Survey snippet 6: Operating costs keep climbing
By Ellen Cools
As forestry machines are upgraded to include the latest sensors, data interfaces and features to improve efficiency and power, it’s no surprise that machinery costs are continuing to rise. But the results from CFI’s 2020 Contractor Survey show that it’s not just machinery costs that are driving higher operating costs – insurance costs have skyrocketed compared to three years ago.
When asked how much their main cost centres have changed in the past three years, nearly half (46 per cent) of loggers say insurance costs have increased significantly compared to just 12 per cent in 2018. Another 46 per cent say insurance costs have increased slightly.
Regionally, 100 per cent of contractors in Ontario and Atlantic Canada say insurance costs are higher than three years ago, followed by 90 per cent in Alberta, 89 per cent in the B.C. Interior, 87 per cent in Quebec and 80 per cent in the B.C. Coast. This increase could be due to a number of reasons, including the risks posed by COVID-19 and more severe, longer wildfire seasons that threaten operations.
Respondents also say machinery purchases, as well as parts and services, have increased significantly, though the percentage of contractors who say so has dropped slightly compared to 2018.
We also asked contractors to rate the cost of labour, hauling, fuel, supervision and finance. Overall, every category of costs has increased for approximately half of all contractors. See a breakdown of results below.
For most categories – gear cost, parts/service, hauling and supervision – these numbers are similar to what we saw in our 2018 Contractor Survey. But there are a few significant changes.
As mentioned above, the cost of insurance has increased dramatically. But, there is some relief for contractors – the cost of fuel is no longer as problematic as it was in 2018. In 2018, 53 per cent of respondents rated fuel costs as rising significantly and another 39 per cent said it had increased slightly. In 2020, just 28 per cent of respondents say fuel costs are rising significantly, and 33 per cent say it has increased slightly. Correspondingly, the percentage of respondents who rate fuel costs as lower than three years ago is up from three per cent in 2018 to 22 per cent in 2020.
Another significant change is that fewer operations rate financing costs as increasing (49 per cent versus 60 per cent in 2018). A larger percentage of respondents say financing costs are the same as three years ago (37 per cent) or lower (14 per cent).
These changes might help explain why operators are potentially seeing their profit margins slowly inching upwards, despite the other increasing cost centres.
Missed last week’s survey snippet? Find a collection of reports published to date here. Look for more news from the CFI 2020 Contractor Survey in our eNews over the coming weeks, with a final digital report in December and a summary in the November/December print issue. Be sure to subscribe to our free eNews to get all the latest industry news.
This survey was conducted in April and May 2020 by independent research firm Bramm & Associates, generating 271 replies to a detailed list of questions. Respondents were distributed according to the geographic breakdown of the forest industry, with 44 per cent of respondents in Western Canada, 26 per cent in Quebec and the rest found in Ontario, Atlantic Canada, and central Canada. Within B.C., responses were split between the B.C. Coast and Interior. Many thanks to our sponsors for making this research possible – Hultdins, Tigercat and John Deere.