Due to increases in agricultural contractor costs, 2020 will see an increase in the “guideline” contracting charges, according to the Association of Farm & Forestry Contractors in Ireland (FCI).

Following the unveiling of the FCI’s ‘Contracting Charges Guide‘ for 2020, the association noted:

“This year sees contractors quoting an average of a 5% increase in charges, rounded off in order to meet with the increases in costs of machinery, fuel, insurance and a further increase in labour costs since the start of 2019 as a result of the introduction of the Revenue Commissioners Payroll Modernisation system.”

The contractor representative organisation added that rates quoted for pit silage systems have increased by larger amounts following detailed consultations with members providing this service and advice from their financial advisors.

There are some consistencies in terms of operating costs which cross all regions. These include the machinery depreciation and finance costs, the group noted.

‘Impacting sustainability’

The increased costs of new machinery for contractors and farmers are impacting on the sustainability of many agricultural contracting businesses, it was warned.

“Machinery cost increases over the past 10 years have been absorbed by contractors in their charges, to date,” the FCI added.

It is important that contractors understand the costs associated with such investments and take account of these additional costs as well as possible improvements in output, in establishing their charge rates.

It was also highlighted skilled driver availability also continues to be an issue, as operating costs increase for rural-based contractors.

“Contractors across Ireland within FCI will be making new efforts to promote and raise awareness of the important role of a modern farm machinery operator within an agricultural and forestry contractor enterprise, during 2020,” the association asserted.

Costs and charges

The FCI reiterated that all contractors should examine their costs of operation in working out their individual charges.

Also Read: Table: Contractor association releases full 2020 ‘guide rates’

Charges must be based on a realistic examination of the cost of the operating tractors and a full host of machinery.

Commenting, FCI chief executive officer Michael Moroney said:

“A basic cost analysis will show that a 120hp modern tractor will require a minimum rate of €50 per hour in order to cover the operating and labour costs, irrespective of the work done.

The minimum rate for any tractor leaving a contractor’s yard should be €50 per hour to cover depreciation (27%), labour costs (48%), fuel costs (13%), repairs and maintenance (8%) and insurance costs (4%).

The FCI asserted that agricultural contractor services “have been proven to be the most economical choice” for many Irish farming businesses, adding that the annual turnover in the farm contractor sector is now worth more than €700 million per year.

Moroney said: “Through the use of new and more efficient machinery systems including precision farming systems, the dedicated land-based FCI contractor provides the best and most cost-effective choice for Irish farming businesses with new opportunities for traceability.

“FCI contractors provide their customers with a professional, prompt and efficient service, with modern equipment, that is properly maintained and with skilled operators and with the use of precision farming technology that meets the traceability standards required for a modern world-class food producing industry,” he concluded.