University of Illinois Extension, Farm Business Management, June 2017 (b). Total non-land costs are projected at $755 per acre for corn, a $124 increase over the $631 per acres cost in 2021 (see Table 1). These . The information below is based on 122 responses and 3,389 custom rates provided by Iowa farmers, custom operators, and farm managers. We provide machinery cost estimates which may be helpful in setting custom rates. 147 0 obj <>/Filter/FlateDecode/ID[<269ADE589DBEE54094DDE17E08AF1239><530EECDB0D779343B2147141D420F3BF>]/Index[122 43]/Info 121 0 R/Length 119/Prev 235468/Root 123 0 R/Size 165/Type/XRef/W[1 3 1]>>stream The list price increase will also increase costs but is countered by a decline in interest rates from 5.5% in 2019 to 4.5% in 2021. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine . If this level of detail is not available, it is common to use annual hours of use and machine age to estimate repair and maintenance costs. Rural Tax.org. Several factors may explain this divergence: Whether prices will come down to those indicated by typical supply/demand relationships is an open question that will play out over the next year. Moreover, stability in fertilizer, The decision between RP, crop revenue insurance, and RP-HPE, crop revenue insurance without the harvest price option (HPO) is discussed. A way for reducing these costs is outsourcing the equipment, thereby allowing the individual performing the operation to perform the operation over more acres, and thereby lower total costs. Using this information the total machinery per acre was $3.90. Custom work charges are determined by demand and supply and are negotiated between farmers and custom operators. The total machinery cost per acre ($3.90) for the case farm is under these custom rates, indicating that it is economical for the case farm to own a self-propelled sprayer. 2H8so:e`!g[ a A survey of agricultural custom operators is conducted in Nebraska every two years. There are many types of tillage operations, some of which perform overlapping tasks, while others are used for more specific purposes. Our YouTube channel includes farmdoc webinars and publication related videos. Historically, cost of production has been a focus, In policy, definitions matter. @ &7 For seven of the nine tillage operations compared, the economic cost of owning the machinery and performing the task is less than the average custom rate cost per acre, with all but one considerably lower than the average custom rate cost. Consider outsourcing certain field tillage passes. Still, overhead costs increased from $122.90 per acre to $126.10 per acre. Here, a look at cost estimates of field, forage and harvesting operations, plus per-hour tractor operating costs. This publication shows estimated costs for owning and operating forage machinery. These per acre return levels will result in above-average net incomes based on high corn and soybean prices. All rights reserved. These estimates are useful for determining custom rates and for analyzing machinery costs on farms. Fuel costs will vary with each operations fuel use. Follow thesesocial media channels for all thelatest ag commentary from Keith Good the Farm Policy News editor. However, profitability is expected if corn and soybean prices remain high. Results are included for all regions in Illinois. 1 Min Read. It is also important to check your report to become an informed consumer of information being used to make decisions about you. %%EOF Anhydrous ammonia at $16.50 per acre. 164 0 obj <>stream Thus, her professional and career focus is centered around educating agriculture producers and youth to aid in prospering the agriculture industry. Includes tractor overhead, implement overhead, fuel and lube, and labor: Split-row planter for soybeans at $12.50 per acre. Moreover, to fully obtain all cost saving from reduced tillage, the amount of equipment on a farm must be reduced. ceres imagaging lindsay irrigation partner. Understanding the difference in the intent of the two reports, and acknowledging some differences in general assumptions (for example, fuel rate of $2.50 versus $2.63 per gallon), explains the potential differences in rates reported from each source. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Schnitkey, G. Revenue and Costs for Illinois Grain Crops, Actual for 2015 through 2020, Projected for 2021 and 2022. Illinois Farm Management Handbook. Fuel. These price changes will influence the relative profitability of the two crops. Subscribe to receive top agriculture news, Be informed daily with these free e-newsletters. In addition to the costs outlined in table 3, the costs in table 4 include fuel, lubrication, and labor costs. The salvage value for the self-propelled sprayer is assumed to be 30 percent of the purchase price. Crop Insurance Decision Tool Spring 2023, Experience, Knowledge, & Collaboration: Why Good Managers Make an Effort to Improve, A Deeper Dive into the February 2023 CBO Baseline: Title I Commodities Programs, Trends in the Operational Efficiency of the U.S. Ethanol Industry: 2022 Update, Fertilizer Prices and Company Profits Going into Spring 2023, RP vs. RP-HPE Insurance Decision: Premium, Cash Flow, and Forward Contracting, The Russia-Ukraine War and Changes in Ukraine Corn and Wheat Supply: Impacts on Global Agricultural Markets, The FAO Food Price Index Drops in February, For the Eleventh Consecutive Month, Reuters: Ukraine Doesnt Plan to curb 2023/24 Wheat Exports, All Options Considered by U.S. Over Mexicos Corn Import Restrictions, AMIS: War in Ukraine, Black Sea Grain Deal- Uncertainty Continues to Hang Over Agricultural Markets, Crop Insurance Guarantee: $5.91 for Corn and $13.76 for Soybeans, Biden Administration Preparing Policy Shift on Rule to Boost Ethanol, Department of Agricultural and Consumer Economics. Salvage values for the tractor and implement were assumed to 30 percent of the purchase prices. As an alternative to the executable tool you candownload the spreadsheet here. Many farms may have tillage implements that have been on the farm for generations, are fully paid for and fully depreciated. Suffice it to say, there is considerable downside risk in the market, and lower prices will result in much lower revenues and returns. As shown in Table 2, a 15-foot chisel plow used on 630 acres has an economic cost of $14.50 per acre and a 21-foot chisel plow used on 882 acres has an economic cost of $16.00 per acre. This program calculates Agricultural Risk Coverage for County Coverage (ARC-CO), Price Loss Coverage (PLC) payments, and ARC at the Individual Level (ARC-IC). Historically, cost of, The Farm Service Agency (FSA) recently released all the information necessary to calculate 2021 commodity title payments. Fuel costs are based on a $2.25 per gallon price for diesel fuel. Number 8860726. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine, etc., and the labor for the operation. What impact would a recession have on farming? Here, we are talking about economic depreciation rather than tax depreciation. For vertical tillage and chisel plow, the economic cost is lower than the lowest custom rate reported. Learn more. May 25, 2019. The University of Illinois farmdoc machinery costs estimates are intended to represent costs associated with buying new machinery and owning the machinery for ten years (links provided in farmdoc daily, August 6, 2019). Includes tractor overhead, implement overhead, fuel and lube, and labor: Depending on your situation, you may want to consider the following spraying and ammonia application total costs from 2019: Fuel costs are based on $2.50 per gallon for diesel fuel. Unlike the farmdoc machinery cost estimates which represent actual economic cost of performing the field operation, the custom rate survey reports actual rates expected to be charged or paid in 2020. endstream endobj startxref All regions have about equal corn and soybean returns (see the corn-minus-soybean returns in Table 2). At this point, those historical relationships suggest much lower prices than are being offered by CME futures contracts. It would be more cost effective to outsource the task than owning an implement of that size for 735 acres. About the report. Ohio Custom Rates. HARVESTING September 2021 This publication shows estimated costs for combining, using grain carts, and hauling grain. A farmer evaluating costs and returns may consider whether to own specialized equipment for a tillage operation versus outsourcing the task. This Current Report summarizes data collected from Oklahoma farmers, ranchers and custom operators during the fall of 2021. Also includesgeneral updateson farmdoc publications and events. Represents the rate obtained from surveys of actual farm data surveys for 2014 & 2015 from Universities listed below to do this type of . Survey respondents include both providers and users of custom services, and data reflect the prices paid for typical farm and ranch custom operations. Similarly, soybean non-land costs are projected at $476 per acre, a $101 per acre increase over the 2021 level. Interest represents the opportunity cost associated with using scarce funds to purchase a machine. Post Application Coverage Endorsement Tool (Sheet), Balance Sheet & Historical Financial Statements, Briomass Crop Budget Tool Miscanthus & Switchgrass, Illinois Soil Productivity & Yield Utilities, Farmland LEasing Facts Sheets & Pricing Information, Swanson, K., G. Schnitkey, N. Paulson, C. Zulauf and J. Coppess. First, a case farm in north central Indiana with 3000 acre of corn and soybeans was assumed. According to Lattz and Schnitkey (2017b), a self-propelled sprayer can cover 80.6 acres per hour. We provide machinery cost estimates which may be helpful in setting custom rates. ", Revenue and Costs for Illinois Grain Crop, Revenue and Costs for Illinois Grain Crops, Revenue and Costs for Illinois Grain Crops, Actual for 2015 through 2020, Projected for 2021 and 2022, Management Decisions Relative to High Nitrogen Fertilizer Prices, Net Change in CRP Acres, 2020-2021 Program Year, Department of Agricultural and Consumer Economics, Department of Agricultural, Environmental and Development Economics, Overall increases in production and land costs, and. Consider reducing tillage operations. Still, we are projecting positive returns for 2022, given relatively high corn and soybean prices. Interest should be included in ownership costs regardless of whether debt is incurred when purchasing a machine. Or in your area, the person who owned the hay may still have expected half the hay plus up to $1 per bale for your half. For a detailed statement, please see the University of Illinois Copyright Information and Policies here. Table 1 shows estimated costs of performing agricultural field operations. To compute economic depreciation, information pertaining to economic useful life, list price, and salvage value are needed. 2017 Indiana Farm Custom Rates." Purdue University, Center for Commercial Agriculture, May 2017. Machinery costs would have been higher had not interest rates been reduced from 2019 to 2021. Another consideration is owning tillage implements that are sized appropriately for acres of expected use rather than total farm acres. Fortunately, ag economists at the University of Illinois keep up on all those numbers, and have an entire listing of costs for various field operations located on their Farmdoc website. If the difference in expected returns for the two crops widens planting decisions may be affected. Report ID: . Table gives results for corn, soybeans, wheat,. Results from several studies suggest that expected yields are maintained with a relatively low number of passes. Farm Progress Show annually hosts more than 600 exhibitors displaying new farm equipment, tractors, combines and farm implements; seed and crop protection products; and many additional farm supplies and services. County yields and market year average (MYA) prices are brought in for a user-specified state-county-crop combination. An active member of organizations such as 4-H, FFA and the National Junior Angus Association, she was able to show Angus cattle on the local, state and national levels while participating in contests and leadership opportunities that were presented through these programs. Michigan State University Extension June 2019. Corn prices have been increased from $5.30 per bushel in August, In 2021, the total noncapital living expenses of 1,213 farm families enrolled in the Illinois Farm Business Farm Management Association (FBFM) averaged $85,828or about $7,200 a month for each family, In the August version of the 2023 Illinois Crop Budgets, wheat plus double-crop soybean is projected to be much more profitable than stand-alone corn and stand-alone soybeans in southern Illinois., Illinois crop budgets for 2022 have been revised from their December release (farmdoc daily, December 7, 2021). Copyright 2023. CUSTOM FARMING: Looking at arranging custom farming on your operation? It is an annual summary of such records obtained from farmers cooperating with University of Illinois Extension, the Department of Agricultural and Consumer Economics, and the Illinois Farm Business Farm Management (FBFM) Association. FIRM Team Fact Sheet Number . If annual hours of use or the useful life were lower, the cost rates for interest, insurance and housing, and repairs would be higher. In situations, where a farmer determines it is cost effective to perform a tillage operation, the next step in a cost management approach is to determine whether it is more cost effective to own and operate the tillage implement or to outsource the operation. The alternative farmdoc forecast and USDA forecast are heavily based on historical supply/demand conditions. Some farms may have other factors to consider, such as requirements of land or business owners, and the ability to outsource, and timeliness of completing the task. The total machinery cost per acre ($9.58 per acre) for the case farm is under these custom rates, indicating that it is economical for the case farm to own a field cultivator. Operating costs include repairs and maintenance, fuel, lubrication, and labor. Gary Schnitkey, Carl Zulauf, Krista Swanson, and Nick Paulson - Gary Schnitkey - Illinois crop budgets for 2022 have been revised from their initial release in July. Ohio Farm Custom Rates. As Day got older, she began to understand the importance of transitioning from a member to a mentor for other youth in the industry. Machinery costs are updated every two years, with the last update occurring in 2019. A total of 193 survey responses were received in 2022 with information reflecting the current rates charged by custom operators for machine hire services and other work they provide for neighboring farms and ranches or as part of a business enterprise that covers a broader area. "Machinery Cost Estimates: Field Operations." University of Illinois Extension, Farm Business Management, June 2017 . Fertilizer prices may decrease in the spring when many fertilizer purchases are made. Machinery Cost Estimates: Forage Field Operations. Illinois Farm Management Handbook, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, updated October 11, 2021. Per hour costs are divided into overhead, fuel, and labor categories. Often, tillage operations are an option for a farmer to consider, carefully weighing costs and potential benefits. Eliminating a tillage pass in a single year will reduce fuel, labor, and repair costs for the given year, but the ownership costs will remain. Guidelines are available here. Farm Progress is part of the Informa Markets Division of Informa PLC. Costs will be at all-time highs in 2022. Several options exist for reducing non-land costs, with this article focusing on tillage related costs. Schnitkey, G., N. Paulson, K. Swanson, C. Zulauf and J. Baltz. If the same chisel plow were used on only 735 acres (50% less acres), the cost would increase about 80% to $22.86 per acre (see Table 2). Significant changes from the initial release are increased corn prices, soybean prices, and non-land costs. Current fall bids for 2022 cash delivery were also considered and are close to projected prices. Crop Insurance Summary of Business Tool (Sheet), Post Application Coverage Endorsement Tool (Sheet), Balance Sheet & Historical Financial Statements, Post Application Coverage Endorsement Tool, Biomass Crop Budget Tool Miscanthus and Switchgrass, Illinois Soil Productivity and Yield Utilities, Illinois Crop Budgets and Historic Returns, A Straight-Forward Structure for a Variable Cash Rent, The Agriculture Improvement Act of 2018: Initial Review, The Price Loss Coverage (PLC) Option in the 2018 Farm Bill, The Agricultural Risk Coverage County Level (ARC-CO) Option in the 2018 Farm Bill, The Case for Looking at the ARC-IC (ARC-Individual) Program Option, ARC-IC in 2019: Release of a 2019 ARC-IC Payment Calculator, Gardner Program Payment Calculator (ARC/PLC), Benchmarking Crop Machinery Cost and Investment, Comparing Machinery Values on Illinois Grain Farms, Revenue and Costs for Illinois Grain Crops, 2021 Cost to Produce Corn and Soybeans in Illinois, When Creating 2023 Crop Budgets, Keep in Mind Family Living Costs, Projected Wheat Double-Crop Soybean Profitability in 2023, April Update to 2022 Crop Budgets: Projected Profits Even with Record Costs, 2020 Cost to Produce Corn and Soybeans in Illinois, Index Numbers of Illinois Farmland Values, Experience, Knowledge, & Collaboration: Why Good Managers Make an Effort to Improve, A Deeper Dive into the February 2023 CBO Baseline: Title I Commodities Programs, Trends in the Operational Efficiency of the U.S. Ethanol Industry: 2022 Update, Fertilizer Prices and Company Profits Going into Spring 2023, RP vs. RP-HPE Insurance Decision: Premium, Cash Flow, and Forward Contracting, The Russia-Ukraine War and Changes in Ukraine Corn and Wheat Supply: Impacts on Global Agricultural Markets, Fixed Cash Rent Lease Form Short Form PDF, Soil Health and Conservation Addendum PDF, October 31 is Notice Deadline for Many Farm Leases, Financial Characteritics of Illinois Farms, Credit Reports and Consumer Credit Scoring, Summary of Illinois Farm Business Records, Farm and Family Living Income and Expenses, 2023 and 2024 Effective Reference Prices and the Next Farm Bill, Mulling over Margin, Part 5: An Inherent Problem with Margin Protection Programs, Mulling over Margin, Part 4: Lessons from Canadas Whole-farm Margin Protection Program, PLC and ARC Payment: 2021 Payments and Outlook for 2022 and 2023, Mulling Over Margin, Part 3: Chasing the Cost of Production Across Regions, Mulling Over Margin, Part 2: the Elusive Cost of Production, A 2022 Review of the Farm Bill: Economic Perspectives on Title I Commodities, Reviewing the Latest CBO Farm Bill Baseline, Mapping the Farm Bill: Reviewing the CRP; Law, Land & History, 2021 Corn and Soybean Yields: Implications for Crop Insurance and Commodity Title payments, Department of Agricultural and Consumer Economics. All rights reserved. University of Illinois Extension provides equal opportunities in . Twitter at farmdocdaily. University of Illinois ag economists publish machinery costestimates intended to represent the actual costs associated with individual farm field operations, which can provide a baseline for setting a custom rate to ensure that costs are covered. Illinois Farm Management Handbook. This reduction generally will come from long-run decisions on replacement of equipment. Lattz, D. and G. Schnitkey. Although tillage can provide value, there is a cost associated with each tillage operation. Study examines impact of beer sales in Colorado, Quick Takes: Cover crop program, Iowa Pork leaders, scholarships and more, 2023 meat production expected to decline 1%. STARTING POINT: Rates for mowing and baling hay vary across Indiana. "Estimating Farm Machinery Costs." Tables 1 and 2 present machinery costs for a field cultivation operation on the case farm. This information is based on 122 responses and 3,389 custom rates provided by Iowa farmers, custom operators, and farm managers. Plastina, Alejandro and Ann Johanns. These estimates are useful for determining custom rates and for analyzing machinery costs on farms. The articles are written by Extension Specialists. This report summarizes farm income and earnings for FBFM enrolled farms for 2012-2016. Machinery cost estimates for 2019 are available in the management section of farmdoc in five publications. Central Illinois is further divided, Shows historical cost for the last 5 years and projections for next year. Numerous farms that are either hiring a custom operator or providing custom rate services to other farms use published custom rate surveys. The farmdoc daily website falls under University of Illinois copyright and intellectual property rights. Declines in natural gas and corn prices likely have led to nitrogen fertilizer price declines. Number 8860726. Costs rise dramatically with lower use because much of the tillage related cost is associated with depreciation and interest on owning the equipment. Labor costs are based on a $19 per hour. The farmdoc daily website falls under University of Illinois copyright and intellectual property rights. Disclaimer: We request all readers, electronic media and others follow our citation guidelines when re-posting articles from farmdoc daily. Table 3 illustrates the computation of depreciation, interest, insurance and housing, and repairs. Lattz, D. and G. Schnitkey. This article outlined the conceptual framework needed to estimate machinery costs per acre. FAST (Farm Analysis Solution Tools) are a suite of Microsoft Excel spreadsheets designed to assist those in agriculture make better decisions via user-friendly computer programs. hbbd``b`$V @]H0 Vq .$ b=\@g For several common tillage operations, the average farmdoc machinery use rate is shown in Table 1 next to the corresponding average, median, minimum and maximum custom rates from the Iowa survey responses. With that level of use, owning a chisel plow is clearly more cost effective than outsourcing the job. Illinois Farm Management Handbook, Department of Agricultural and Consumer Economics, University of Illinois at Urbana . 2017 Indiana Farm Custom Rates." Interest, insurance and housing, and repair cost rates were assumed to be 5 percent, 1 percent, and 3 percent, respectively. The 2019 Custom Machine and Work Rate Estimates fact sheet from Michigan State University Extension is now available. 2019 Custom Machine and Work Rate Estimates. The average is representative of a 35-foot chisel plow used on 1,470 acres. A chisel plow in that size range would be cost effective to own and operate on 735 acres. The total costs per hour for the tractor and implement were estimated to be $203.06 and $75.61 for a total combined cost per hour of $278.67. This indicates that some level of tillage is resulting in yields that offset costs, while repeated tillage operations add costs beyond attained value. The farmdoc daily website falls under University of Illinois copyright and intellectual property rights. Labor. Spraying. An additional amount for profit should be added to our cost estimates, as we have not added an amount for returns. Between 2019 and 2021, the list price on a 310 HP tractor increased by 9.1% from $410,256 in 2019 to $447,479 in 2021. Summary of statistical data on variable case rent leases in Illinois. Differences in corn and soybean returns will be influenced by corn, soybean, and nitrogen fertilizer prices. Learn, Introduction Knowledge, experience, and collaboration work hand in hand with one another to improve farm output per unit of input (i.e., productivity). farmdoc daily (11):150, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 2, 2021. Pursuit of one of these items without the, The Congressional Budget Office (CBO) projections for mandatory program spending, known as the CBO Baseline, have developed an into one of the primary influences on farm bill debates. The 2018 Farm Bill What-If Tool has been released (clickhere to download). 2453 0 obj <>/Filter/FlateDecode/ID[<7EEAAD7FB86E6843A8A58DCD32D3470D>]/Index[2431 44]/Info 2430 0 R/Length 103/Prev 175604/Root 2432 0 R/Size 2475/Type/XRef/W[1 2 1]>>stream The total cost per hour for the self-propelled sprayer is estimated to be $314.57. Air-seeder at $16.80 per acre. Farms that use custom operators or provide custom operations to other farms need to compare machinery costs per acre with published custom rate survey values. The dynamics of fertilizer prices in conjunction with movements in corn and soybean prices will influence relative profitability of corn and soybeans and acreage decisions. Formulas are used to estimate each cost, and the purchase price enters those formulas. FAST aids users in performing financial analysis, assessing investment decisions, and evaluating the impacts of various management decisions. Check out the baseline prices on custom rates from 2019. Lets say you dont want to retire and rent out your farm, but you dont want to do it all yourself either. From time to time, Prairie Farmer gets requests for the custom rate estimates on various field operations. A Purdue survey can provide a starting point for setting custom rates. Users then can change 2018 through 2020 county yields and prices to see ARC-CO and PLC payments under those yields and prices. hb```]O@(9j0;sLUG\S%mN3/,w```6 q(f`4``fg4bx#C]e^T&2@f`{ 6Vy,(! Iowa State University Extension and Outreach, Ag Decision Maker, A3-29, May 2015. Much uncertainty exists about all three prices levels, and it is likely that there will be changes in prices moving into the spring planting season. If it occurs, the $25 per acre increase will be the second-highest, only exceeded by a $33 per acre increase in cash rents between 2010 and 1011. Edwards, William. Labor costs per hour increased from $20.90 per hour in 2019 to $22.00 per hour in 2021 (see Table 1). Tillage, Nitrogen Use, and Cover Crop Impacts of Corn and Soybean Returns. farmdoc webinar, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 22, 2020. A "custom rate" is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider. Or if a farmer is assisting a neighbor or seeking custom work, knowing their own cost of operation provides a baseline level for which to add a profit margin when setting a custom rate. 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.