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Farm custom rates increasing in 2014

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Due to the high cost of investment in farm machinery, an ever-increasing number of farm operators are hiring other farm operators to provide some or all of their machinery resources for their farm operation. This is especially true with new and younger farm operators, and with children that decide to start farming with their parents. Also, some land investors are choosing to operate the farm themselves rather than cash renting the land another farm operator. In that case, the landowner is generally hiring a farm operator to provide necessary tillage, planting and harvesting crop operations under a custom farming agreement. Some farm operators also hire specific farm operations through a custom arrangement with another farm operator, such as combining or hay baling. Many farm operators negotiate these types of custom rate and custom farming arrangements in the Spring of the year.

As has been the trend in recent years, average 2014 custom rates for farm work are likely to show a small increase, compared to 2013 custom rates. Most custom rates for farm work in 2014 are listed at 4-7% above the rates for similar operations in 2013, with an average increase of about 5%. Fuel costs have remained fairly stable; however, increasing cost for new and used machinery, along with rising repair and labor expenses, are also factors in the higher custom rates.

These results are based on the annual Iowa Farm Custom Rate Survey (pdf) that is coordinated and analyzed by Iowa State University. The survey sampled 195 custom operators, farm managers and ag lenders on what they expected 2014 custom farm rates to be for various farm operations. The survey summary lists the average custom rate and the range for various tillage, planting, fertilizer and chemical application, grain harvesting and forage harvesting functions on the farm. The survey also includes many miscellaneous faming practices, lists average machine rental rates for some equipment, and includes a formula for estimating average machinery rental rates. The survey also lists average custom farming rates for corn, soybeans, and wheat. Over the years, the average custom rates for farm operations in Southern and Western Minnesota has been very close to the average Iowa custom rates.

All listed custom rates in the Iowa Survey results include fuel, labor, repairs, depreciation, insurance, and interest, unless listed as rental rates or otherwise specified. The average price for diesel fuel was assumed to be $3.25 per gallon. A fuel price increase of $.50 per gallon would cause most custom rates to increase by approximately five percent. These average rates are only meant to be a guide for custom rates, as actual custom rates charged may vary depending on continued increase in fuel costs, availability of custom operators, timeliness, field size, etc.

 

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