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Agrivision: What is a fair price to pay parents for equipment use?

Agrivision: What is a fair price to pay parents for equipment use?

Our Agrivision panel answers a question about getting started farming.

Complete your crop budget and try to work out the best deals possible with your parents.

Question: I will be a junior in high school this fall. I am active in FFA. I live on a 400-acre grain and beef farm in western Wisconsin. This year, I am renting 150 acres of cropland from a neighbor. I planted corn on 60 acres and soybeans on 90 acres. So far the crops look good despite a lot of rain. I’m hoping to double the number of acres I farm next year. I will probably stick with corn and soybeans, but maybe grow a little more corn next year. My question is, my parents have been letting me use their equipment free of charge this year, but I feel I should pay them something for the use of their tractors, combine, planter, and other equipment next year. What is a fair price to pay them? I am trying to work out a budget so I know how much I can afford to pay for land rent.

Hodorff:  It is great to hear your plans and that you are taking responsibility for your farming endeavor. To answer your question about compensation for use of equipment, I would suggest looking at rental rates in your county. Extension has a great website for custom rates in your county and even statewide. I feel your parents want you to succeed so they want to help you by letting you use their equipment. Make this a win-win situation by treating yourself and your parents fairly. Do your budgets with real costs for land rent and equipment rent. The budget will give you a good indication where your break-even costs are. Best wishes with your farming enterprise. 

Miller:  Congratulations on starting your farming career. Completing a budget is critical to understanding your cost and returns and equipment is a significant cost of crop production. Many states prepare custom rate guides giving a range of charges for each field related activity. The most recent is the 2016 Iowa State Custom Rate Guide. (extension.iastate.edu/agdm/crops/pdf/a3-10.pdf)  Wisconsin also periodically completes this guide but the most recent is from 2013. Keep up the good habits and skills by completing a budget and seeking to find the actual returns achieved from farming activities. Good luck with your harvest and your interest in agriculture as a career.

Wantoch: Wow, you’re only a school junior and already looking to create a budget for your cropping operation? That’s awesome! Extension has crop budgets and other resources available on the Farm And Risk Management (FARM) team website - fyi.uwex.edu/farmteam/field-crop/. I would encourage you to have a conversation with your parents to see what they are expecting for use of their equipment. Your parents might be willing to forgo payment to help you get started with your farming operation. Or they may be considering payment in lieu of, such as additional labor around the farm for use of machinery. During these times of low commodity prices, I would encourage you to complete your crop budget and try to work out the best deals possible. This way you can have a better start and future in farming. Best of luck! 

Agrivision panel: Doug Hodorff, Fond du Lac County dairy farmer; Sam Miller, managing director, group head agricultural banking BMO Harris Bank; and Katie Wantoch,  Dunn County Extension agricultural agent specializing in economic development. If you have questions that you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919 or e-mail them to foleary@farmprogress.com

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