Iowa farm custom rates are up slightly for 2015

Iowa farm custom rates are up slightly for 2015

Rates for custom machine work and services show a steady increase again, according to ISU survey.

Many Iowa farmers hire custom machine work done in their farm business or perform custom work for others. Others rent machinery or perform other services. Each year, Iowa State University Extension surveys farmers, farm managers and others in Iowa to see what the going rate is for various types of custom work. The results are released in late February or early March. The 2015 survey results were released February 26.

HELPFUL GUIDE: The annual Iowa Farm Custom Rate Survey is conducted by Iowa State University Extension economists. Results are used as a guide by farmers to help compare and figure a fair price to pay or to charge for custom work.

Rates for custom machine work and services are showing a steady increase again for 2015, according to the 2015 Iowa Farm Custom Rate Survey. The service categories that were surveyed include information on tillage, planting, spraying, harvesting and hauling grain and forages. Also included are values for miscellaneous services, and machinery and grain storage rental.

Alejandro Plastina, economist with Iowa State University Extension and Outreach, says the expected farm custom rates for 2015, as reported in the survey, increased on average 1.2% from the 2014 survey results.

"In dollar terms, rates are 19 cents higher on average. However, 90% of the changes in custom rates range between a decline of $2.10 and an increase of $2.20 from their 2014 levels, averaging only a 1-cent increase," says Plastina.

Reported survey values are intended to be used only as a guide
Reported values in the survey results are averaged from all the received responses for each category. The range of the highest and lowest responses received is also reported. The values the survey participants report are what they expect to pay or charge in the coming year. These values are intended only as a guide to help both custom operators and people who hire custom work done arrive at a reasonable rate.

A total of 166 Iowa farmers, custom operators and farm managers replied to the 2015 survey. Twenty-five percent of them reported they perform custom work for others, 11% reported they hire custom work done and 64% indicated that they did both.

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There are many reasons why the rate charged in a particular situation should be above or below the average. These include 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 also will affect rates.

What is a fair price to charge or to pay for custom work?
ISU's Ag Decision Maker website offers a Decision Tool to help custom operators and other farmers estimate their own costs for specific machinery operations. The Machinery Cost Calculator, File A3-29 can be found under Crops, then Machinery in the Ag Decision Maker left-hand navigation bar.

The 2015 Iowa Farm Custom Rate Survey is available at your county extension office or online as publication FM-1698, from the Extension Online Store, or as Information File A3-10, Iowa Farm Custom Rate Survey, on the Ag Decision Maker site.

Rate reported is what is expected to be charged or paid in 2015
For each operation, the average rate and the range reported are shown in the survey report. The rates reported are what is expected to be charged or paid, and include tractor, implement, fuel and labor. In the 2015 survey, the average price for diesel fuel was assumed to be $2.94 per gallon. A fuel price increase of $0.50 per gallon will cause total machinery costs to increase by approximately 5%, says ISU's Plastina.

"Again, remember the rates we gather from our survey are intended to be used only as a guide," he adds. "Actual custom rates may vary according to availability of machinery in a given area, timeliness, operator skill, field size and shape, crop conditions, and the performance characteristics of the machine being used."

Rental rates for some machinery items are shown in the ISU publication 2015 Iowa Farm Custom Rate Survey, along with a worksheet for estimating rental rates for other items. All rates include fuel, repairs, depreciation, interest, labor and all other machinery costs for the tractor and implement.

For farm management information and analysis visit ISU's Ag Decision Maker site extension.iastate.edu/agdm.

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