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FARM & RANCH: Custom Services May Be Way Out of Haywire Farm Economy For Some

In simpler times farmers and ranchers often repaired equipment with a piece of bailing wire, thus giving birth to the expression “haywire.”

Something that was haywire was broken, but not so broken that it couldn’t be made serviceable by the industrious application of some bailing wire.

I suppose we might say that today many farmers’ and ranchers’ budgets are haywire, if not the whole darned farm economy.

Today’s farm economy has a lot of operators reaching for financial bailing wire. Extracting profits requires a lot of hard thinking supplemented by finger-numbing keyboard pounding.

Many farmers and ranchers are having to re-think their operations, develop new strategies and modify their operations. Operators have to think several times before buying a new piece of equipment. Better yet, they need to run some numbers through the computer until they come out with a few positive dollar signs attached.

Some of those numbers have to do with the question of whether they should replace a piece of equipment or hire custom services. Or, flip side, perhaps they have equipment they could use to do some custom harvesting that would bring in enough money to put their own budgets in the black.

The nut of the problem lies in determining what to pay or charge for custom services.

Washington State University’s Herbert Hinman has explored the subject and produced a printed publication and a computer software program that farmers and ranchers can use to evaluate custom harvesting decisions.

Hinman says if farmers aren’t careful, they might hire themselves and their equipment out at a short-term profit and a long-term loss.

Operators who are considering doing custom work are the folks that Hinman wrote for, but the publication and software might be used as well by someone to evaluate whether a custom harvester’s rates are reasonable.

Hinman has developed worksheets that help operators calculate the true costs of owning and operating equipment. Custom rates need to compensate the owner for future replacement costs, interest, taxes, insurance, housing, repair and maintenance, as well as for fuel, lubrication and labor, the economist urges.

Of course these costs are calculated on an hourly basis, or on a per-acre basis. In the final analysis, the result is the same. If the operation is plowing with a 10-bottom, 18-inch moldboard plow, about six acres can be covered in an hour.

Hinman suggests tossing in some time for machinery maintenance and servicing. He estimated 1.2 hours for each hour the equipment will be operated, or one 15th of an hour per acre plowed.

When all the costs are calculated, don’t forget to add something for profit. How much depends on the risk the custom operator is taking, and–of course–on what the farmer buying the service is willing and able to pay.

“Calculating Equitable Custom Rates” may be printed from the World Wide Web at http://www.farm-mgmt.wsu.edu/PDF-docs/machinery/eb1364e.pdf.

Or, you can buy a DOS-based computer software program. Send a check or money order for $20.44 to Bulletin Office, Washington State University, P.O. Box 645912, Pullman, WA 99164-5912. The price covers shipping and handling. Ask for “CUSTOM: A Computer Program that Estimates Equitable Custom Rates,” MCP0025. Or telephone your order to 1-800-723-1763. VISA and MasterCard accepted.

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