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How to set custom haying rates

Profit Planners: It’s that time of year — here’s a look at determining custom rates for haymaking.

May 2, 2024

3 Min Read
A New Holland tractor pulling a New Holland baler
BIG INVESTMENT: If your hay equipment looks like this, you have a big investment to recoup over time through fair and realistic custom haymaking rates. Tom J. Bechman

I have lots of hay equipment and will do custom work. What should I charge for mowing and conditioning, tedding, raking, and baling? I bale both large round bales and small squares. One person wants me to make 10 acres of grass hay on shares, where I take half the hay. Should I charge him so much per small square on his half too?

Profit Planners panelists include David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue Extension educator, Putnam County, Ind.; Jim Luzar, landowner and Purdue Extension educator, Clay and Owen counties, Ind.; and Steve Myers, farm manager with Busey Ag Resources, LeRoy, Ill.

Erickson: Use published custom machinery rates from university sources to determine cost of each step of the operation and compare that to current prices for hay bales. Determine whether it makes economic sense to provide all machinery for half of the total hay crop. Putting actual numbers to the process will give you greater confidence.

Evans: There are several state university custom rate surveys that you can search on the internet. Check the dates for the last update and compare. In some cases, responses are few and rates can be skewed. This information gives you a start for perspective.

For the landowner on shares, is the grass hay of good quality? Do you need hay? It would seem easier to determine the percentage that is your portion rather than charge an additional cost for the landowner’s portion. If it is poor quality hay, this may not be desirable.

Luzar: This is not a situation where you are doing a small job for a neighbor and can stand to not cover all direct and indirect costs. Start by reviewing Purdue Extension custom rate survey charges. Review data from the University of Illinois, Iowa State and Ohio State, too. Arm’s length transactions are documented in this survey data. They exclude deals based on family, friendship or motivation to cover only cash costs.

Custom rate charges should also cover noncash costs, including unpaid operator labor and machinery depreciation. Compare your actual costs to custom rates.

As for haying on shares, a common transaction here is baling on halves for lesser value stands of grass hay — not alfalfa. Compare your costs for baling small squares vs. large round bales. Ten acres will not break you either way. But don’t tackle larger jobs without knowing that you’re covering all costs. It is very easy to not charge enough and “eat” depreciation. This will be clear next time you invest in newer hay equipment.

Myers: You have a couple of options. Learn what the local marketplace is for those activities, which would include what other custom operators charge or benchmark custom rates available through Extension data. Second, look at your cost of ownership in equipment and return to your labor to develop pricing. This, too, is available through Extension data.

On the 10 acres, learn the quality of that stand. Perhaps do it on regular custom rates until you know more. The landowner’s hayfield can vary in quality and quantity.

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