Several sources of information are available to help you decide what to charge for your labor and machinery expenses for custom work. One handy tool is ISU’s Ag Decision Maker website.
WHAT TO CHARGE: Several sources of information are available to help you decide what to charge for your labor and machinery expenses for custom work. One handy tool is ISU’s Ag Decision Maker website.

Sharing labor with a neighbor

Timely Tips: Negotiate an agreement that will work best for both of you.

Each month in Wallaces Farmer magazine, the Timely Tips panel answers questions sent by readers. Members of the Timely Tips panel are Alejandro Plastina and Wendong Zhang, Extension economists, Iowa State University; Leslie Miller, Iowa State Savings Bank, Knoxville; and Rob Stout, Master Farmer, Washington, Iowa. Following are the questions they are answering this month.

I began labor sharing with my neighbor in the farm financial crisis in 1985. I was a 20-year-old kid trying to get started farming. He was an established farmer. For 10 years I did a lot of work for him in exchange for using his machinery. Over the next 25 years I acquired my own machinery. We mostly traded labor. Worked great. Over the last five years my now 82-year-old neighbor really slowed down. My son and I are now doing all of our work and most of our neighbor’s too. We use his machinery on his land, our machinery on ours. We’ve basically become custom operators for him, except we use his machinery. Any suggestions on an agreement that might pay us for our labor? Any tips on how to negotiate?

Stout: You might have to tread lightly while doing these negotiations. Your neighbor probably felt he was giving you a good deal in helping you get started in farming. However, you shouldn’t work for nothing now. I would use the ISU Iowa Farm Custom Rate Survey as a guide, which you can find on the Ag Decision Maker website. Average farm labor wages are listed as from $15.25 to $17, which seem low to me, but show a range up to $30 per hour. Another method would be to look at the custom rate and subtract the rental rate for the same equipment. For example, an NH3 custom application is listed at $12.80 per acre and renting an NH3 applicator is listed at $8 per acre, which would give you $4.80 per acre for labor. Not all operations are listed, but you could use this as a guide. It also might be the time to approach him about either crop-sharing or cash-renting the farm from him.

Plastina: There are several sources of data to guide negotiation of an hourly rate:

 Starting in July 2009, the U.S. Department of Labor set the federal minimum hourly wage for farm workers for the U.S. at $7.25.

 According to the Farm Labor Survey conducted by USDA in April, the hourly wage in Iowa and Missouri (Corn Belt Region 2) averaged $12.60 for fieldworkers, $13.95 for livestock workers, and $13.15 for field and livestock combined.

 The 2017 ISU Custom Rate Survey reports hourly farm labor wages for operating machinery averaging $17.15 for spraying or harvesting and $15.25 for other operations.

But the hourly rate is only part of the agreement. Other things to consider and ideally put in writing are timing of payments (possibly following spring operations and fall harvest), and the items to include in the invoice (itemized statement of work completed, dates, acres and payment rates).

Finally, it’s important to check with your insurance agents about obtaining coverage or bonding against damage to machinery or property while doing custom work. Some agents offer special policies for custom operators. Ag Decision Maker File A3-15, Custom Farming: An Alternative to Leasing goes into more details to consider when evaluating custom work agreements.

Miller: It may be uncomfortable, but you need to talk. Is it possible he might rent your son a few acres in exchange for the labor your son puts in? If not, then tell him you are happy to help him, but he has to compensate you for the time. After all, if you were not working for him, it is possible you could use your machinery to perform custom work for other neighbors, which would give you more income.

During negotiations, you should review how you started the partnership and discuss how that has changed now that you have your own equipment and your son in the operation. Use a custom rate sheet from a land-grant university (there’s one on Ag Decision Maker pertinent for Iowa) to show what labor might cost and see what he thinks. Last, but not least, whenever there is a financial component, I tell my customers to “blame the banker” for suggesting that you need to do something different.

Our son is away at college and we are short on labor. A neighbor boy is a senior in high school and wants to help. He just turned 18. He could either drive the grain cart or run the no-till drill, planting cover crops. We also feed 100 head of cattle. He doesn’t have much farm experience. Where should we put him? I like the idea of training an inexperienced person to become the additional help I need with specific training for the situation. What do you think?

Stout: Since he is inexperienced, you should make sure and spend some time training him for whatever operation you decide is best suited to his abilities. My inclination would be to have him on the drill seeding cover crops. We have hired a person to do much of our drilling the past few years, and it works well with a varying schedule as a high school senior would have. Just communicate with him which fields are ready and have the seed tender there with the seed. Whether you have him regularly grease and check for worn bearings, etc., is up to you, but at least let him know what to look for so that worn-out parts don’t cause a major problem.

Miller: I would hesitate to put someone with no experience in charge of feeding livestock. I think someone unfamiliar with cattle could easily miss a sick steer until it’s too late. If you can get by having a new person work on fall tillage or drilling cover crops, those jobs will have the least economic impact to your operation (meaning mistakes aren’t as costly). Just make sure they have thorough instructions and your cellphone number.

Zhang: I applaud your efforts to help a young person to get into farming. The key is to think of the neighbor boy as a new employee in your farm business, not as a family friend. Give him a clear definition of job duties and provide good communications with him, other members of your family farming operation, and especially his assigned supervisor or mentor. Check with your neighbor and this young man to get a better understanding of his qualifications and preferences, but bear in mind that you want to assess where additional labor would help your farm most, assuming he’s capable with either of the jobs you mention. The ISU Ag Decision Maker File C1-73, Farm Employee Management: Assembly of Farm Job Descriptions, has a nice introduction on how to define job descriptions, which involves identifying and matching the skills of personnel with job duties, tasks and needs. Finally, make sure the young man knows his place in your family farm business, especially who and how often he should report to and learn from.

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