The Association of Farm & Forestry Contractors in Ireland (FCI) has published the FCI Contracting Charges Guide for 2021 – which shows an average of a 4% increase in contracting charges, which the group says is to meet higher expenses.

In a statement today (Tuesday, February 9), the contractor representative group said its publication “provides fair and reasonable guidance for both farm and forestry contractors and their client farmers”.

The guide figures are produced on an annual basis and are compiled by collating an average figure for each operation from a panel of FCI contractor members from across Ireland.

It was highlighted that, because of local differences, the actual guide charge may vary between regions, across soil types, distance travelled, size of contract undertaken, size and type of equipment used as well as the amount of product spread.

This year sees contractors quoting an average of a 4% increase in charges, “rounded off to meet some of the increases in costs of machinery, insurance and labour costs” since the beginning of 2020.

Michael Moroney, FCI CEO, said: “FCI always advocates working out individual charges based on the actual cost of the operation; this guide is helpful to both contractors and farmers in highlighting a national average.”

Pointing to increasing costs of new machinery, the FCI noted that “further machinery cost increases in 2021 due to worldwide raw materials and component shortages, induced by the Covid-19 virus, are driving up machinery purchasing and ownership costs”.

Moroney claimed that agricultural contractor services “have been proven to be the most tax-efficient, economical, and reliable choice for many Irish farming businesses”.

Highlighting inflationary new tractor prices, he added: “It has never been more important for contractors to take account of these additional costs balanced against possible improvements in output, in establishing their charge rates with the support of the FCI Contractor Charges Guide.”

The FCI CEO also pointed to the high cost of insurance premiums and the cost of farmer credit – with a claimed €60 million in long-term debt now owed to farm contractors – as additional factors taken into consideration.

Moroney said that this long-term debt “is costing the contracting sector in Ireland in the region of €3.5 million each year in interest”.

On another note, he said: “FCI always advocates that all contractors should examine their costs of operation in working out their individual charges.

“To ensure sustainability of the business, charges must be based on a realistic examination of the cost of the operating tractors and a full host of machinery, as well as the costs of running a modern progressive rural enterprise.

An FCI tractor cost analysis has shown that a 120hp modern tractor will require a minimum rate of €55 per hour in order to cover the operating and labour costs, irrespective of the work done.

He believes that 55% of that hourly cost is accounted for by labour and diesel costs, with 25% allocated to maintenance, repairs costs, fuel and insurance costs, giving a very tight operating margin.

“Contractors need to look very closely at costs in order to establish rates for their services that will allow for profit and take into account the huge depreciation costs associated with owning modern farm equipment,” he added.