New contracting guide prices for 2019/20 have been published by the National Association of Agricultural Contractors (NAAC).
The prices give a national average to help steer contractors and farmers. However, businesses are warned not to rely too heavily on these guide prices as it is important that contractors know their individual costs and are therefore clear what they need to charge to continue to run a viable business.
Jill Hewitt, NAAC technical consultant says; “The charge for contracting operations tends to go up in small increments each year. Contracting prices should increase annually by the inflation rate, at a minimum, to keep pace with labour and other rising input costs such as machinery replacements, which have gone up 10 to 15 per cent each year.
"Whilst contractors may face resistance from customers, alongside fierce completion, it is all about knowing your costs and ensuring you can offer a professional service, with well maintained, safe kit that your customers can rely on at crucial times, year on year."
Mrs Hewitt adds; “Capital investment is now very significant on farms and, to manage cash-flow and depreciation, over 90 per cent of farmers are bringing in the services of a contractor to take some of the investment burden for specialist, high capital cost machinery, alongside the need to bring in skilled labour which is in short supply.”
However, contractors are urged to carefully plan and cost their operations to try and ensure a profit margin so they can run a sustainable business. Mrs Hewitt says; “All costs such as downtime, insurance, depreciation, labour, machinery servicing and maintenance must be calculated to try and ensure customers are charged appropriately to maintain a viable business model.
“Like every industry, there is fierce competition in the contracting sector which can result in prices being driven down, but a successful business with longevity is one that costs its operations carefully and refuses to work for less than a realistic price. There is little point being a busy fool, working all hours for little benefit.”
Contractors are advised to use the prices as a guide but take into account their own costs, and variations in the types of land, customer size, machinery and scale of the business to work out their charges.