Custom farming rates continue to rise as costs of fuel and farm machinery continue to go up, a University of Nebraska-Lincoln agricultural economist said.

Farmers who hire other people to do field work can expect to pay 15 percent more for tillage operations and 13.5 percent more for planting operations than in 2004, said Doug Jose, UNL farm management specialist who conducts the biennial survey of custom rates. The 2006 survey results will be published later this spring.

"These guidelines will help those doing custom work come up with some custom rates, while it will prepare farmers to expect to pay more," Jose said. In 2004, the last time the survey was released, rates overall increased 10 percent. Then, as now, higher fuel costs were to blame. Power costs, which do not include fuel, but rather the ownership and operating costs for the tractor, increased 8.8 percent in the last two years.

Fuel costs went up 46.2 percent in the last two years.

Other costs that increased during this period, based on the Indexes of Prices Paid by Farmers published by the National Agricultural Statistics Service, include:

  • repairs, 8.1 percent

  • depreciation, 8.8 percent

  • overhead, which includes interest, insurance and housing, 14.4 percent, and

  • labor, 10.1 percent.

  • To translate how these increases in the cost of machinery operations affect custom tillage and planing operations, Jose calculated the percentage of total costs represented by each of the cost categories.

    For example, for tillage operations, which include disking, chisel plowing and moldboard plowing, power costs represent an average of 33 percent of the total cost of tillage operations. He then combined these percentages with the cost increases from NASS to calculate a weighted average increase.

    To apply these percentages, multiply the rate charged in 2004 by these percentages to calculate an equivalent 2006 rate. For example, if the rate charged for a tillage operation in 2004 was $9 per acre, the equivalent rate for 2006, based on the cost increases, would be $9 x 1.15 or $10.35 per acre.

    More information about this analysis is here on the UNL Agricultural Economics Department Web page.

    SOURCE: IANR News Service (University of Nebraska Institute of Agriculture and Natural Resources).