Farm tires: Expect another flat year
Farm tire dealers know that when it comes to farming, nature always has the last word.
In 2012 the United States had the largest drought in 56 years, when 55% of the country experienced drought conditions. Many farmers lost their crops. Farm tire sales suffered and dealers ended up with overstock at the end of the year.
“Last year, a great-looking season turned dry,” says Seth Walters, vice president of marketing and supply chain, Alliance Tire Americas Inc.
“When farmers realized they were staring down the barrel of a drought, they put a hold on equipment purchases, and the farm tire market went dead for the second half of 2012. As it turns out, most farmers ended up coming through OK, but inventory was backed up at farm equipment dealerships and farm tire outlets.”
Last year manufacturers predicted there would be pent-up demand for farm tires in 2013. Farmers were hoping for a good growing season, and the rain that Hurricane Sandy brought in October 2012 promised to produce a snowy winter with a good spring melt and excellent planting conditions for farmers.
But nature didn’t cooperate.
“Weather patterns have affected overall demand this year, with cold wet weather delaying planting early in the year,” says Adam Brown, product marketing manager for ag/construction tires at Carlisle Transportation Products.
“Based on what I’ve seen, I would say that the sector I’m serving has been flat to lower this year than last,” says Clark Ent, farm and light truck sales manager at Specialty Tires of America Inc. (STA), manufacturers of American Farmer brand OE small farm and replacement tires, and bias rear replacement tires.
“We’re around the 2012 numbers, slightly lower, but nothing like 2011. That was a banner year for us.”
“The past year has been a challenging one for farmers and farm tire dealers,” says Alliance’s Walters. “After several years of great prices, commodity prices started to slide a bit, while rents and costs went up. That started slowing down an equipment-buying spree a year or so ago.”
Farmers needed a good 2013 to offset 2012 losses. Declining commodity prices have made that difficult. According to the U.S. Department of Agriculture (USDA), net cash income -‑ which measures the difference between cash expenses and the combination of commodities sold during the calendar year ‑- is forecast at $120.8 billion in 2013, down just over 10% from 2012.
That’s not necessarily bad news for farmers -‑ or farm tire dealers.
“This year farmers were worried about whether they were going to get into the fields,” says Robyn Conrad, Michelin North America’s director of marketing, ag/North America. “They did, and this year’s net is they actually planted more than anticipated, and more than in previous years. Then over the summer the quality of the weather was great. The sense is that the farmers are having a great year and net farming estimates are that it will pass the preceding year.”
“We feel that the farm tire market in 2013 was slow at the beginning of the year until spring, and many dealers were still carrying inventory from 2012,” says Andrea Masella, North America marketing manager for agricultural and forestry tires at Trelleborg Wheel Systems Americas Inc.
“Our dealers were concerned early in 2013 because they weren’t seeing their product moving and that was due to the weather with the long spring -‑ it was raining until the end of June. After the spring the market was very good during the summer and through September. This fall the market was active and dealers were selling tires. However, we feel that this year is about the same as 2012 in terms of volume, and that’s what we’re hearing from our dealers in the market.”
2013: Good year or bad year?
“2013 overall has been a good year for the farm tire market,” says Brad Feeney, commercial products program manager at TBC Wholesale Group, distributors of the Harvest King brand.
“Overall units are up over the prior year. Market prices have dropped the past 12 months due to lower raw material costs while dealers and manufacturers worked through most overstocks from 2012.”
“Demand in our farm tire segment has been soft this year,” says Michael Burns, marketing manager, Del-Nat Tire Corp., manufacturers of Akuret brand bias rear and small farm replacement tires.
“Our sales normally peak in mid-March but did not peak until mid-May this spring. Our sales are reflective of an unusually cold and wet early spring in North America. It delayed planting and shortened the growing season which has impacted sales in this segment.”
“2013 was a good year overall for the farm tire market, however it was full of ups and downs,” says Jay Christman, commercial sales manager at K&M Tire Inc., manufacturer of Co-Op brand tires.
“The drought throughout the Midwest in 2012 left many of the tire dealers with large inventories of tires to be carried over into 2013. There were many farmers who did not even make it out to the field for harvest in 2012 which left many of the tires untouched until the planting season of this year.”
Christman says many farm tire dealers had hopes of a good second quarter in 2013, when farmers would likely need to replace tires. However, when farmers finally could plant their crops, ideal planting and soil conditions created less wear than usual on farm tires and equipment.
“Farmers were in and out of the fields in record time with very little issues that would cause their tires to fail,” says Christman. “Now is the end of the harvest season and much of the winter crops have been planted. The harvest season has been good in much of the Midwest this year. Farmers are in full force with their equipment in the fields and confident in the return. This has made a positive effect on tire sales in October. Dealer’s inventories are depleting and orders are already coming in for the spring.”
Overall, 2013 was average at best for farm tires. Christman hopes the momentum of the second half of this year will continue into 2014.
2014: Calm seas?
According to Tom Rodgers, director sales and marketing for Firestone-brand ag tires at Bridgestone Americas Tire Operations LLC, manufacturers were set up for a good Q4 2013 as the result of late planting and late harvests.
“Typically in the Midwest, the corn and soybean harvest is over by mid- to late-October,” says Rodgers. “In the middle of November there was still corn in the field and that delay is pushing farmers’ year-end tire purchases back a little bit. That momentum will continue into 2014 for the replacement farm tire market.”
While no one can say what the weather is going to do in the next several years, manufacturers can predict other factors that affect farm tire dealers.
“I think two to three years from now you’re going to see another wave of offshore tire companies coming over here from places like India and China,” says Richard Rose, vice president of sales and marketing at Titan International Inc.
“I think tire dealers are going to have more choices and instead of having a whole slew of brands at different price points, they’re going to be more like the automobile tire dealers, where they have 10, 15 brands from all these other places. I think farm tire dealers are going to see more selection out there and different qualities, and there will probably more lower qualities, but a whole different variety.”
Winds of change: manufacturers adapt
“The issues that affect farm tire manufacturers include weather patterns, increased customer demand for productivity, commodity pricing and low-cost offshore competition,” says Carlisle’s Brown. “Through the difficult economic conditions recently it has become clear that farm tire manufacturers need to be focused on delivering solutions which can boost the productivity of the farmers and the farm equipment.”
Another issue that affects farm tire dealers is the shifting nature of the farming industry.
“One conversation that has come up many times with various dealers is that small farms are leaving and many large volume farmers are taking over,” says K&M’s Christman.
“This takes a lot of the older equipment out of the fields and causes the replacement tire market to suffer throughout the Midwest. The large farmers tend to invest in new equipment year over year and turn that equipment over before the tires need replaced.”
Christman says that practice takes business away from many of the independent shops who deal directly with the smaller farmers.
“The major issues that affect farm tire manufacturers continue to be the impact of raw material costs, government tax and crop incentives, crop prices and of course the weather, which directly impacts the success of the annual harvest,” says TBC’s Feeney.
“Yet we also are seeing tire manufacturers challenged with keeping up with new OE sizing for American and foreign markets, challenges in keeping up with developing technologies in crop management and reduced soil compaction.”
Another concern for U.S. farm tire manufacturers is that offshore manufacturers continue to take market share in this country.
“Considering the expansion and growth of offshore competition, product knowledge and information is becoming increasingly important to farm tire dealers,” says Carlisle’s Brown.
“While there may be many low-priced tire options available, dealers need to know which products to recommend that will best suit customers’ needs. If a tire is sold simply based on price, then customers may be disappointed with the life and performance received from the tire purchased.”
Brown says his company is continually working to better educate distributors to assist in the buying and selling process. That has its challenges as large-scale farming expands.
“As farm equipment grows, the tires and their load requirements do as well. The increased tire prices place more pressure on dealers to select the right product and manage inventories carefully.”
Dealers hold their ground
“Farm tire dealers are affected by the financial health of the ag economy both on a macro and micro level, supply from manufacturers, the ability to have brand or product controlled distribution to address competitive pressures, price fluctuations, especially the issue of managing inventory during a period of falling prices,” says TBC’s Feeney.
“One big challenge for farm tire manufacturers is the modern necessity of building a tire that can hold up today’s large and heavy equipment and at the same time reduce the soil compaction,” says K&M’s Christman. “This has been a common trend in the last few decades and there have been some tremendous leaps made by many of the manufacturers. It is a constant battle between the manufacturers to come up with a tire that will make the farmer money in the field.”
“More than any other segment, agricultural tires are seasonal and very dependent on the weather,” says Mike Phelan, Del-Nat’s inventory and pricing manager. “As farm tire sales slacken off it impacts inventory turns and purchasing cycles. We will definitely see some impact on normal orders going into 2014.”
“If 2011 was a banner year, I think the sales will increase slightly for 2014 but I don’t think it will be huge,” says STA’s Ent. “2009, 2010 and 2011 were very good years for us for ag tires. The life of a farm tire is around five years. When the product life starts to cycle, we’ll start to gain back product demand.”
To see rear farm tire shipments and market shares, click here.