December 10, 2018
FINALIZING FARM MACHINERY PAYMENTS FOR 2018
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 2018 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 2018 Iowa Farm Custom Rate Survey is available on the following web site: https://www.extension.iastate.edu/agdm/crops/html/a3-10.html
Even though fuel prices increased somewhat in the past year, the availability of more farm operators being available for custom work services, has resulted in average 2018 custom rates for farm work remaining close to steady compared to 2017 rates. Most custom rates for tillage, planting, and harvest operations in 2018 are listed at no increase or down slightly, compared to the rates for similar operations in 2017. The 2018 custom farming rates for corn and soybean production declined slightly from a year earlier. In addition to the higher fuel costs, labor expenses also increased slightly compared to 2017 levels. The cost for new and used machinery has also remained fairly stable in 2018, thus helping keep most custom rates at a fairly even pace.
The 2018 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 increasing ownership costs of larger farm machinery, and the difficult field conditions and long harvest season that existed in some areas in 2018. 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 2018 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, 2018. 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
Most corn and soybean producers across the Midwest have completed the 2018 harvest season, and now need to pay close attention to grain that is stored in on-farm grain bins for potential storage problems. Due to low local corn and soybean prices, a much higher level of corn and soybeans in the Upper Midwest are likely being stored following harvest in 2018. It is likely that most of the crop was 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. There have already been reports of grain going out of condition in some areas.
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. This type of loss would only add to the financial difficulties that many farm operations are facing as we head into 2019.
Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — firstname.lastname@example.org)