March 23, 2016
Contractor’s Prices Up or Down

Pricing work can be a contentious issue.  PAC frequently gets enquiries, from both contractors and farmers, asking what is the right price for this or that job.  We can only respond that this is one of the areas where there is no single answer.  PAC always advises contractors to carefully and scientifically cost all the services they provide; never again can prices be set on a wing and a prayer.  That said it’s not always easy to arrive at a price that is acceptable to all.

There are several influencers to be taken into account when pricing work, these include the fixed costs of running a contracting business to the variables such as the machinery used, region, soil type, conditions and distance travelled, labour, fuel  and of course profit.  Some contractors also make individual arrangements with their customers with regard to provision of fuel or charging for fuel separately.

Therefore it is a dangerous exercise to represent an average price for any contracting service.  Even publishing an upper and lower range of prices can adversely affect the price the professional contractor gets, as clients may use the lower range to leverage a reduced price.  Prices quoted by Shadow Economy are also used to bargain; but farmers should be aware that, unlike professional contractors, these operators do not comply with revenue requirements nor, importantly, do they have the appropriate insurances in place that, in the case of an accident, can protect the farmer.

There is no doubt that mechanisation is a key input in modern farming.  The use of professional agricultural contractors is a sensible and cost effective solution to the supply of mechanical services on the majority of Irish farms and brings considerable benefits to farmers.  The need for economies of scale in relation to machinery ensures a continuing demand for the services of agricultural contractors.  Consequently it is important that contractors maintain viable businesses with longevity.  The best way to ensure this is for them to get a fair price for their work.  Contractors can contact the office on 090 6437518 to discuss pricing issues.

Finally, the Big Debate now is whether lower diesel prices should be reflected in prices charged this season. Over the years most contractors have not raised their prices in line with inflation; but if your contractor shows fuel as a separate charge then there might be some chance to negotiate.  However this year we also have to contend with considerable increases in insurance premiums, so when this is taken into the equation price reductions are highly unlikely.