Consider This When Calculating Custom Rates
Various land grant universities are compiling custom rate survey data and custom operators will soon be determining rates for the year. William Edwards, Iowa State University emeritus professor and author of the Iowa Farm Custom Rate Survey, says the first thing custom operators look at when determining these rates is the price of diesel fuel. "That's because it's very visible," Edwards says. "Operators are more aware of fluctuations in diesel fuel than some of the other costs."
It also affects machinery costs. As a rule of thumb, a fuel price change of 50 cents a gallon changes total machinery costs by about 5%, justifying a change in custom rates.
Commodity prices also affect willingness to negotiate machinery costs, which has a ripple effect on custom rates. Along with fuel and machinery, labor is another factor in calculating rates. It takes more skill to operate this machinery, so custom rates increase.
Custom rates also increase depending on the value of technology to landowner. Most often, landowners see a direct benefit from technology. Edwards notes an example – automatic shutoffs on planters, which save landowners money by wasting less seed, and are becoming popular throughout the Corn Belt.