The Association of Farm & Forestry Contractors in Ireland (FCI) is pleased to publish the FCI Contracting Charges Guide for 2019. At FCI, we are satisfied that this averaged price guide will act as a fair and reasonable guide for both contractors and farmers.
However, it must be remembered this is only a guide. These FCI 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. Because of the local differences the actual guide charge may vary considerably 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 a 5% increase in charges, rounded off in order to meet with the increases in costs of machinery and higher labour costs since the start of 2019. Michael Moroney, FCI Chief Executive Officer said, “FCI always advocates working out individual charges based on the cost of the operation; this guide is helpful to both contractors and farmers in highlighting a national average.” There are some consistencies in terms of operating costs which transcend all regions. These include the machinery depreciation and the finance costs as well as the machinery purchase costs.
The increased costs of new machinery for contractors and farmers are impacting on the sustainability of many agricultural contracting businesses. Machinery cost increases in 2018 and into 2019 as a result of the Tractor Mother Regulations (TMR) have added costs to new tractor prices, which have been absorbed by contractors in their charges, to date. 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.
The arrival of the new Revenue Commissioners Payroll System from January 1, 2019 has been an added cost to agricultural contractors. Skilled operators must be paid weekly and tax returns issued weekly, contributing to additional costs.
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 2019.
The cost of farmer credit continues to rise for farm contractors. Some contractors have outstanding debt from 2018. FCI is encouraging all contractors to issue monthly or weekly invoices followed by monthly statements in order to help to manage cash-flow. This level of long term debt level estimated at more than €60 million, now owed to farm contractors, is costing the contracting sector in Ireland in the region of €3.5 million each year in interest, based on a 6% interest rate.
Michael Moroney, FCI Chief Executive Officer said, “FCI always advocates that all contractors should examine their costs of operation in working out their individual charges. Charges must be based on a realistic examination of the cost of the operating tractors and a full host of machinery.
“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,” he added. He believes that 80% of that hourly cost is accounted for by labour and diesel costs, with just 10% allocated to depreciation, finance and repairs costs, giving a very tight operating margin. “Contractors need to look 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.
The FCI is also aware that some contractors are now making individual arrangements with their customers regarding diesel (eg separate fuel surcharge, fuel used on-farm etc). The prices below do not reflect this as diesel prices are variable throughout the season. Such individual agreements may make a difference to contracting charges.
Agricultural contractor services have been proven to be the best and economical choice for many Irish farming businesses. “The dedicated land-based FCI contractor provides the best and most cost-effective choice for Irish farming businesses in the long run,” said Michael Moroney.
“FCI contractors provide their customers with a professional, prompt and efficient service, with modern equipment, that’s properly maintained and with skilled operators and the use of precision farming technology that meets the traceability required for a modern world-class food producing industry.
FCI rural-based farm & forestry contractors are tax compliant, hold the correct contractor insurance along with health and safety certificates to protect you and your farm business. The price and value of this service is being increasingly appreciated by many farmers as they work with their contractors in a progressive partnership for the planned future growth of many successful farm businesses,” he added.