The increase in machinery costs this year has created uncertainty about what are fair costs for custom services. Fuel costs certainly are a major factor, but the purchase or "sticker" prices of machinery and the repair costs have increased as well. Fuel costs have increased about 46% over the past two years since the last Custom Rates surveys were taken in Spring 2004. Over the same period, overhead costs which include taxes, interest and insurance went up 14% and labor costs increased 10%. These increases are measured by input cost indexes reported by USDA's National Agricultural Statistics Service. Fuel costs may account for less than 10% of the total costs of some field operations such as planting or as much as 20% of total costs for operations such as combining.

When comparing one survey to another, there are some points to keep in mind:

1. The Custom Rates Survey is anonymous and strictly voluntary. We do not know who responds and therefore we can't estimate how many respondents are repeat respondents. There is probably a significant difference in the group who responds from one survey to the next. If respondents were the same, we could expect more uniformity in the results. That doesn't mean the numbers would be similar. It just means that they would be more easily compared. For example, if a particular respondent reported a relatively low rate one time, it is likely that person would report a relatively low rate the next survey. It doesn't imply that rate is accurate or inaccurate. It just means the reported rates would be consistent - in this case perhaps consistently low.

2. We are not able to assess if all rates reported are "arms length," independent rates. Some rates reported may be "good neighbor" rates where operations are done to help a neighbor or a relative. It may involve an exchange of machinery operations, or an exchange of field work for labor or some other activity, or may involve the work recipient supplying the fuel rather than the custom operator.

3. There is a local supply-demand factor involved in custom rates. That is the reason we report the survey rates by district wherever possible. The factor we can't control is the number of responses we get by region. For example, if we got a large number of responses on one survey from an area where rates are relatively high and get fewer responses from that area the next survey, this could cause a shift downward in the relative rates.

The bottom line is that the reported rates are simply a random survey and that randomness can and does create what appear to be inconsistencies in the numbers. Using a calculated approach, we would start with the existing machinery and fuel prices and labor rates and use the same procedures to calculate hourly costs.

Table 1 shows the changes in the average custom rates by type of operation from 2004 to 2006.

H. Doug Jose
Extension Farm Management Specialist

Farm custom rates updated Check custom rates for your area and specific machinery operations in one of two recently revised UNL Extension publications, the 2006 Nebraska Farm Custom Rates -- Part I and Part II. Every two years custom operators in eight regions of Nebraska are surveyed to determine what rates are charged for specific machinery oeprations. Part I addresses those operations typically conducted in spring and summer and Part II addresses those operations typically conducted in the fall and winter.

Copyright 2006 by the University of Nebraska Board of Regents. All rights reserved.

Published by University of Nebraska-Lincoln Extension in the Institute of Agriculture and Natural Resources Cooperating with the counties and the U.S. Department of Agriculture.

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