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Ag and Forestry Tire Segments Offer Stability and Profits

December 14, 2010
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For some very positive economic news, one needs to look no further than the agriculture and forestry markets. Although the two fared quite differently during the recession – farming remained fairly strong throughout 2008 and 2009, while logging saw a steep decline during that time – both segments are on a growth track now.

This, of course, translates to added opportunities for tire dealers in locations where ag and forestry activity is prevalent. If dealers are willing to invest the time and training to create a knowledgeable staff – and back that up with solid service – the coming years could be very profitable.

“It’s all about helping farmers, loggers or small OEMs find the tire that delivers the best value and performance for their needs in the field with minimal downtime,” says James Tuschner, director of marketing for Alliance Tire Group. “It’s about knowing the products and knowing the customer’s needs, and when the chips are down and farmers are in the height of planting or harvest, providing quick turnaround service the farmer will never forget.”
Although the forestry market took a big hit during the recession, the segment is back on track, with several tire manufacturers predicting steady growth for the next several years.

Economic Effects
Looking back at the recession, the housing bubble’s burst and the sharp decline in residential and commercial new construction heavily impacted the logging industry.

“The economy did have a large impact on the forestry industry, and as a result, impacted our tire production that supports forestry equipment around the world,” says Tom Rodgers, director of marketing for Bridgestone Americas agricultural group. “With housing starts dropping significantly during 2009 and 2010 and overall paper demand dropping with not only the condition of the economy, but also the turn to more electronic communication, the forestry industry dramatically cut timber harvest levels.”

“Logging suffered almost immediately with the decline in new construction,” Tuschner adds. “The recession came about a year or so later to agriculture, after a year of tremendously high commodity prices that drove plenty of investment in new equipment. Producers in the livestock industries – particularly dairy and pork – were hit hardest.”

He notes Alliance felt the slowdown as equipment manufacturers cut back on production. The tiremaker’s flotation tires – widely used in the dairy and pork industries on equipment like manure tanks, which have to carry extremely heavy loads on the road and in the field – felt the downturn especially.

“The other significant effect was the reluctance of distributors and dealers to invest in inventory during the down cycle,” Tuschner says.

“The recession in North America impacted farm tire sales for late 2008 and throughout 2009,” according to Jeff Vasichek, vice president of sales and marketing for Titan International. “2010 saw an improvement in commodity prices, which in turn stimulated sales at both OE and replacement.”

Bridgestone’s Rodgers, on the other hand, says the ag market in North America “has seen very little impact from the economic crises the U.S. has experienced over the past couple of years.”

He explains, “Given an increased interest in biofuel production and a low global inventory (stocks) of primary ag commodities such as corn, soybeans and wheat, the revenue stream for the ag industry has remained strong. The long-term burden of feeding and helping fuel the world is a challenge that should present positive opportunities to the ag industry for years to come.”

In 2010, there was a significant year-over-year increase in equipment sales, resulting in strong OE demand, Rodgers says. The replacement market also has remained strong, as farmers invested available money to keep their equipment in good condition.
Because today's ag tires are application-specific - no till, narrower rows, precision farming, etc. - tire dealers must keep track of local demand when stocking product.

“Ag manufacturers built very little equipment during 2009, while forestry producers parked equipment,” he says. “This significantly reduced tire demand at both the OE and replacement levels. In 2010, the forestry industry has begun to recover as housing and construction improved and the field inventory levels of tires and equipment were depleted to the point tires were needed to backfill this void.”

“In 2011, we will continue to see a robust farm tire market,” says Titan’s Vasichek. “The OEMs are predicting better than average sales, which translates to increased demand for tires. Also, for the aftermarket, farmers will continue to upgrade tires to meet various applications – no till, narrower rows, precision farming, etc. – that will mean more opportunities for tire dealers.”

According to Alliance’s Tuschner, commodity prices had been favorable this fall, giving farmers some capital to work with, in addition to a feeling of optimism. On the forestry side, he notes prices seem to have strengthened. “With improvements in the economy and growing brand awareness on our side, we believe we’ll see continued growth for Primex and Alliance in that space.”

Fast Forward
Looking ahead to the next several years, each of the tiremakers’ representatives foresees steady growth for both segments.

“Over the next year or so, farmers will be watching Congress to see how the next farm bill will shape up,” Tuschner says. “The tone of that debate – which sets U.S. policy on subsidies, export programs, research and other farm-related issues – will influence farmers’ confidence and spending patterns, and we’ll surely see some impacts on our sales, positive or negative, as that legislation is discussed and enacted.

“But everyone needs to eat, so the sector will remain healthy overall,” he continues. “Farmers have to feed a steadily growing population, so the prospects for commodities will continue to be strong.”

Tied in with that growth will be further technological developments, including bigger tires designed to carry larger, more productive equipment, according to Bridgestone’s Rodgers.

“For large agricultural equipment, radialization is almost complete,” he says. “Very few combines, row crop or four wheel-drive tractors are fitted with bias tires. Radial tires carry a greater load at lower inflation pressures, which improves traction and reduces compaction, making the farmer more efficient.”

On the forestry side, Rodgers notes the market still is predominantly bias, a result of the extreme conditions in which the tires operate. 

“As a company, we’ve already seen Europe switch to radials, and we’re seeing steady growth here in the U.S., especially as equipment has gotten bigger and heavier,” Alliance’s Tuschner says. “As farmers see more of their neighbors enjoy the benefits of radials and have a chance to work with them on their new tractors and combines, the rate of adoption will continue to increase.”

Titan’s Vasichek notes that mid- to high-horsepower tractors and combines already ride on radials, and that Titan predicts this will migrate to compact utility tractors, hay and tillage equipment.

Innovation Highlights
Each tiremaker is proud of its unique technological advancements in the ag and forestry tire segments.

Titan currently is developing tires and wheels that meet specific applications. “Farming and forestry have become more specialized and the tires and wheels have to be engineered for it,” Vasichek says. “Titan is the only major off-highway company with the ability to design, test and produce both the wheels and tires. There’s more than meets the eye when it comes to manufacturing both; the two are a total system.”

He adds the company offers ag tires ranging from 6 to 72.5 inches in diameter, including the Goodyear Optitrac Radials for mid- to high-horsepower tractors and the Goodyear Ultrasprayer, specifically engineered for the sprayer market. Titan’s other popular offerings in these markets are: Goodyear Farm Highway Service Implement Tire, Titan High Traction Lug Rear Farm bias; Titan Ultimate Skid Steer; and Goodyear Logger Lug III on the forestry side.

New for the Firestone brand in 2010 was the AD2 (Advanced Deflection Design) Technology, which meets the industry standard set by the Tire and Rim Association. “This standard allows for a radial tire to carry 20% more load at the same inflation pressure or to carry the same load at a lower inflation pressure compared to a standard tire of the same size,” Rodgers explains. “Just as the transition from bias to radial tires provided the farmer with performance improvements, this standard provides an even greater footprint size, improving traction and reducing compaction in the field compared to a standard radial of the same size.”

He says the majority of the company’s forestry and agricultural traction tires are designed with a 23-degree lug angle that the tiremaker has proven through testing and verification to provide the best traction in normal field conditions.

“We feel with our design, testing, verification and proven field performance, as well as our dealer network of support and service, we are in a very good position to support our customers, both in the field and in the forest,” Rodgers says.

Alliance’s Tuschner says the company, which strives to develop tires that carry heavier loads at higher speeds, is the first to develop a 100 km/h (60 mph) radial flotation tire.

“Load rating and speed are our hallmarks, because that’s what farmers need all around the world,” he says. “Our global R&D team also is focused on designs that reduce soil compaction, an unseen but extremely important factor in keeping farms productive and sustainable.

“Our radial R1 and R1-W tires – including our 900/60R32 AgriStar 375 combine tire – have really taken off. It’s one of the only combine tires on the market with steel belts, which dramatically reduces punctures from the stalks of today’s tougher corn hybrids.

The company’s new Alliance 550 offers a multi-purpose design for municipal tractors and backhoes that delivers better traction, performance, durability and snow performance, he adds. On the forestry side, the Primex LogStomper line has captured a lot of share in the skidder segment as loggers look for performance and value. The Alliance brand has focused on more technical flotation tires in sizes that fit cut-to-length and more specialized harvest equipment, Tuschner says.

“We make purpose-built tires that meet specific needs in specialty markets like agriculture, forestry and industrial applications. That provides tire retailers with opportunities to broaden their offerings to make sure they can meet the very particular demands of their customers and deliver the best performance value.”

He adds Alliance will introduce more than 100 new designs and sizes in 2011. Though the Alliance brand has largely been a container-direct business, over the past few years, the company has built up its warehouse footprint to provide more flexibility to OEMs, dealers and distributors. The tiremaker also plans to add another warehouse in North America.

The Dealer Level
Because ag and forestry tires are tailored to specific applications, there’s no one solution for tire dealers when choosing SKUs to stock. Knowing individual markets is the key to being able to offer customers exactly what they need.

“This isn’t the passenger tire business; each farm tire market segment is different. Farming is very specialized and one cannot say how many SKUs must be inventoried,” Titan’s Vasichek says. “A dealer needs to be close to the farmers in their particular area to determine what product needs to be inventoried. Also, the local implement dealer that sells the equipment is a good source of what new sizes are coming out on equipment.”

Bridgestone’s Rodgers adds that with the size of equipment and tires continuing to grow, it is critical for dealers to have the equipment necessary to perform in-field service. “We support the purchase of service vehicles with our co-op program; this allows a dealer to meet customer needs in the field and eliminate as much down time as possible,” he says. “In the ag market, the ‘window of opportunity’ for planting and harvesting is small – and downtime impacts the bottom line. Our certified Firestone ag tire dealers recognize this and have planned for equipment and schedules to accommodate farmers’ needs.”

Though farm tire specialists must have the knowledge, skill and equipment big enough to manage heavy tires and extremely strong beads, what’s most important, according to Alliance’s Tuschner, is their understanding that farmers don’t have time for tire problems.

“Farmers are running hard; planting and harvest are a race against the clock, while spreading nutrients or protecting crops is time-sensitive. They’re also running lean – equipment has to be amortized across as many acres or head of livestock as possible, and many machines have to do double- or triple-duty to make a farm work in a business built on unpredictability and tight margins.

“Farmers need attentive service and they need tires that are reliable, long-lasting and deliver value for their investment,” Tuschner adds.