USDA outlook pessimistic for grain markets

By Kent Thiesse

High labor costs coupled with higher custom operator rates have resulted in slightly higher anticipated average custom rates for 2019. High machinery investment costs are also a factor, driving many farmers to pay others for use of machinery use rather than buying.

This is especially true with new and younger farm operators, as well as children who decide to start farming with their parents. Some investors now operate farms themselves rather than cash renting, thus hiring a farm operator under a custom farming agreement.

Some farm operators also hire specific farm operations through custom arrangements, such as combining, grain hauling or hay baling. Many farm operators negotiate these custom rates and custom farming arrangements in the spring; others wait until after harvest.

Even though fuel prices were fairly stable in the past year, higher labor costs—together with custom operators trying to more fully cover their expenses—has resulted in slightly higher anticipated average custom rates for 2019.

Average custom rates for tillage, planting, and harvest operations in 2019 are expected to increase by slightly over 7 percent compared to 2018. Custom farming rates for corn and soybeans are also expected to increase by about 9 percent. The cost for new and used machinery increased slightly 2018, which is another factor in the higher anticipated custom rates for 2019.

These results are based on the annual “Iowa Farm Custom Rate Survey” from Iowa State University. The survey sampled 532 custom operators and farm managers on what they expected 2019 custom farm rates to be for various farm operations. There were 121 useable surveys returned. 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, some machinery rental rates, including a formula for calculating rental rates. The survey lists the average custom farming rates for corn, soybeans and small grain.

Average 2019 farm custom rates for some typical tillage, planting, and harvesting practices, as well as custom

farming rates, are listed in the following table. The average custom rates for farm operations in southern and western Minnesota, as well as most other areas of the Upper Midwest, tend to be very close to the average Iowa custom rates.

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 $2.94 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.

Following are the median (adjusted average) custom rates for some common farming practices for 2019, based on the “Iowa Farm Custom Rate Survey”:

Custom Farming Rates:

(Includes tillage, planting and harvesting costs)

Corn ————   $132.25 per acre (Range = $80.00 – $225.00)  
Soybeans ——-  $121.20 per acre (Range = $75.00 – $210.25)
Small Grain —-  $118.35 per acre (Range = $100.00 – $140.00)

Tillage:

Moldboard Plow ———-   $20.20 per acre
Chisel Plow —————-   $18.35 per acre
Disk/Chisel —————-   $19.70 per acre
V-Ripper (deep tillage) —  $23.45 per acre
Field Cultivator ————  $16.00 per acre
Tandem Disk —————  $15.40 per acre
Chopping Cornstalks ——  $12.40 per acre

Planting and Spraying:

Planter With Attachments ——-  $21.80 per acre (Extra charges for GPS, seed shutoffs, etc.)
Planter Without Attachments —  $20.40 per acre
No-Till Planter ——————–  $22.90 per acre
Soybean Drill ———————   $19.10 per acre
Grain Drill ————————-  $18.35 per acre
Crop Spraying (broadcast) ——- $ 7.65 per acre (self-propelled sprayer)

Harvesting Grain:

Corn Combine ——————-  $35.95 per acre ($41.35 with Chopper Head)
                                                                                   ($54.10 per acre with Grain Cart & Truck)

Soybean Combine ————–   $35.10 per acre ($38.50 with Draper Head)
                                                                             ($51.55 per acre with Grain Cart & Truck)

Small Grain Combine ———-  $31.90 per acre
Corn Grain Cart (in Field) —–  $6.55 per acre
Soybean Grain Cart (in Field) –  $5.75 per acre
Hauling Grain (5 mi. or less) —  $0.10 per bushel
Hauling Grain (5-25 mi.) ——-  $0.16 per bushel
Grain Auger Use (On Farm) —  $0.06 per bushel

Harvesting Forages:

Windrowing Hay ———————-  $15.40 per acre
Hay Baling (Small Square Bales) —  $0.68 per bale
Hay Baling (Large Square Bales) —  $10.95 per bale
Hay Baling (Large Round Bales) —  $12.35 per bale ($13.05 per bale with wrap)
Corn Stalk Baling (Large Bales) —-  $12.35 per bale ($13.60 per bale with wrap)
Haylage Chopping ——————— $ 8.40 per ton
Silage Chopping ———————–  $ 6.75 per ton

For additional information email Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal at kent.thiesse@minnstarbank.com.  
 
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