Déjà vu. Fuel prices are once again the unknown variable in this year's custom rates.
“Fuel has been a thorn in the side of all custom operators,” says Tom Ellis, president of the California Alfalfa and Forage Association. “Fuel prices were horrendous about a year and a half ago and they really threw a monkey wrench into our work. They tapered off last year but seem to be on the rise again. We just don't know how to really get a handle on it.”
One way to handle it is with fuel surcharges.
Dick Kraus, Elkhart Lake, WI, says he won't change existing contracts, but fuel surcharges are where his new contracts are headed. Kraus owns Kraus Custom Forage Harvesting with his brother, Bill.
“It's our plan for the future,” Kraus says. “It's common in the trucking industry and we're looking at that option for our new customers.”
With uncertainties in the Middle East and fuel prices already rising, harvesters are trying to be prepared for anything. While fuel is the main concern, rates are holding steady. Most harvesters raised their rates within the last two years to cover the fuel price spike of 2000, but aren't planning significant increases again.
“Two years ago we had a pretty hefty increase and we've maintained our rates since then,” says Kraus. “The only changes we'll have are if we make equipment changes. If we upgrade certain pieces, then we might have an increase to reflect that.”
Ellis cites increasing insurance rates, significant increases in equipment part costs and the effort to raise California's minimum wage to $10/hour as other concerns. “These are the things that just knock you on your ear when you're trying to stay within a budget or protect your costs.”