Custom rates higher in 2019
Performing custom work can be an additional source of income for farm operators around the state. For others, custom work is a full-time career. When labor is available, and another party has equipment, renting equipment for a short- term is also a common practice. While only a small portion of Iowa farmland is completely custom farmed, many farm operations rent equipment or hire out one or two operations on their farm each year.
The 2019 Iowa Farm Custom Rate Survey canvassed 532 farmers, custom operators, and farm managers from the state, putting together a guide for pricing custom machine work. The survey questionnaire was mailed to 349 people by the U.S. Postal Service and 183 people via e-mail in February 2019.
A total of 121 usable responses, giving 3,716 custom rates were received from Iowa farmers, custom operators, and farm managers. Twenty percent of the respondents performed custom work, 10 percent hired work done, 47 percent indicated doing both, 2 percent indicated doing none, and 21 percent did not indicate whether they perform or hire custom work.
The publication, which can be found online at the ISU Extension Store (FM 1698) or on the Ag Decision Maker website (File A3-10), provides rates for custom work in the following categories: tillage, planting, drilling, seeding, fertilizer application, harvesting, drying and hauling grain, harvesting forages, complete custom farming, labor, and both bin and machine rental. All rates include fuel, repairs, depreciation, interest, labor, and all other machinery costs for the tractor and implement unless otherwise noted.
The average rate and range for each machine work function were compiled into the survey as usual, as well as the median charge and number of responses for each category. The average rate for a work function is calculated as the simple average of all responses for that work function. The median rate is the response that splits all the ordered responses within a work function (from smallest to largest) in half. A newly listed operation in 2019 is controlled burning of grass, CRP, or pasture per acre.
The survey found there was a 7 percent price increase across all surveyed categories. The change from 2018 to 2019 varied across categories, with complete harvesting and hauling for corn and soybeans increasing by 6 percent and hired labor going up by 7 percent. Table 1 shows historic rates for a sample of operations from the survey.
"Even with stable fuel prices and thin profit margins in crop production in the horizon, the majority of operations reported a rate increase." said Alejandro Plastina, assistant professor and extension economist with ISU Extension and Outreach. "I believe this is more indicative of part-time custom workers paying more attention to covering all costs and actually profiting from this activity than of a substantially higher demand for their services."
The reported rates are expected to be charged or paid in 2019, including fuel and labor. The average price for diesel fuel was assumed to be $2.94 per gallon. The values presented in the survey are intended only as a guide. There are many reasons why the rate charged in a particular situation should be above or below the average. These include the timeliness with which operations are performed, quality and special features of the machine, operator skill, size and shape of fields, number of acres contracted, and the condition of the crop for harvesting. The availability of custom operators in a given area will also affect rates. Any custom rate should cover the cost of operating the farm machinery as well as the operator’s labor.
The Ag Decision Maker website offers a Decision Tool, to help custom operators and other farmers estimate their own costs for specific machinery operations. If you are interested in joining the 2020 Custom Rate Survey mailing list, send your mail or e-mail address to: Alejandro Plastina, Iowa State University, Department of Economics, 478E Heady Hall, 518 Farm House Lane, Ames, IA 50011-1054; call 515-294-6160; or email email@example.com.
Alejandro Plastina, extension economist, 515-294-6160, firstname.lastname@example.org