IF YOU'RE WORKING just a bit more land than you and your equipment can handle, you can either upsize your equipment, find a hired hand (no easy feat in some areas these days), or hire a custom operator. According to recent surveys of current rates charged for various field operations, using a custom operator may be a cost-efficient solution.
The Indiana Custom Rates 2004 survey found that, while custom rates for tillage, planting and harvesting have gone up, they aren't significantly higher than the rates of 2000, which is the last time the study was done. In some cases, the rates are about the same or lower, says Craig Dobbins, Purdue Extension economist who helped compile the survey results.
Big equipment, higher prices
“We saw the biggest rate increases in planting and combining rates,” Dobbins says. “And that was likely due to the increasing price tags of large machinery over the last few years, along with rising fuel prices.”
A 1 to 2% annual increase in rates is fairly common, notes Iowa State agricultural economist William Edwards, who conducts a similar survey in that state. “Most custom folks don't want to raise prices every year, so they make an adjustment every three to five years, instead,” he says. “This coming year, higher fuel costs may bump rates up a bit. But they account for only about 10% of a custom operator's total costs, so any increases shouldn't be too significant.”
Dobbins says there are definite advantages to hiring custom operators. “If you're short on labor, you'll usually get a more skilled, knowledgeable person by hiring a custom operator rather than just finding someone to drive your tractor,” he says. “You should be getting a better quality of work. And in most cases, custom operators use their own equipment and incur the operation and maintenance costs, so you don't have to.”
The biggest drawback is having to relinquish control, especially control of the exact timing of the operation, Dobbins adds. “That's probably the biggest hurdle most farmers have to get over before they are comfortable using custom operators, especially for the more time-sensitive jobs like planting and harvesting,” he says. “It often will make economic sense to hire someone to do the job, but it's hard to lose some control.”
Building in safeguards
There are some simple ways to reduce risk and worry when using custom services. Here are Dobbins' suggestions:
Make a detailed list of specific operations the custom operator should complete, with the understanding that it can be modified, if necessary.
Know the exact number of tillable acres in the fields to be covered, since most operators charge by the acre. If necessary, check FSA records or use a planter monitor.
Verify the specific location of each field, especially if you are dealing with someone who doesn't live in the area.
Identify who will arrange for any necessary input purchases and deliveries to the field.
If harvesting is involved, state where grain should be delivered.
Find out where your work will fall on the operator's priority list. How many acres is he responsible for covering in total during that season and will he allow plenty of time to cover your land?
If you don't already know, ask about the machinery he has and if it is well maintained.
Review per-acre charges and exactly what they include.
If you don't know the operator well, ask for references from other customers.
“You need to get this kind of information up front in order to feel comfortable with a custom work agreement,” Edwards says.
Dobbins adds, “If a farmer is thinking about hiring some custom work, reports such as ours and those done in other states are good starting points in helping him determine what is a reasonable rate for various operations. It pays to do your homework.”
To view the 2004 Indiana survey, along with the most recent surveys from Iowa, Michigan, Minnesota, Missouri, Nebraska, Ohio and Wisconsin, click on the links below.
Indiana: http://www.ces.purdue.edu/extmedia/agecon.htm, scroll down to EC-130-W under Farm Management