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Wondering what you can expect to be charged by your contractor or (if you’re doing work for a neighbour) what you should charge them? The latest list of contractor charges issued by the National Association of Agricultural Contractors (NAAC) give a good guide, as chief executive Jill Hewitt explains.
You won’t be surprised to hear that contractor charges for 2008/9 are significantly higher than they have been in previous years. The reasons are by and large the same as those being experienced by everyone in UK farming.
Diesel prices had reached record highs of 65p/litre when we were gathering the figures from NAAC members in July. They have eased in the past few weeks to nearer 58p/litre, but fuel remains a significant operating cost.
Machinery and labour costs, meanwhile, continue to rocket. Steel prices and the big drop in the euro exchange rate have meant that 20% more has had to be budgeted into the cost of replacement equipment.
The cost of financing such purchases has also become more expensive. Soaring steel prices have affected the wearing-parts bill, especially for cultivation equipment. At the same time, the wages bill maintains a steady climb.
The rapid changes in costs have made financial management even more of a nightmare for contractors than usual. To keep on top of it, NAAC members have been trying out a useful software package developed for contractors and farmers by the machinery ring 7Y and consultants Andersons (see box).
Users put in their actual costs for each machine and member of staff and can vary any item such as the price of diesel or work-rates. They can then quickly calculate the amount they should be charging for each operation.
Some have been shocked by the outcome. They discovered they had been seriously under-estimating their costs, perhaps for many years, and had been under-charging their clients as a result.
To cope with the big fluctuations in fuel prices, some contractors have decided to charge diesel as a separate item on their bills so their farmer-customers can clearly see what they are paying for.
With all the upswings and market turmoil of the past season, the figures for 2008/9 in the table (below) must be used as guidelines only.
How are the charges calculated?
They have been drawn from a range of charges sent in by NAAC members from all over the UK. Boiling that range down into a single figure inevitably hides the quite large variations that occur. The figures include fuel.
There are obvious regional variations. Any contractor mowing grass in the West Country would be pleased if they could get the rates charged in the east of England. And every contractor tackling big fields of prime grass swards would be delighted if they were paid the rate per acre for mowing small thistle-infested horse paddocks in the south east.
The east-west contrast works in reverse for crop-spraying East Anglian sprayers travel short distances between fields to treat large acreages of the same crop over a long season. They can afford to charge less per acre than sprayer operators working on small, far-flung fields in the south west.
Operational variations must also be taken into account. Work rates are slow on heavy land, but the same kit can fly along on light land. As the tractor plus implement and driver cost the same whatever the soil type, the contractor is obliged to charge more per acre if the job takes longer.
The same holds true if the kit has to move frequently between small fields rather than spend the day in the same field.
The figures in the table are always a snapshot rather than a detailed portrait of the contracting market. This year’s picture, taken in July, could alter quite dramatically over the coming months and contractors might be forced to revise their prices rather more frequently than they have in the past.
Andersons’s ABC Cost Calculator
The CD-Rom includes:
- A database of hundreds of items of farm machinery
- Prices, fuel use, work-rates, repair charges, depreciation and other cost items
- Allows customisation so you can input your own figures
- Calculates the complete cost of owning farm machinery
- Allows you to build profiles of different contracting operations, analysing and comparing costs, working out how much to charge for each operation, as well as establishing the optimum time to replace machinery
- For a free trial go to the NAAC website and follow the link for your 30-day trial. For information contact: Andersons 01664 567 676
* These prices are the “middle price” and the actual price may vary considerably between regions, soil types, distance travelled, size of contract undertaken, size and type of equipment used, amount of product applied etc. These prices are only a guide. Figures are in £/acre (unless otherwise stated).
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