setting custom rates
Determining a rate to charge for agricultural custom services should be no different than establishing prices for other industry business services. First, observing current market rates or prices, as provided in the Nebraska Custom Rates report or other resources that provide such information, then figuring total operating and ownership costs, and if desired, adding an extra amount or profit margin to the price charged.
Full summaries from the custom rates survey, including regional rates for the eight Nebraska Statistics Districts and the overall state, are published as University of Nebraska-Lincoln Extension Circular (EC) 823 and available online at: cap.unl.edu/customrates. The information presented in the state summary and full report should be used only as a guide when determining what to charge or pay for custom operations.