Future-proofing will be key when setting prices, according to NAAC chairman and Derbyshire contractor, Martin Hays.
While there have not been any major increases in the NAAC contracting charges this year [PDF], the impact of Brexit, farm payment changes and rising input costs will most likely see prices rise in the longer term.
“Contractors can no longer rely on charging a loosely calculated price that makes them competitive with their rivals,” says Mr Hays.
“It might pay the bills right now, but in a few years’ time when it comes to trading in machinery you may find you have not been charging enough.
Current overheads need to be carefully worked out and contractors need to be looking ahead to make sure the business can keep pace with rising machinery and input costs.
“I bought two new tractors seven months ago. Since then, the cost of the same machine has gone up almost £10,000,” says Mr Hays.
“That could be crippling for a contractor, particularly if they’re trading in multiple or larger machines, and undercharging will be a likely way out of the industry for anyone that’s not careful about pricing.”
See also: NAAC farm contractor charges 2016-17
Roger Dickinson, NAAC vice-president and managing director of JO Straughan and Co in Northumberland, agrees.
“We are going to gradually need to push up prices as our running costs continue to rise. We know all our costs in detail and it is still much cheaper for our customers to get a contractor in for many operations than to make the massive capital outlay in machinery.
“The level of investment we make is astronomical but we work in long-term partnerships with farmers to make sure that we can provide the standard of service they need, alongside modern, well-maintained kit.
“Many farmers now rely on the services of contractors, particularly where larger kit is needed, and as everyone feels the squeeze of Brexit this will continue to be an area where machinery and labour costs can be diluted.
“However, contractors need to look hard at their own margins and costs to be certain that their business is sustainable both for themselves and to provide a professional service to their customers – which will inevitably see prices start to rise.”
Download the NAAC contractor charges guide 2017-18 [PDF].