November 27, 2017
FINALIZING FARM MACHINERY PAYMENTS FOR 2017
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 certain 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 2017 Iowa Custom Rate Survey includes farm custom rates for typical tillage, planting, and harvesting practices, as well as custom farming rates. It also includes average custom rates for less typical practices and services performed on the farm. 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 2017 Iowa Farm Custom Rate Survey is available on the following web site:
As a result of continued lower fuel prices during the past few years, as well as steady costs for labor, repairs, and machinery overhead costs, most average 2017 custom rates for farm work have remained steady, with only a few minor increases, compared to rates in 2016. Most custom rates for tillage, planting, and harvest operations in 2017 are listed at no increase, with only a few being slightly higher, than similar operations in 2016. The 2017 custom farming rates for corn and soybean production stayed fairly steady, compared to a year earlier. The cost for new and used machinery in 2016 and 2017 has remained mainly stable, with slight declines reported for some used machinery sales.
The 2017 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 and long harvest season that existed in some areas in 2017. An analysis of farm custom rates from a couple of years ago 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 some of the custom rate surveys. Based on this cost analysis, the 2017 farm custom rates in some areas for harvesting, Fall tillage, and custom farming should probably be a bit higher than the “average” custom rates listed in the Iowa survey, 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 May, 2017. 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 have completed the 2017 harvest season, 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 2017 was harvested and placed into grain bins at a variety of outside temperatures, some grain at fairly warm temperatures, and other grain at quite cool temperatures. This grain temperature difference, along with fluctuations in recent outside temperatures, can result in wide temperature variations in the final grain temperature in grain bins. This can lead to moisture migration in the bin, which could potentially result in significant grain spoilage, if not properly addressed. Farm operators should run aeration fans periodically to equalize the grain bin temperatures, which will help prevent this situation from occurring. It is also 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 that is 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)