ISU Extension and Outreach Survey Shows Decline in Custom Rates

Overall rates are expected to decrease by 5.6 percent in 2018

March 16, 2018, 9:05 am | Alejandro Plastina, Ann Johanns
AMES, Iowa – An overall decrease of 5.6 percent for custom work can be expected in 2018, according to results of a survey conducted by Iowa State University Extension and Outreach.

The 2018 Custom Rate Survey, which is available in the March issue of Ag Decision Maker or through the ISU Extension Store, was conducted by Alejandro Plastina, assistant professor and extension economist at Iowa State.
“Even with an increase in the price of diesel fuel assumed, the majority of operations reported a rate decline,” Plastina said. “This is in response to tight margins continuing for farm operations across the state.”
While the cost of labor rose by 4.6 percent from a year ago, all other categories saw declines. The cost for harvesting and hauling grain dropped 9.4 percent while preharvest operations, harvesting forages and bin and machinery rental fell by more than 4 percent.
The survey received input from 124 farmers, custom operators and farm managers to determine estimated pricing for custom work. Custom rates are provided for tillage, planting, drilling, seeding, fertilizer application, harvesting, drying and hauling grain, harvesting forages, complete custom farming, labor, and bin and machine rental.
“We appreciate the respondents to the survey, as the information available in the Custom Rate Survey is only possible due to their responses provided each year,” said Plastina.
The reported rates are expected to be charged or paid in 2018, including fuel and labor. The average price for diesel fuel was assumed to be $2.95 per gallon. The values presented in the survey are intended only as a guide.
There are many reasons that 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 (fuel, repairs, depreciation, interest) as well as the operator’s labor.
The Ag Decision Maker website offers a Decision Tool (download Excel file at www.extension.iastate.edu/agdm/crops/xls/a3-29machcostcalc.xlsx) to help custom operators and other farmers estimate their own costs for specific machinery operations.
Photo by Ann Johanns
 
 
About the Authors: 

Alejandro Plastina

Extension Economist/Assistant Professor in Economics
515-294-6160
plastina@iastate.edu

Ann Johanns

Department of Economics
641-732-5574
aholste@iastate.edu
Share |