Farm Custom Rates Increase for 2019
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, as well as with children that decide to start farming with their parents. In addition, some land investors are choosing to operate a farm themselves rather than cash renting the land another farm operator, thus hiring a farm operator under a custom farming agreement.
Some farm operators also hire specific farm operations through a custom arrangement with another farm operator, such as combining, grain hauling, or hay baling. Many farm operators negotiate these types of custom rate and custom farming arrangements in the Spring of the year, while others wait until harvest is completed.
Even though fuel prices were fairly stable in the past year, higher labor costs, together with custom operators trying to more fully cover their expenses for custom operations, has resulted in slightly higher anticipated average custom rates for 2019. Overall, average custom rates for tillage, planting, and harvest operations in 2019 are expected to increase by slightly over 7 percent, compared to the rates for similar operations in 2018. The custom farming rates for corn and soybean production are also expected to increase by about 9 percent in 2019 from a year earlier. The cost for new and used machinery increased slightly 2018, which is another factor in the higher anticipated custom rates for 2019.
These results are based on the annual “Iowa Farm Custom Rate Survey” that is coordinated and analyzed by Iowa State University. The survey sampled 532 custom operators and farm managers on what they expected 2019 custom farm rates to be for various farm operations. There were 121 useable surveys returned. The survey summary lists the average custom rate, as well as a range, for various tillage, planting, fertilizer and chemical application, grain harvesting, and forage harvesting functions on the farm. The survey also includes many miscellaneous farming practices, average per hour farm labor rates, some machinery rental rates, including a formula for calculating rental rates. The survey lists the average custom farming rates for corn, soybeans, and small grain. The average custom rates for farm operations in Southern and Western Minnesota, as well as most other areas of the Upper Midwest, tend to be very close to the average Iowa custom rates.
Average 2019 farm custom rates for some typical tillage, planting, and harvesting practices, as well as custom farming rates, are listed in the adjoining Table. The complete 2019 “Iowa Farm Custom Rate Survey” for all farming practices is available on-line at the following Iowa State University web site: https://www.extension.iastate.edu/agdm/crops/html/a3-10.html
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 $2.94 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.