We had a recent query from a contractor regarding the costing of the individual components within a silage harvesting outfit. This came about because the contractor was hiring in at least one component of the harvesting team, namely the loader.

In other situations where the loader is owned by the contractor, it is still a significant cost in the overall silage-making operation.

The cost of the loader needs to be teased out in establishing the overall costs of the silage-making operation and to identify which costs need greatest attention.

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To help establish the role and costs to allocate to the loader, I’ve spoken with a number of silage contractors in recent weeks.

They all identified that the loader is a significant cost in the overall operation, both in terms of buying price and running cost, particularly diesel.

The challenge was to identify how much of the €100 per acre of the silage contractor charge could be allocated to the loader in the silage-harvesting outfit.

This seems to be close to the upper limit that contractors are charging for silage harvesting, so each of the system’s components must be costed within this charge level.

There are a number of ways to try to establish the loader cost. Some are more clinical than others, while you need to establish a cost that’s realistic for the contractor fleet.

The typical loader charges we had quoted earlier this year in our contractor charges table were from €40 to €50 per hour. This was based on a range of work, much of which will be dominated by work on the silage pit.

Contractors have estimated that silage pit work accounts for 90% of the work of loaders in their fleets.

There will be some additional work, perhaps loading farmyard manure and some other yard work, but this is not significant in terms of the annual loader workload.

Many contractors will agree that the actual seasonal silage harvesting capacity is in the region of 6ac/hour, so that the loader will be handling the output of close to 6ac of grass per hour.

Spot harvesting rates will often be higher, but they do not reflect the actual overall seasonal harvesting rate.

Put against the loader charge of €50 per hour, in simple terms this equates to a loader charge of €8.30/ac, irrespective of the size of the loader and including fuel and driver costs. In practice, the loader performance will be dictated by the speed of the harvester and the transport team.

But it’s not as simple as that. The loader operator will often have additional time to allocate to the job, especially helping to tidy up around the pit and helping with covering the silage.

These jobs may add an extra hour or more to the silage contracting operation for the loader operator.

That extra work and time needs to be taken into consideration in establishing the rate of charge for the loader.

Given that the contractor may cut between 1,500ac and 2,000ac of grass per season, that rate per hour gives a loader income from the system of between €12,450 and €16,600 per season.

This income allocation will not fund the ownership of a modern, high-capacity silage loader.

In the past, there was a simple rule of thumb when it came to establishing charge-out rates for machines on a per-hour basis. This was the equivalent of €0.50 per €1,000 invested in the machine per hour.

Put that figure against the silage loader with a list price of €150,000 and the ownership cost per hour comes to €75 per hour. At 6ac/hour, that equates to €12.50/ac allocated to the loader.

In today’s world of higher machinery and fuel costs and higher depreciation, the figure of €0.50 per €1,000 invested in the machine on a per-hour basis looks tight.

The fact that a machine such as a silage pit loader has a relatively short work season means that a rule of thumb charge of €1 per €1,000 invested in the machine on a per-hour basis is now more appropriate.

This would mean a loader cost of €150 per hour or €25/ac of silage cut.

So how does this plug into the overall silage machinery costs? Fuel continues to be a major silage machinery cost and the heavier the crop of grass, the heavier the diesel bill.

One contractor confirmed that his silage team used almost 46,500 litres of diesel on 2,050ac of this year’s first-cut silage. That equates to almost 23litres/ac.

At €0.86/ litre, that’s a cost of €20/ac for diesel for silage harvesting with a modern well-maintained fleet of machinery, including a new loader on the silage pit.

The loader fuel tank capacity will typically be between 225 and 300 litres.

It is not unusual to have to top that up before the day is out when silage harvesting with a self-propelled machine picking the grass up.

That can mean a loader fuel cost alone of between €5/ac and €6/ac or €7,500 on a 1,500ac harvest at the lowest cost.

This leaves just €15/ac for labour, depreciation and finance costs.

Overall harvesting costs

Looking at the overall costs of the self-propelled silage harvesting outfit, you can see where the loader costs fit in. The exercise has proved interesting.

The harvester cost is in the region of €45/ac. This is based on experience of hiring in other contractors, in cases of a breakdown emergency.

The same rules of thumb relate to the cost of the harvester on its own and these are also worth examining.

A cost of €1 per €1,000 invested in the harvester per hour needs to be allocated because of the high depreciation rates and fuel consumption of self-propelled harvesters. For a self-propelled silage harvester alone costing €250,000, this equates to €250/hour.

Break this down further and you see where the machine has an overall seasonal working capacity of 6ac/hour, then the cost of the harvester on a per-acre basis is about €40/ac.

As you increase the output of the harvester, the cost of the machine on the basis of the rate per acre will drop.

Using these figures, and depending on the cost of the tractors and trailers used, a team of three trailers will cost between €20/ac and €30/ac of silage harvested.

Add the mowing operation at the quoted rates of €20/ac and the overall costs run to between about €100/ac and €125/ac of silage harvested.

The range is shown because it depends on the level of machinery investment.

If the machines are newer, then the repayment costs will be higher, while the running costs such as fuel can be lower.

With good work organisation, there will be an opportunity to increase output per hour and lower the costs per acre.

While older machines will typically have lower ownership costs, due to lower depreciation, the repair costs may be higher.

This may impact on the seasonal costs and output. It may convert into higher costs per acre of silage harvested.

Many contractors continue to hire in components of the silage harvesting team to make up a complete outfit. This can make good sense and allow for more manageable overall silage harvesting operating costs.

It is important to establish the individual costs of the system in order to give a fair return on the investment for some of the system components, such as the mower or the loader, which may be owned separately from the harvester and trailers.

Within this, it is important to select machines that have lower fuel costs and lower depreciation, two of the major running costs in a modern silage pit loader.

Contractor case study

The contractor that we spoke to needed to establish a fair price for the loader owner on a per-acre basis as he, the contractor, was being paid on a per-acre basis by his farmer customers.

Given that the contractor was offering the loader operator in excess of 1,500ac of silage work, there was a bit of room for negotiation based on these suggested rates. This is because, compared with when working the machine from job to job with more travel time for the loader owner, the silage contractor was offering a good block of work over a season with a guarantee of payment.

There is always a compromise between the ownership costs and the value of a good loader operator to the silage harvesting outfit.

Where the machine and operator are hired in, there must be due consideration for the loader operator’s skill and willingness to be a team player in a very time-demanding operation.

While a modest discount would be fair given the length of the seasonal work, it is important to remember that loader ownership and operation are expensive.

Even if the annual hourly use rates are low at not more than 500 hours per season, the hourly returns need to add up to fund the repayments and running costs.