Custom operations hit by inflation

Two combines harvest soybeans Sept. 26, stirring up a little dust on dry soil in McLean County in Central Illinois. But overall farmer Colin Loeffler said farms near Stanford received pretty timely rains this year and he was pleased with harvest so far.

Inflation has affected the price of virtually everything over the past couple of years. Custom farming is certainly no exception.

Operators are charging more for the same services as their costs have increased. And while fuel prices are one contributor, the increased expenses fall across the board.

“Obviously, energy prices have moved,” said Paul Mitchell of the University of Wisconsin. “Machinery costs have also spiked because of increased demand. Over the past couple of years, prices and yields are up.”

The average cost of hiring outside help for planting, spraying, harvesting and other farm tasks has risen as much as 15% in just one year, according to results of a survey published by Iowa State University. Longer term, prices have risen even more dramatically.

“All the standard supply-chain disruptions and general inflation are showing up from the farmer’s perspective,” Mitchell said.

Gregg Zurliene sees few other options available for those who need some custom work done on their farms.

“They’re going to have to pay more or get out of the business,” said Zurliene, a resident of Fairfield, Illinois, who does some custom work for forage operators in southern Illinois and eastern Missouri. “You don’t go to the grocery store, take a gallon of milk to the counter and negotiate the price.”

He does know some farmers who have purchased machinery even though they don’t have work on their farms to cover the cost of the equipment. They make ends meet by spreading their work to other farms.

“Some don’t even have cattle or horses,” he said. “They justify their hay acres by baling other people’s hay.”

There may be an acreage threshold for the need to contract some field work. On a 500-acre farm operation, purchasing a combine may not pencil out.

“Plenty of farmers say combines are just too expensive; it’s cheaper for them to hire someone,” Mitchell said. “The trouble is, the (custom operator) will get to it when he can get to it.”

USDA estimates that fertilizer costs have increased nearly 60% over the past three years. Prices of agricultural chemicals and machinery are up more than 40%, according to the report.

Average rates may be even higher than the increase estimated in the Iowa State survey. The survey, released in March, assumes the U.S. Energy Information Administration forecast of diesel prices averaging $3.39 per gallon in 2023. Prices have recently moved close to $4, however.

The current situation is nothing new, according to Ann Johanns of Iowa State University.

“This isn’t the first time there’s been inflation,” she said. “We’ve had wild swings in fuel prices and machinery. This is a time of adjustment.”

Although the high price of modern farming equipment may be one reason many farmers turn to outside operators, it is only one piece of the puzzle.

“What are they trying to cover?” Johanns said of farmers looking to hire out some work. “Machinery prices go up astronomically, but when you factor that in price per acre, machinery cost itself is just a fraction. You have labor, fuel. All those pieces are going up.”

While full-time custom operators are finding plenty of work, many farmers rely on help closer to home. Availability is also a major factor, maybe even more than price in some instances.

“One of the ways is with your neighbor or relative,” Johnson said. “There you have a longer- term, personal relationship. Farmers are like anybody; they want it done and don’t want to wait. But sometimes you have to get in line. It’s easier for a customer operator to do 500 acres than 100 acres. Small- to mid-size farms may get pushed back to the end of the line.”

Help from neighbors may be especially common in forage operations. Zurliene sees a lot of hay producers who trade tasks.

“Most guys who want a custom guy this year are doing their own,” he said. “We’ve seen a transition. One guy might own hisd own hay mower but a neighbor down the road has the baler.”

Johanns agrees.

“When you look at a baler, for example, that’s something where you can fit in some small jobs around your own to cover those costs,” she said.

She also points to farmers who may hire a custom operator when considering a new practice.

“Someone may look at trying to strip-till, and they’ll do custom for a few years to see if it works for them,” Johanns said. “Then they may consider buying the equipment to make that change.”

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