If they think of it at all, many Canadian farmers think of custom combining as something for Americans. North of the border, the conventional wisdom is, you can’t rely on custom. Time’s too short during harvest. You need to own your own machine so you can use it whenever you need it.
But there are years when hiring a custom combine crew can be a profitable economic decision for your grain farm.
Custom work in action
Stacy Lund, his brother Travis and their father Peter have been expanding their Weyburn, Sask. farm for years. In the past, they’ve relied heavily on custom harvesters. “We didn’t have enough acres to justify two combines,” Stacy says. So for several years the Lunds owned one combine and hired custom combine crews to fill in the gaps.
It wasn’t a perfect situation. “Timing is everything,” Lund says. “Lots of times our crop stood ripe for a couple of weeks before they got here. They did show up. But if you thought they were coming on September 1st, you might wait until September 19th.”
Today, the Lunds are farming 8,000 acres. A few years ago they purchased a second combine and they haven’t looked back, Lund says. “It’s better to own your own machine if you can justify it.”
But even though Lund believes they have the right number of combines for their farm, they still hire custom harvesters on occasion. “If the crop’s ready and you can find somebody,” Lund says, “there are years when your gain on grades will more than cover it.”
Last year was one of those years. As Lund says, “Weather patterns have totally changed from what everybody’s used to in southern Saskatchewan.” Lund’s 2010 harvest was plagued by rain, frost, rain, and, well, more rain. Although, in the end, crops came off well for most farmers, weather delays caused quality declines that came with a real cost.
What are the numbers?
Typical rates for custom combining range from $24 to $30 per acre, with the custom operator providing the labour and hauling all the grain, and the farmer providing the fuel. Sometimes farmers might negotiate lower rates to have neighbours do the work, but in these cases the cost of transporting machines is lower and staff don’t have to be far from home.
Saskatchewan Agriculture and Food (SAF) 2010/2011 Custom and Rental Rate Guide suggests an average price of $23.89 per acre, but this figure doesn’t include the costs of trucking and it assumes that the custom worker provides the fuel. When they calculated this rate, SAF staff used a labour cost of $14 per hour, with an added a 15 per cent margin for management and profit.
Not surprisingly, rates depend on hauling arrangements and distances, harvest conditions, field conditions, and, as always, supply and demand.
Is it worth it?
Lets say the terminal in Weyburn, Sask. is buying 2010 #1 large green lentils for 40 cents per pound. If you’re selling #2 lentils, the price is eight cents lower: 32 cents per pound. If you grew 1,300 pounds per acre and your lentils came off as #2 instead of #1, you lost $104 per acre (based on a 1,300-pound per acre yield). If you’d finished harvest sooner, $28 per acre (plus fuel) for custom harvesting would have been a small price to pay. You would also have gained a few extra days to finish other work, and accumulated less wear and tear on your own combine.
And that was just the math for a quality decrease from #1 to #2. If the quality of your lentils fell all the way to #3, you’d be selling them for less than 18 cents per pound, a difference of 22 cents, or $234 per acre (based on the scenario above). That kind of saving could easily have paid for a custom harvester.
Price differences aren’t as pronounced in some crops. The mid-winter difference between #1 wheat ($7.84/bushel) and #2 wheat ($7.46 per bushel with 13.5 per cent protein) was only 38 cents per bushel. If you were worried about a quality loss and hired custom help, you could have paid $25 per acre to save just $13.30 per acre (with a yield of 35 bushels per acre, 35 bushels x $0.38 per bushel). Oops.
But if your quality might have fallen all the way down to feed (selling for $5.07 per bushel), hiring custom help to get the crop off sooner could have saved you $96.95 per acre.
So when conditions are right, it can really pay off. “It’s a pretty small cheque to write, in my opinion, for what you can gain on quality.” Lund says. The Lund family also maintains a cow-calf operation with 225 cows on 3,000 acres, so their time is at a premium. Speeding up harvest gives them time to tackle fall field work before snow flies. “It sure took the pressure off us this year,” Lund admits.
Of course there are years when the weather is “normal” (if that term applies any more). You might hire someone to help you get your crop off quickly, then find yourself standing around in the sunshine with free time for the next three weeks. And, some years the price differential between grades isn’t that great, so you can drop grade without losing much profit.
As you can see, it’s simple to do these calculations at home. All you need is a spreadsheet and… that’s right… a high-quality time machine.
Is custom a growing trend?
Custom combine operator Lee Petersen thinks it might be a trend. “In Canada we’re seeing more customers that are larger farmers who don’t want to buy more machinery. They’re just hiring out a small percentage of their harvest.”
Petersen is a farmer from Hodgeville, Sask., who operates a custom combine business, L. Petersen Farms Ltd, with five combines and 10 or 11 staff. He’s also the vice-president of the Canadian Customer Harvesters Association. 2011 will be Petersen’s 13th year combining on a U.S.-Canada route. “We’ll be in Oklahoma on the first of June, and we’ll harvest right into November.” Petersen says.
The custom harvesting market in the U.S. is different from the Canadian market. Petersen explains, “Most of the farmers I work with in the U.S. don’t have their own combines.” These farmers can see their whole crop be ready to harvest in a week. They can’t justify owning enough machinery to bring off the whole crop on their own.
But in Canada things are different. Here, farmers are used to harvesting for a month or more. Rather than relying on custom harvesters to bring in the entire crop, Canadian farmers are more likely to use custom to help out until they can purchase that second machine, or to speed up harvest to beat a gloomy weather forecast.
The fact that he supplies staff and trucking makes hiring custom harvesters more appealing, Petersen says. “Anyone can buy a combine, but you’ve got to find people to run them.”
But will they come when I call? Maybe.
For custom operators, logistics is one of the biggest management challenges. When one farmer runs into harvest difficulties, the odds are that every farmer in the area is having the same issue at the same time. Petersen says that this happens quite a bit. “It may seem like there’s not enough custom combiners, and some years there isn’t.”
“The problem,” Petersen says, “is that I can’t be five places at once. If there’s a farmer I’ve worked for before, I’ll go there again. Ninety-five per cent of the work I do is for repeat customers who’ve contacted me ahead of time. Of course weather changes everything, but repeat customers get some priority, because they’re who I count on to earn a living.”
Custom harvesters have to learn to live with flexible plans. Two rainy days can completely change the schedule.
Custom harvester Lynn Prevost has found the last three years especially busy. Due to the rainy harvest weather in Canada, Prevost has been getting more last-minute calls than usual. “Last year was just unreal,” Prevost says. “We did a lot of combining in southern Saskatchewan where we normally don’t go.”
As well as serving as the executive secretary of the Canadian Custom Harvesters Association, Prevost runs Prevost Harvesting with her husband. They operate three combines and support equipment out of Rose Valley, Sask. When she gets requests for work she can’t complete, Prevost tries to fix the farmers up with someone who can, usually referring callers to the Canadian Customer Harvesters Association website.
So what should I do?
Again, you’re going to need a working time machine. The best way to make sure you have a place on a custom harvester’s schedule is to be a long-term customer. For new customers, the best thing to do is call early. But there’s not much point if you’re not sure what you want to do. Petersen says, “I get guys that phone earlier, but they won’t commit.”
Prevost mentions that some harvesters will ask for an up-front deposit from new customers.
Is it wise to make a commitment before you know what sort of harvest you’ll have? “It’s a gamble, like anything else in farming. It might not rain, but if it does, they’ll be laughing,” Petersen says.
If you’re not willing to make a commitment, it may still be worthwhile to re-evaluate your options during harvest. If it seems that 2011 could be the year that custom harvesting becomes a profitable option for your farm, the sooner you start calling, the more likely it will be that you get on a customer harvester’s list. When it comes to scheduling, Prevost likens it to the stock market. “You’re gambling all the time.”CG