Many Iowa farmers hire some custom work in their farming business, or they perform custom work for other people. Other farmers rent machinery or do other services. Each year Iowa State University Extension surveys farmers, custom operators and farm managers to find out what the typical custom rate charges are for different machinery operations in Iowa.
Results of the 2011 survey were recently compiled. Overall, most rates are up about 3% to 5% from last year, says William Edwards, the ISU Extension economist who conducts the survey with the help of ISU Extension specialist Ann Johanns. This is the first year the average custom rate for combining corn has exceeded $30 per acre, says Edwards.
The results of this year's survey are available as an ISU Extension publication, "2011 Iowa Farm Custom Rate Survey," FM 1698 revised. To view the publication or print a copy, go to www.extension.iastate.edu/agdm, which is ISU's Ag Decision Maker website. Look under "Crops and machinery" and click on "Iowa Farm Custom Rate Survey, A3-10." This year the information is based on responses from 179 Iowa farmers, custom operators and farm managers. Of the respondents, 22% perform custom work, 14% hire work done and 64% indicated they are doing both; hiring custom work and doing work for others.
There are a number of reasons why custom rate charges vary
For each operation, the average rate from the survey and the range are shown in the tables in the ISU publication. The rates include all machinery costs, such as ownership costs including depreciation and interest and repair costs, fuel costs and labor. "Some people charge a custom rate that does not include fuel," says Edwards. "In that case, the rates in the survey need to be adjusted downward to reflect the fact that the person hiring the operation provides their own fuel."
This custom rate schedule is intended to be used only as a guide. "Actual custom rates charged or paid in your area may vary from what is reported in this survey," he notes. "Custom rates do vary according to availability of machinery in the area, timeliness, operator skill, field size and shape, crop conditions and performance characteristics of the machine being used."
The average price for diesel fuel was assumed to be $2.75 per gallon in the 2011 survey. A fuel price increase of 50 cents per gallon will cause total machinery costs to increase approximately 5%, says Edwards.
Rental rates for farm machinery are also reported in this survey
In addition to custom rates, ISU also reports rental rates for various types of farm machinery. A rental rate would cover only the ownership costs and repairs for a particular machine, says Edwards.
The publication has a section that shows how to estimate a machinery rental rate, how to do the calculations. For example, say you want to rent a tandem disk. You start with the custom charge (includes labor, fuel and tractor) which is $11.80 per acre on the average, according to the survey.
The percent of the custom charge which is for interest, insurance, depreciation and repairs (excluding fuel and labor) is 70%. You would use 70% for tillage machines, 80% for planting and harvesting. Multiplying 70% x $11.80 equals $8.26 per acre. That's the rental value of the disk, including the tractor.
To calculate the rental value without the tractor, you take the horsepower times the dollar per horsepower-hour rental rate (.22 was average this year) divided by the number of acres covered per hour. For example, 150 HP x 22 cents (per horsepower-hour rental rate) divided by 15 acres disked per hour = $2.20. So the rental value of the implement is $8.26 minus $2.20 = $6.06 per acre.
Several new farming operations recently added to the survey
Several new field operations have been added to the survey the past few years. They include complete harvesting of corn and soybeans. That is, the custom operator provides not only the combine, but also a grain cart and trucking, as well as operators for each of those. "With this 'complete harvesting' category, we now have a single, per-acre charge for an entire harvesting operation," says Edwards.
Another new field operation that is being reported in the survey for the past few years is combining a corn crop with a stalk-chopper cornhead. This special header on the harvesting machine chops up cornstalks as they go through the header. Also, new this year is a category for land rolling. That ranges from $3 to $11 per acre with a $6.55 average. Other operations ISU added to the survey for the first time in 2011 are "tedding" of hay and filling silage bags.
Custom rate categories for some things you haven't thought of
"Our annual survey of custom operators and farmers reports charges for custom work," sums up Edwards. "Many farmers hire custom machinery work done on their farms or they do custom work for others. These custom rate survey results can also be used to set rental rates for machinery."
The ISU "2011 Iowa Farm Custom Rate Survey" has a number of categories, he adds. They include tillage, planting, spraying, fertilizer application, harvesting, drying, storing grain, harvesting forages, miscellaneous services, machine rental, bin rental, custom farming and farm labor wages for operating machinery.