December 5, 2016
FINALIZING FARM MACHINERY PAYMENTS FOR 2016
Many farm operators provide some type of custom work or use of farm machinery to other farmers during the growing season, and payment is usually made following the completion of the harvest season. Sometimes, it can be difficult to arrive a fair custom rate is for the various farming practices, or for the use of various pieces of machinery. Iowa State University releases the annual “Iowa Farm Custom Rate Survey” each year in February, which is based on a survey of custom operators, farm managers, and ag lenders on what they expect custom farm rates to be for various farm operations to be for the coming year. This is probably the most widely used and updated custom rate information that is available in the Upper Midwest.
The 2016 Iowa Custom Rate Survey includes farm custom rates for typical tillage, planting, and harvesting practices, as well as custom farming rates. All listed custom rates in the Iowa Survey results include fuel and labor, unless listed as rental rates or otherwise specified. These average rates are only meant to be a guide for custom rates, as actual custom rates charged may vary depending on increases in fuel costs, availability of custom operators, timeliness, field size, etc. The 2016 Iowa Farm Custom Rate Survey is available on the following web site:
As a result of the decline in fuel prices during the past couple of years, average 2016 custom rates for farm work have remained steady or declined slightly, compared to 2015 rates. Most custom rates for tillage, planting, and harvest operations in 2016 are listed at no increase to 2 percent below the rates for similar operations in 2015. The 2016 custom farming rates for corn and soybean production declined about 5 percent compared to a year earlier. In addition to the decline in fuel costs compared to 2015 levels, repair and labor expenses increased slightly from the previous year, thus keeping most custom rates at a steady pace. The cost for new and used machinery in 2016 has remained fairly stable, with slight declines reported for some used machinery sales later in 2016.
The 2016 Iowa Custom Rate Survey lists a range of custom rates being charged, in addition to the “average” custom rates for most farming practices. Some of the “average” custom rates listed, may be a bit low, given the high ownership costs of larger farm machinery, and the difficult field conditions that existed in some areas in 2016. The analysis also found that some of the harvesting costs for combining, as well as for the use of a grain cart and grain hauling, were somewhat undervalued in the Iowa survey. Based on this cost analysis, most of the 2016 farm custom rates for harvesting, Fall tillage, and custom farming should probably be a bit higher than the “average” custom rates listed in the Iowa survey in some areas, in order to reflect the “true” costs of operation.
The University of Minnesota periodically releases a publication titled : “Machinery Cost Estimates”, which was last updated in July, 2016. This summary looks at use-related (operating) cost of farm machinery, as well as overhead (ownership) costs. The use-related expenses include fuel, repairs and maintenance, labor, and depreciation. Overhead costs include interest, insurance, and housing, which are calculated based on pre-set formulas. This can serve as a good guide to help farm operators estimate their “true cost” of farm machinery ownership. The University of Minnesota Center for Farm Financial Management has this publication and some other very good resources available on the costs of farm machinery ownership available on their web site at : http://www.cffm.umn.edu/
CHECK GRAIN BINS
Many corn and soybean producers across the Midwest completed harvest by mid-November, and now need to pay close attention to grain that is stored in on-farm grain bins for potential storage problems. Much of the corn and soybeans in 2016 was harvested and placed into grain bins at fairly warm temperatures; however, outdoor temperatures have cooled considerably in the past few weeks. These fluctuations in outside temperature can cause wide temperature variations in grain bins to occur, resulting in moisture migration in the bin, and potential for grain spoilage. Farm operators should run aeration fans periodically to equalize the grain bin temperatures, which will help prevent this situation from occurring. It is very important to check grain bins on a regular basis for any potential storage issues, and to address those issues promptly. Otherwise, there can be considerable damage to grain in storage, resulting in a significant financial loss to the farm operator.
Note — For additional information contact Kent Thiesse, Farm Management Analyst and
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — firstname.lastname@example.org)