In a time of high inflation, there is “simply no scope” for agricultural contractors to reduce their charges below those of 2022, according to FCI chair, John Hughes.
He has reported that the Association of Farm & Forestry Contractors in Ireland (FCI) has received calls from members who are “coming under pressure” from dairy farmers and their advisors, to lower silage harvesting charges in 2023.
Earlier this year, the association, published a charges guide for 2023, which you can access via this link.
Hughes said: “It is easy and sometimes convenient to forget that today’s agri-diesel costs remain 25% higher than in 2021.”
“Agri-diesel prices are currently up to €0.20 per litre more expensive than in 2021. That converts to a difference of at least €600 more per day in fuel costs of a silage harvesting outfit, according to the Association of Farm & Forestry Contractors (FCI).”
“Based on the results from the FCI Cost Calculator, diesel costs are only between 16% and 18% of total agricultural contractor operating costs.”
“Diesel costs are not the major cost, wages and machinery costs are higher.”
“FCI’s advice to members is not to cut rates just because diesel costs are lower, as all other contractor costs have risen significantly and unlike fuel costs, they are here to stay,” said Hughes.
This is because, he added, machinery purchase prices have increased by between 30% and 50%; (silage trailer costs up by €10,000, mowers up by €15,000 and tractor costs up by €20,000+).
A recent FCI survey of farm machinery suppliers showed that machinery replacement parts prices have also risen by between 15% and 30% between 2022 and 2023.
Moreover, bank interest rates have more than doubled in 12 months from 3% to almost 8%, adding further to agricultural contractor machinery investment costs.
“Irish agricultural contractors have suffered the pain of machinery cost inflation, along with machinery replacement parts and interest rate increases,” Hughes stressed.
“For many agricultural contractors, their focus is on getting the work done as efficiently as possible for their client farmers.”
“Farmers and their advisers need to appreciate the value of the services provided by agricultural contractors, not just the price.”
“Farmers and their advisors need to understand that sustainability in the agricultural contacting sector is multi-facetted.”
“That sustainability combines profitability with respect and understanding of the integral role that Irish agricultural contractors and their operator teams play in delivering constant supply of the most modern machinery services to thousands of Irish farmers each week in an integral partnership for farming success,” he concluded.