Contractors set to hold charges at 2015 levels
Agri-contractors appear determined to hold their prices at 2015 levels even though plummeting oil prices in recent months have knocked one third off fuel bills.
The fall in tractor diesel prices to 50c/l has wiped €25/ha off fuel bills on cereal crops, according to Teagasc.
In heavy soils far from the yard, the fuel savings are almost double this level, said mechanisation specialist, Dermot Forristal.
"The average cereal farmer will use about 85 litres of diesel per hectare, but that excludes road-work," said Mr Forristal.
Despite the savings, contractors are adamant that they should not drop their prices.
"Rates aren't going to go down, because they never went up," said Farm Contractors of Ireland general secretary, Peter Farrelly.
"Every second operator I talk to is fed up, and plenty have gone to the wall over the last number of years because they were losing money."
He added that large dairy farmers were a particular problem for contractors looking to get paid at the moment.
"The drystock men and the 50-60 cow dairy farmer are all paying their bills, but the bigger lads are under pressure," he said.
When diesel was costing 77c/l, contractors estimate that it was costing them €38/ac in diesel to keep a silage outfit with four trailers moving.
The subsequent 30pc drop in diesel prices would translate into a €13/ac saving.
While the Professional Agricultural Contractors (PAC) association admitted that some farmers would be able to negotiate a lower rate, it maintained most rates would stay the same.
"Those that put up their prices without any break-out of the fuel charges when diesel was expensive may well have leeway to drop their prices now," said PAC director, Tom Murphy.
"But not every contractor increased their rates, and others simply added a separate fuel surcharge when prices were high to help the farmer see where the increase in costs was.
"The other option for farmers is to supply the contractor with diesel out of the yard. The contractor arrives with a full tank of diesel, and leaves with a full tank, but anything used in between is supplied by the farmer."
Mr Murphy claimed that the contracting business in Ireland was not sustainable, and that proof of this was the absence of successors following their fathers into the business.
"Contractors haven't been charging economic rates for years. Instead, they've been cross-subsidising their business with farming or off-farm work in construction.
"There's also a problem with unprofessional contractors not being fully insured for the work that they are carrying out, or paying the correct PRSI," he said.
Instead, PAC want to introduce more fixed price contracts, where farmers and contractors agree to a fixed price arrangement for up to two years for a pre-determined range of jobs.
"This is one of the ways we've been exploring with Teagasc to make contractors more professional and sustainable.
"Fixed price deals would give contractors the security to invest in kit, and variable fuel prices could be covered by an agreed fuel surcharge that would reflect the changing cost," he said.
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