Agricultural contracting remains a challenging business for many of Ireland’s contractors. With unfavourable weather conditions last back end and little uptake since, Irish contractors are under severe pressure to make up for lost time this spring.
As a result, contractors need modern, reliable machinery capable of handling these large workloads. Other challenges faced by the sector are labour shortages and rising machinery costs, to name a few. This year, most new tractors have seen a price hike as result of the latest tractor mother regulations (TMR) and in compliance with Stage V engine regulations. It is important that contractors assess their machinery costings thoroughly.
Similar to last year, contractor charges have increased by 5% for 2020, according to the Association of Farm and Forestry Contractors in Ireland’s (FCI) annual guide.
The FCI stresses this is only a guide and charges may vary considerably between regions and job sizes. The association compiled the guide based on average figures for each operation from a panel of its members located across the country.
The FCI said this 5% elevation is in order to meet increases in the cost of machinery, fuel, insurance and rising labour costs since the introduction of the Payroll Modernisation system in 2019 (see page 10 for more on the new payroll system).
The FCI noted rising costs are affecting the sustainability of many contracting businesses and that over the past 10 years, these increases have been absorbed by the contractor in their charges to-date.
The group highlighted the importance of contractors accounting for these additional costs, as well as possible improvements in output when setting their rates.
While many contractors have outstanding debt from 2019, the association encourages all contractors to issue monthly invoices to customers in a bid to tackle the rising cost of farmer credit and help manage cashflow. It said the annual farm debt to the Irish contracting sector is close to €3.5m each year in interest alone, based at a rate of 6%, and that contractors can no longer act as unofficial bankers for farmers. The estimated long-term debt in Irish farm contracting exceeds €60m, says the FCI.
The association said all farm and forestry contractors are legally entitled – but not obliged – to charge interest on overdue accounts. FCI stated that turnover in the farm contractor sector exceeds €700m annually. All guide prices listed below are based on green diesel at 70c/l and are subject to VAT at 13.5%.