How to Adjust for Fuel Costs

Fuel expenses have become too big an input cost to ignore.

Published on: Jul 21, 2008

Whether you're hauling grain or livestock or doing custom work, everyone has to devise an acceptable way to cover rising fuel costs. Depending on the task, fuel plus lubrication costs can range from 15% to more than 30% of total costs, according to ag economists at University of Illinois and University of Minnesota.

Between January and August, diesel fuel prices rose an average of $1.46 a gallon (44%); gasoline climbed $1.11 (36%), according to the Energy Information Administration. So fuel expenses are too important to not adjust for.

"Today's customary practice is to negotiate the job rate without fuel," reports Bill Lazarus, machine cost guru at University of Minnesota. Then either the farmer provides the fuel, or the custom operator provides it and charges for its cost."

Lazarus also developed a comprehensive list of machine costs on tractors, combines and implements in March. It breaks out costs, labor and fuel, plus fuel use per acre for more than 110 machines. He plans to have it updated this month for fuel expenses. You'll find it on the Web at www.apec.umn.edu/faculty/wlazarus, under publications.

Calculate your own

Ohio State Extension Educator Gene McCluer, of Hardin County, Ohio, discovered a fuel cost estimator developed by Thomas Dorn, University of Nebraska Extension educator. With it, based on Lazarus' fuel use estimates, you can calculate current per hour and per acre fuel cost for operating farm equipment.
You'll find that fuel cost estimator in an Excel spreadsheet format at:
hardin.osu.edu/agriculture/ag-newsletters/fuelcostestimator-2008.xls.

With the spreadsheet, you can change the numbers in the fuel cost cells to your current or expected fuel price. You can also estimate how fuel costs may change in the future and project equipment fuel costs.