After a record year in 2011, the North American farm market is still strong. Though the U.S. Department of Agriculture(USDA) predicts declines in net farm income for 2012 compared to last year, ag tire manufacturers remain positive, considering 2011’s final numbers – $100.9 billion, up 28% from 2010, and the highest value on record.
For 2012, the USDA predicts a 6.5% decline in net farm income, to $91.7 billion – still extremely healthy, and the second highest value on record.
Higher commodity prices and demand mean more income for farmers – who are, in turn, willing to invest in new equipment and tires. It all adds up to another year of high potential profits for ag tire dealers, provided they can keep up with market trends and give these hard-working customers the right products for the job.
Ag Market Data
According to Bill Haney, North American sales manager for BKT Tires USA, there’s been an overall trend of near record farm income for the last three years. “2012 sales are forecasted to be off slightly, combined with an increase in input expense,” he says. “The key, however, is that the overall trend has been and is expected to remain very positive. Farm equipment sales are off slightly but still are very strong, especially for large machines.”
Crop prices are expected to remain favorable, fueling farmers’ investments in new equipment and encouraging them to use all available land for production, notes Andrea Masella, Trelleborg Wheel System’s marketing manager for farm and forestry tires.
“The weather is also playing an important role,” he adds. “Hopefully the spring will bring water to the fields, as in many states farmers are waiting to till the ground because of the dry condition of the soil. For this reason and also to avoid a late freeze, despite the mild winter, lots of work in the field has not been done yet. This will probably help to increase even more the demand in the replacement market in the near future.”
Buoying the market in recent years is continued strong global demand for U.S. crops, as well as favorable legislation. According to Jim Allen, vice president of sales at Titan International, “As for legislation, it appears the subsidies and tariffs the ethanol industry has enjoyed for several years are ending, which may have an impact on corn supply available for consumption. This likely won’t take effect until 2013, so we expect ethanol demand to remain high through 2012 and for corn prices to remain stable for the next year.”
Alliance Tire Americas’ Seth Walters, vice president of marketing and supply chain, notes there have been some soft spots in the market, but these haven’t been enough to offset the rapid growth in recent years. “The livestock industry, especially dairy and pork producers, had a tough couple of years of low margins, so some of the manure-handling equipment hasn’t been performing as strongly as crop-oriented equipment like tractors and combines,” he says.
Each of these tire manufacturer representatives say they expect farm equipment sales to stay strong throughout the remainder of 2012.
“Based on discussions with our top OE customers, as well as our top shortliners, they’re all expecting the strong sales of 2010 and 2011 to continue into 2012,” Titan’s Allen notes. “This is true pretty much across the board.”
“Equipment sales were so good in 2011 that it would be hard to see vast increases – but the predictions for this year’s farm equipment sales were in the 7% or 8% range, and I think that’s probably borne out,” says Alliance’s Walters.
“As for the future, farmers are very realistic about the cyclical nature of crop prices, and I’d say that leads the market to be cautiously optimistic,” he adds. “What helps support that optimism is the fact that the global demand for food, feed and fiber continues to grow – the world population is on its way to 9 billion people, and the population that can afford protein and better diets is continually increasing. Many agricultural economists predict that the next downturn is likely to be less dramatic than we’ve seen in previous years because demand will still be high.”
Tire Trends
Replacement ag tire sales have been just as strong as the equipment market, and this is expected to hold. “Traditionally, ag tire markets follow up/down cycles, but BKT expects continued growth up to 2015 and beyond,” Haney says, adding that the tiremaker continues to grow more than 30% in both shipments and orders.
“2011 was a record year for Titan, and Q1 of 2012 was a record quarter,” Allen says. “Agriculture was about 64% of our business in 2011, so it’s been a strong driver of our growth, and we expect that to continue into 2012.
“All the indicators are pointing toward a strong second, third and fourth quarter this year for our ag business,” he adds. “Beyond 2012, we are looking at some significant global opportunities. Specifically, the agricultural market in Brazil and throughout South America is a great opportunity for Titan, which is why we purchased Goodyear’s farm tire assets in Sao Paulo back in April 2011. We are continuing to explore similar opportunities in Europe and throughout the world.”
In order to keep up with ever-increasing productivity and performance demands from farmers and equipment makers, tire manufacturers have had to develop radials that excel at carrying heavier loads at higher speeds – and that minimize soil compaction.
“As farm equipment is getting larger and more powerful, tires need to carry heavier loads without increasing inflation pressures,” Allen says. “The lower the inflation pressure, the lower the ground-bearing pressure, and the less soil compaction there is. So the industry is seeing a lot of increased flexion (IF) tires in order to combat compaction in high load applications.”
BKT’s Haney, who says the tiremaker now offers IF technology, notes that “newer and better tire building methods are allowing for better uniformity, allowing higher speeds. Steel belted radial implement tires are now available for applications that require road time to and from the fields, which is proving beneficial to ag services contractors.”
BKT’s newest offerings in the ag tire market include new sizes in its Agrimax Force (IF900/60R42, 710/60R34); size 620/70R46 in the Agrimax RT675; new sizes in the Agrimax RT855 (480/80R50, 520/85R46); and the complete line of Agrimax Teris heavy-duty harvester radials.
“We’re very excited about our high-speed, all-steel flotation tire technology, which helps farmers move heavier loads at higher speeds – our new all-steel 390 Heavy-Duty Flotation tire is approved for loads of 11,000 pounds at 50 mpg over the highway,” says Alliance’s Walters. “For an industry that is constantly pushed to new extremes of load, speed and efficiency, high-speed flotation tires are huge assets.”
He notes the company’s Alliance, Galaxy and Primex brands offer a wide variety of tires for all equipment on a diversified farm operation – not just tractors and combines, but also grain carts, loaders, skid steers and the other machinery necessary to operate a modern farm. “Our tires deliver top-line performance at a bottom-line price,” Walters adds. “Alliance is dedicated to delivering great value and performance for the dollar.”
Trelleborg’s Masella says that in the future, “not only the tire, but the complete wheel will play an important role in order to achieve the target of modern agriculture.” To that point, the tiremaker recently introduced its THK, or Trelleborg High Knurling solution.
“Specifically engineered for high power tractors, the THK features a new concept of wheel that has an advanced knurling design with a higher profile, which boosts performance when the tire is operating at high speed and torque,” according to Trelleborg. “In addition, a new painting process is used that maximizes the friction characteristics of the wheel when the tire is fitted.”
The tiremaker also recently rolled out the following new sizes: 380/90R50 151A8 (151B) and 380/90R54 158A8 (158B) in the TM100 range of tires, designed for row-crop applications; and 480/8050 (159D) and 520/85R46 158A8 (158B) in the TM600 range.
Titan’s Allen notes farmers and equipment makers also are seeking tires with improved resistance to stubble damage.
“As seed companies continue making hybrids with stronger stalks, we’re working on developing and testing compounds that boast improved resistance to stubble damage while maintaining the flexibility needed for a smooth ride,” he says, adding that as a wheel and tire manufacturer for ag and OTR markets, Titan is able to provide a mounted, ready-to-install product.
“Our field technicians work very closely with our research and development team to ensure our tires are engineered to solve the real-world challenges of farmers,” Allen adds.
Dealer Success
As in any segment, when it comes to keeping farmers as loyal customers, tire dealers must focus on service.
“Before the sale, dealers need to be well-versed in the benefits and potential uses of these new tires,” Titan’s Allen says. “They should be confident in recommending the right tire for the job and providing tips for proper tire care and inflation pressures based on load.
“Service after the sale is essential for a tire dealer to be successful, so as ag tires are getting bigger, dealers will need to invest in equipment that can handle these big tires, both in the shop and out in the field,” he adds.
BKT’s Haney agrees, noting, “Careful handling with both late model boom trucks and trained operators for safety and comfort are the norm today.”
Alliance’s Walters points out that service begins in the dealership – in helping customers pick out the best tire for a particular piece of equipment and a particular farm. “A farmer’s soil type can make a difference. His work style can make a difference. What he does with a particular tractor – whether it’s out pulling equipment through the field all year or whether it’s more of a utility tractor around the farm – can dictate the most appropriate tire.”
As far as service in the field, he adds it’s important to make sure replacement tires and a repair crew are available if there’s a problem – because for farmers, downtime will wither profits.
