Fuel Costs Drive 2008 Custom Rates Higher

Higher-than-expected fuel prices this year are affecting farmers' costs for tillage and all-field operations.

Each year, Iowa State University economists William Edwards and Darnell Smith conduct a survey to get a reading on farm custom rates, a handle on how much people are paying and how much they are charging for custom work. The latest results are published as an ISU Extension bulletin titled "2008 Iowa Farm Custom Rate Survey."

In the 2008 survey, higher fuel costs are very definitely showing up. "This is the third year in a row we've had major price increases in diesel fuel during the winter," says Edwards.

"We just finished the 2008 survey a few weeks ago," he adds. "On average if you look across the board, custom rates are up about 10% this year compared to last year; some operations are up more and some are up less. The heavy tillage operations tend to be up a little more because they are heavy fuel users. On the other hand, things like planting and harvesting, although they do use a lot of fuel, the higher percentage of the cost of those operations is tied up in the purchase cost of the machine itself. So those operations aren't up quite as much."

Machinery prices also keep increasing

Fuel isn't the only reason custom rates keep climbing. Machinery prices have been going up for a number of years as well, notes Edwards. That adds to the cost of custom rates, too.

Statewide, the price of gasoline and diesel fuel are up considerably from last year. But the price of diesel fuel is much higher than gasoline. "That's an interesting thing that has occurred," says Edwards. "It hasn't always been that way. It used to be that diesel fuel was priced cheaper than gasoline per gallon."

When Edwards and Smith mailed out their questions for the survey, they assumed diesel fuel would average $2.75 per gallon at the farm for 2008. But as soon as they sent the survey out, fuel prices started going up and have kept going up so far in 2008. So that $2.75 per gallon for diesel fuel isn't an accurate number now since diesel prices have risen, notes Edwards.

Who do the ISU economists send the survey questions to? "We contact farmers who hire farm work done, and we also contact the custom operators themselves and also professional farm managers," says Edwards. "We have a list and if anyone is interested in being added to our list to participate in the survey, I'd appreciate them contacting me."

Farmers and custom operators surveyed

About 17% of the people responding this year said they hire at least some of their work done by custom operators while 34% of the respondents said they did custom work for others. Surprisingly, the remaining 49% of the respondents did both: they hire some done and do some custom work for other folks as well. "I think we have a fairly balanced survey," he says.

There are 134 different kinds of custom work operations in this year's survey. "The survey gets a little longer every year, as people always have something else they tell us they want to add to the survey," says Edwards. "In contrast, our very first custom rate survey was conducted in 1974, and we only had 38 different kinds of custom work on that survey."

Thus, the survey has increased by almost 100 different types of custom work since it was started in 1974. "Some of those types of work that are reported in the survey are not strictly custom rate operations," explains Edwards. "They are services some folks provide on the farm. For example, we survey and report the rates that are being charged for renting machinery, and they vary from farmer to farmer, for short-term rental."

2008 results are available for you to use

What's new in the 2008 survey? "We added a category called 'complete harvesting' which basically includes combining corn or soybeans, and also having a grain cart to take the crop away from the combine and hauling the crop into farm storage," says Edwards. "So we're probably talking about three people at least and a combine, grain cart, trucks or wagons."


This 'complete harvesting' is a custom rate that ISU hasn't had in the survey before. "But more of this type of service is being offered in Iowa now so we felt a need to put a question about it in our 2008 survey," he explains. "We had 40 or 50 responses to that question by the people who filled out our survey, so 'complete harvesting' is evidently fairly common."

Another survey question Edwards and Smith asked about was the service of managing stored grain. In other words, grain stored over the wintertime, on farm. What would you pay someone to check that grain and manage it through the wintertime? "We now have that and a lot more information in our survey results," notes Edwards.

To get a copy of the 2008 Iowa Custom Rate Survey, you have some options. It's available at ISU Extension county offices as publication FM-1689 or from the ISU Publications Store at 515-294-5247 or [email protected] or as information file A3-10 on the Ag Decision Maker Web site www.extension.iastate.edu/agdm/. If you would like to be included in ISU's future custom rate surveys, contact William Edwards at [email protected].

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