LAKE CRYSTAL, Minn. — 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.
Custom farming agreements usually include tillage, planting, some weed control, harvesting, and delivering grain to a specified location. Some farm operators also hire custom work for specific farm operations with another farm operator, such as planting, combining, 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.
One of the best resources for average custom rates is the annual “Iowa Farm Custom Rate Survey” that is coordinated and analyzed by Iowa State University. Earlier this year, 559 custom operators and farm managers were sampled regarding expected 2022 custom farm rates to be for various farm operations. 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, and includes 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 most other areas of the Upper Midwest tend to be very close to the average Iowa custom rates.
The complete 2022 “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
Based on the Iowa State data, average custom rates for tillage, planting, and harvest operations in 2022 are expected to increase by about 7 percent, compared to the rates for similar operations in 2021, while 2022 custom rates for harvest operations are expected to increase by 3.4 percent. The custom farming rates for corn and soybean production are expected to increase by about 1.5 percent compared to a year earlier. The cost for new and used machinery increased rapidly in the past 12 months, which together with increasing fuel costs and higher labor charges, accounts for the increases in 2022 custom rates. It should be noted that many of these factors have continued to increase early in 2022, which may result in custom operators increasing their final custom rates even more by year-end to fully cover the increasing expenses for custom operations.
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 $3.33 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. and could be adjusted later in the year due to changes in economic factors.
— Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank