Farm tire market trends for 2015
Corn production in the Midwest was greater in August than was forecast. At the same time, cotton production in the South was down year-over-year.
Farm equipment sales in some segments have been steady, despite the change in the maximum allowable deduction on farm equipment purchases from $500,000 to $25,000.
Farmers in California are optimistic about navel orange production, but that could change because of the effects of a lingering drought.
With all the variables that can affect crop yields and pricing, it would seem almost impossible to accurately predict farm tire supply and demand.
Modern Tire Dealer decided to try anyway.
We asked experts from some of the largest farm tire manufacturers and marketers in the United States to share their insights into the farm tire market in 2015. They talked about a number of trends, including Increased Flexion (IF) and Very High Flexion (VF) radial technology.
Michelin North America Inc., Bridgestone Americas Inc., BKT Tires USA Inc., Alliance Tire Americas Inc., Mitas Tires North America Inc., Trelleborg Wheel Systems Americas Inc. and TBC Corp. agreed to participate.
MTD: As the year winds down, crop yields are high and commodity prices are low. In addition, new farm equipment sales appear to be down. Do these factors bode well for farm tire sales in 2015?
James Crouch, North America Farm Segment marketing manager, Michelin: It will be an interesting year for replacement ag tire sales. In the past, we have seen a direct correlation between the replacement market and original equipment sales. This was very consistent until a few years ago when the accelerated depreciation bill was passed as part of the Farm Bill.
Section 179 of this bill allowed for farmers to deduct up to $500,000 of their taxable income in the first year on up to $2 million of equipment purchased. This, along with some of the highest commodity crop prices ever and record high farm net incomes, created the perfect storm for farmers to finally upgrade all of the equipment on their farms. During this time, the original equipment tire market was booming, while the replacement market was declining.
Now that this section of the Farm Bill has expired, original equipment sales are tapering off, as expected, and the dust is starting to settle on the implement dealer lots. This new environment creates opportunities for replacement tire dealers. Farmers are now on their second or third year on the tires that came new on the sprayer in the shed. Instead of the farmer simply trading it in before those fitments become a target, they may instead shop for tires and put a few more years on that sprayer. We have seen the replacement farm tire demand cycle move cyclically through the years in three- to five-year curves. If legislation remains the same, it appears things will begin to trend in favor of the replacement farm tire dealer.
An interesting dynamic to consider is the willingness of the farmer to alter the tire configuration of the tractor. A farmer who will keep a machine one season is obviously not very interested in investing in a wider combine tire to manage wet conditions or triples over duals to manage the load imposed by a planter. If farmers keep equipment longer, the tire is no longer simply black and round. It turns into a piece of value-adding equipment that can increase the productivity of the machine as much as a larger planter or header. All of these different aspects coming together will give the replacement tire market momentum moving into 2015.
Tony Solon, marketing manager, Bridgestone-Firestone Ag Tire Division: Low- to mid-range horsepower tractors and some implements are still doing well. The type of equipment used in livestock operations and this segment is doing well. The higher horsepower tractors and combines have dropped off compared to the last three years due to the drop in commodity prices. OE equipment manufacturers are adjusting their production levels down to address some of the new equipment inventories on their dealer lots, so that business will be down. On the replacement side, these same issues may cause a slowdown in that business.
Bruce Besancon, vice president of marketing, Alliance: It is clear that the farming community is facing some lowered expectations in terms of commodity prices and equipment sales — and our dealers and distributors have seen some of this in their day-to-day operations as well. At the same time, however, we are also seeing calls for some of the largest food commodity harvests that we have seen in recent years. It is clear that the business of providing food is not going away, and we will need to have equipment in the field to accomplish this task. And where equipment is being used, tires will be needed. Today’s farmer is making sure he does not spend his money unwisely. In some cases, he may delay purchases to see what he will bring in from his crops, but he is not doing any less work than he has done in previous years.
We anticipate that with lowered equipment sales, the farming community will have more vehicles that they will want to keep running longer. While OE figures may drop in 2015, aftermarket sales to farmers in the field should remain fairly steady compared to what we have seen this year.
The demand for increased productivity and technology in the agricultural field is not slowing down and everyone is going to be pushed to “do more with less.” With new products ranging from the highest technology IF/VF row crop and combine tires to best-in-class flotation tires for spreaders and haulers, we anticipate that 2015 will be another excellent year.
Carl Casalbore, president, BKT: There is apprehension with the end user. Farmers are being cautious with large purchases. That being said, we believe that the replacement business in 2015 will be active.
We also believe that the end users are looking for value, meaning excellent products for less money.
Our market is mature and growth is slow but steady. The momentum is based on the product/value that a brand has to offer. Technology is also playing an important role, which plays into the value equation.
Neil Rayson, vice president, Mitas: For the replacement market segment, if there are favorable weather conditions in the spring, a normal sales pattern may be enhanced by the effect of a decrease in new machine purchases, leading to more tire replacements on existing equipment.
Farmers and dealers should avoid complacency over supply in the spring as tire manufacturers will tend to “right size’’ production to anticipated 2015 demand, bringing the supply/demand relationship into balance and creating the potential for tight supply in high demand sizes during the crucial early selling season.
Jeff Jankowski, director of ag sales in North America, Trelleborg: We expect the tractor tire market to remain relatively weak through the beginning of 2015. This is mainly due to lower commodity crop prices leading to lower demand for new equipment, especially in the high horse power segments. In the replacement market, demand should be maintained at the same level as 2014.
In 2015, professional farmers will focus even more on reducing their input cost in order to maximize earnings. In this market context, new tire technologies, such as ProgressiveTraction and IF/VF, may play a significant role in upgrading the efficiency and productivity standards of agricultural practices around the U.S.
At Trelleborg, we want to meet and sustain this trend, providing further acceleration of farming performance. That’s why we are investing heavily in our upcoming production plant in South Carolina. The new facility, along with a new R&D center, will boost our competitiveness and ensure that OEMs, dealers and farmers will benefit from Trelleborg’s proximity and product availability.
Bill Dashiell, senior vice president, Commercial Division, TBC: The outlook for 2015 is likely to be a little cautious. High crop yields may partially offset low commodity prices. Corn and soybeans recently showed modest improvements in October finally coming off two-year price declines, while some livestock sectors are continuing to gain momentum. 2015 is likely to be a year of mixed opportunities; if farm income declines, we are likely to see stronger tire sales as farmers are likely to delay investment in the new equipment.
The prospects and opportunities for 2015 vary greatly by region. The ongoing drought in the West is putting significant pressure on farmers, with no major expectation of relief, while areas of the Midwest had strong harvests even with the early winter. (Next year) may be very similar to 2014 as weather continues to make the news and will continue to be a key factor.
MTD: Do you plan to introduce any new farm or ag tire products into the U.S. market in 2015?
Crouch, Michelin: Yes we do. We have several new tire launches planned for 2015. We will continue to expand our Spraybib tread design, which is a VF high clearance sprayer tire offer. There is a very large demand for VF sprayer tires because of the extreme loads they carry. The Spraybib allows for a much lower pressure to carry this load, which dramatically decreases the amount of compaction imposed by the machine.
We are also continuing to expand our Cerexbib tread design, which is an IF/VF combine tire. We plan to offer the farmer several new low pressure combine dual options by year end.
Solon, Bridgestone: We have a number of new products in the pipeline for 2015 covering a range of tire applications.
Besancon, Alliance: The coming year promises to be an exciting one for Alliance and our customers. We’re continuing to broaden our product line with more innovation, more purpose-built designs and more sizes.
At the cutting edge of flotation tire technology, our 393 and 882 Radial Flotation tires deliver outstanding load ratings along with excellent “roadability” at up to 40 mph on the highway. We have seen them tested on farms, pavement and oil fields this year, and everybody who’s seen them wants a set — or as many as they can get their hands on. Our 381 Radial Implement tires offer a tread pattern that’s great for over-the-road handling as well as excellent performance in a wide variety of field conditions. We’re working with top-tier OEMs to introduce sizes that will roll out on new equipment.
Our classic diamond-tread 330 flotation tire will be expanded to include massive 28LR24.5, 28LR26 and 28LR32 sizes in radial construction, at the request of a couple of OEMs. Our engineers continue to work hard to keep up with equipment that gets bigger, stronger and faster every year.
We’re also introducing a full line of tires for the irrigation market, which is a new entry into a very large market and a great opportunity for dealers to fill up containers or expand their options for working with Alliance. We’re committed to being versatile, customer-centered and easy to do business with. Part of that is being able to offer a wide range of tires to help customers meet almost any need on the farm.
Casalbore, BKT: Yes, as a general statement, we add between 50 to 75 new SKUs per year, and we modify another 50 to 75 SKUs of current products. Currently, we have over 2,300 SKUs... including industrial, construction and OTR tires.
Rayson, Mitas: Mitas will extend the range of Very High Flexion tires for high-horsepower machines. Mitas will introduce additional sizes of HC 2000, namely VF600/70R30 and VF710/70R42 for powerful tractors. The special feature of the Mitas VF-rated tires is the highly flexible sidewall allowing for an extended footprint competing shoulder to shoulder with the increasingly popular rubber tracks. Very High Flexion tires are produced at the Mitas factory in Charles City, Iowa, and Otrokovice, Czech Republic.
Currently, the Very High Flexion tire for harvesters is under development. It will be marked VF HC 3000, and Mitas will introduce it at the beginning of 2015.
Andrea Masella, marketing manager, agricultural and forestry tires, Trelleborg: In 2015, Trelleborg will introduce several sizes according to the newest concept: ProgressiveTraction, a concept of agricultural tires specifically designed to improve farming efficiency thanks to a double lug design. ProgressiveTraction tires demonstrated a traction capacity over 10% higher when compared to standard technology tires. Moreover, the extra pulling force resulted in a 3% to 5% reduction of working time, as well as a 5% reduction in fuel consumption, providing farming operations with substantial cost savings.
More sizes in our new VF line for sprayers and soil application equipment will follow in the near future. This new line is designed according to Trelleborg TMBlue technology.
When it comes to agro industrial, we have just introduced a new size in TB40: 340/80-18TL 143A8. The TB40 is designed for agro industrial applications and guarantees excellent wear resistance, sturdy tread pattern, robust sidewall and great stability on hard and tough soils.
In the forestry (segment), we are going to introduce the T418 35.5-32 for log skidding service.
With the addition of this size together with our range in the CTL sizes and a complete range of forestry tubes and rims, we can offer a wide and complete coverage to the forestry industry.
Dashiell, TBC: This year, we concentrated on improving our programs. In 2015, we will be expanding our product lines again with new sizes in our Harvest King brand that will provide greater market coverage starting with our rear tractor, front tractor, and implement tire lines. This will give our customers an enhanced two-tier farm tire program with more options in our Harvest King brand, complemented by BKT’s wide range of products. ■
To see 2014 U.S. replacement farm tire market shares, click here.