Finalizing custom rates for 2014

Finalizing custom rates for 2014

Many farm operators provide some type of custom work to other farmers during the growing season, and payment is usually made following the completion of the harvest season. Sometimes, it can be difficult to arrive a fair custom rate is for the various farming practices. Iowa State University releases the annual Iowa Farm Custom Rate Survey each year in February, which is based on a survey of custom operators, farm managers, and ag lenders on what they expect custom farm rates to be for various farm operations to be for the coming year. This is probably the most widely used and updated custom rate information that is available in the Upper Midwest.

The 2014 Iowa Custom Rate Survey (pdf) includes farm custom rates for typical tillage, planting, and harvesting practices, as well as custom farming rates. All listed custom rates in the Iowa Survey results include fuel and labor, unless listed as rental rates or otherwise specified. These average rates are only meant to be a guide for custom rates, as actual custom rates charged may vary depending on increases in fuel costs, availability of custom operators, timeliness, field size, etc.

The University of Minnesota releases Machinery Cost Estimates (pdf), which was last updated in June 2014. This summary looks at use-related (operating) cost of farm machinery, as well as overhead (ownership) costs. The use-related expenses include fuel, repairs and maintenance, labor, and depreciation. Overhead costs include interest, insurance, and housing, which are calculated based on pre-set formulas.

An analysis of some of the more common custom rates in the 2014 Iowa Custom Rate Survey showed that the listed “average” custom rates for some farming practices may be a bit low, given the higher ownership costs of larger farm machinery, higher fuel expenses that have existed in 2014, and the difficult field conditions that existed in some areas. The analysis also found that some of the harvesting costs for combining, as well as for the use of a grain cart and grain hauling, were somewhat undervalued in the Iowa survey. Based on this cost analysis, most of the 2014 farm custom rates for harvesting, Fall tillage, and custom farming should probably be in the upper half of the range in custom rates listed in the Iowa survey, in order to reflect the “true” costs of operation. 

TAGS: Soybeans
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