Contracting charges for the year ahead are up by 4% on average across all operations, according to the annual guide published by the Association of Farm & Forestry Contractors in Ireland (FCI).
The association emphasises that this is only a guide and that charges may vary considerably. These charges are compiled by collating an average figure for each operation from a panel of FCI members from across Ireland.
FCI noted that contractors will be quoting a 4% increase on last year’s charges to cope with increasing labour, insurance and machinery costs.
However, because of local differences – soil types, distances travelled, contract size and other factors such as application rates – charges will vary between regions.
COVID-19 is said to have played a part in these cost increases, creating a worldwide shortage of raw materials and components, which in turn has driven up machinery purchasing and ownership costs.
The association also stated that insurance costs for contractors equate to between 6% and 7% of their annual turnover. As an industry, that equates to close to €50m in premium payments per year.
FCI also highlighted that the cost of farmer credit continues to be an issue, with a significant minority of contractors still having outstanding debt from 2020.
The association is encouraging all contractors to issue monthly or weekly invoices followed by monthly statements in order to manage cashflow. The level of long-term debt owed to contractors is estimated to be more than €60m, costing the sector over €3.5m each year in interest.
Results of a recent FCI tractor cost analysis has shown that a 120hp modern tractor will require a minimum rate of €55/hour to cover its operating cost and the cost of labour, irrespective of the work done.
FCI chief executive officer Michael Moroney said: “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.”
The guide prices quoted are based at a diesel price of 70c/l and exclusive of VAT at 13.5%. It is worth noting that since these guide prices were published, inputs such as diesel, net and bale wrap have all seen increases in price. Net is said to be up €10/roll on last year and plastic is quoted to be up €6 to €8/roll on average.