Understanding Ontario's Custom Farming Rates

Monday, July 24, 2023

Setting Fair Prices for Both Farmers & Contractors

By Mel Luymes

Considering the costs of the latest farm equipment and technology, more and more producers are opting to hire agri-contractors for one or more field operations.

Every three years, OMAFRA polls farmers and custom workers from across the province for their custom rates. These rates help OMAFRA understand and analyze farming costs, but they are also used by farmers and contractors to adjust their prices. In 2021, the Ministry worked with the Ontario Professional Agri-Contractors Association (OPACA) to modify some of the questions and categories, as well as make the survey available online.

In early 2022, OMAFRA released Ontario's 2021 Custom Rates report but with rising fuel and equipment prices it was already out-of-date by the time it was published. Ontario farmers might be hard-pressed to find custom rates as low as OMAFRA's last report.

Agri-contractors are a growing sector in Ontario agriculture, and they have different regulations and concerns than most other farmers. OPACA was formed in 2017 to support and represent them. Most OPACA members have a farm operation of their own but do agri-contracting as more than half of their business – which might be manure hauling and application, planting, harvesting, spraying, etc.

Following the results of OMAFRA's Custom Rates Survey, OPACA polled 20 of their members in early 2023 and compared current custom rates with OMAFRA's report. Farmers can expect that contracting rates would be 25 per cent higher than OMAFRA's values.

While many farmers do custom jobs for their neighbours, it can be difficult to know what to charge. The danger of charging low rates is that these farmers are subsidizing their neighbours' farms with their own.

Professional agri-contractors, on the other hand, need to pencil out all their costs into their custom rates, including their maintenance and labour, interest payments and insurance, administration, licensing, and even office supplies. So, finding a rate that is affordable to both the farmer and the contractor is critical.

Contractors can invest in the latest equipment and technology because they cover a lot of ground in a year.

More than 20 per cent of OPACA members do work on over 15,000 acres in a year. The majority of OPACA members indicated that they have row-shutoffs and Variable Rate Technology. Many also have Central Tire Inflation Systems, which reduces soil compaction. While these features are included in contractors' custom rates, neither the available technology nor efficiency was indicated in OMAFRA's Custom Rates. Not all custom rates are created equally.

On average, OPACA businesses had been operating for 20 years and their operators are trained and experienced, often with in-house agronomists and mechanics. They have up-to-date licences for spraying and manure application, with all the necessary insurance so that their farmer customers can have peace of mind.

So, what did OPACA members say that rates were?

These rates may vary widely by business and by equipment, but liquid manure seemed to have the most dramatic gap to OMAFRA's values:

• Tanker application: $16 per 1,000 gallons (+31 per cent)
• Drag hose application: $15 per 1,000 gallons (+16 per cent)
• Agitation by pump: $137 per hour (+74 per cent)
• Agitation by manure boat: $388 per hour (+51 per cent)

Discing was $32/ac on average (34 per cent higher than OMAFRA's), planting conventional corn was $35/ac (+30 per cent), spraying was $13/ac (+20 per cent) and combine harvesting corn was $66 (+30 per cent).

For haylage, OMAFRA reported that a combined price for chopping, hauling, and packing would be about $600 to $700/hr, while OPACA members ranged from $725 to $1,145/hr. The range in price is often based on the quality of equipment and how much work a crew can do in an hour, so taking the lowest price doesn't always mean the best deal.

Contractors often wonder if they should charge by the acre or by the hour, and some even charge a combination of both. As well, rates can vary by customer based on field sizes, quality of field access and distance from the home shop. Many contractors also adjust their rates based on the price of fuel, either with a fuel surcharge or by modifying prices. This winter, OPACA started work on a comprehensive spreadsheet for its members to calculate their break-even rates by job in hopes that their own rates won't put themselves out of business.

Considering the costs of equipment these days, it is often more cost-effective for small to medium-sized farms to hire out some of the field work. There are still obvious hesitations, but many contractors are gaining great reputations in the farming community. They take pride in a job well done and often treat their customers' fields like their own, proactively scouting to coordinate all the field work. They prioritize jobs for loyal, longtime clients, so it is well worth it to develop a good relationship with a local contractor instead of shopping around each year for a lower price. Contractors make investments in the latest equipment for the benefit of their customers.

By setting a price that is fair for both contractors and farmer-customers, they can work together to grow Ontario agriculture. BF