Custom Farm Work Rates on North Dakota Farms, 2016 (EC499 (Revised))
The U.S. Department of Agriculture’s North Dakota Agricultural Statistics Service, Fargo, in cooperation with the North Dakota State University Extension Service, conducted a survey of custom operators in North Dakota in 2016.
The survey of early season operations was conducted in July and August and covers tillage, planting, fertilizer and pesticide application, haying operations and other custom operations. The survey of late-season operations was conducted during September and October and includes data on harvesting, drying and hauling of crops, seed preparation, hauling hay and livestock, and other operations.
The custom rate survey is conducted every three years. The two 2016 surveys summarized more than 2,600 reports from farmers and ranchers, aerial sprayers, elevators, custom harvesters and other custom operators.
Also included in this survey are reported rental rates for tractors, combines, corn heads, grain carts, swathers and field rollers. Both surveys included a question on the price of diesel fuel that producers were paying at that time. Because this survey is conducted every third year and fuel cost is one of the more volatile components of operating costs, this presents a reference for any adjustments in charges between surveys.
Survey data for 2016 are summarized for the state as a whole. This publication shows the number of reports, the range in rates, most frequently reported rate and the average rate for each operation. Data broken down by North Dakota farming regions are no longer available.
Custom rates include charges for the equipment, tractor or power unit used, fuel, repairs and operator labor. Rates vary because of local supply and demand and costs of custom operators. Some of the low rates may represent charges by a farmer who did custom work to help out a neighbor but was not concerned about recovering full costs. Custom operators who perform these operations as a main source of income would be expected to set rates that cover average operating costs, depreciation, return on investment, labor and management.
These rates are published as a guide in establishing rates for custom work, comparing ownership or leasing costs with custom work and settling accounts when two or more people exchange work.
Assistance in helping determine a fair custom rate may be obtained from county Extension agents or Extension Service specialists at North Dakota State University.
Custom rates should not be confused with the cost of owning and operating farm machinery. Presumably, custom rates are set with knowledge of the true cost of owning and operating machinery.
In practice, this is not always the case. For example, the average custom rate reported for field cultivation is $9.36, while an economic engineering approach suggests a range of costs from $5.57 to $7.09 per acre, depending on the size of the equipment. Likewise, the average custom rate for combining corn is $35.13 per acre, while the economic cost estimate is $29.05 to $46.36, depending on machine size.
Custom rates represent a market-derived price. They reflect the supply of and demand for the services rendered, which include the use of the machine, power, fuel, repairs and the operator. Custom rates are to machinery services as market prices are to commodities. Custom rates may deviate from the cost of machinery ownership and operation, just as the market price for commodities deviates from the cost of producing the commodity.
Ownership and operating costs represent an accounting of all the resources used. These costs include depreciation, interest, repairs, fuel, taxes, insurance, housing and labor. Supply and demand will impact the price paid for machinery, which then will affect the ownership costs. However, once a machine has been purchased, the ownership cost becomes fixed relative to the life of that machine.