Farm Tire Sales -- What to Expect in 2016
Unpredictable crop prices, just like the unpredictable weather, aren’t going anywhere, and manufacturers and marketers of farm tires know they have to be strong enough to withstand both. It’s the added pressure of everything else – fluctuations in original equipment production and depreciation write-offs, and a strong dollar to name a few – that is really making life difficult.
Still, most are bullish, like James Crouch, North America farm segment marketing manager for Michelin North America Inc. “The market will recover soon enough. Even though all of the tires in the farmer’s shed are new right now, they will eventually need to be replaced. We believe that when the replacement market does rebound, it will be significant.”
Modern Tire Dealer turned to Crouch and other farm tire experts from companies that have the most to lose – the ones holding onto the largest shares of the market. We asked these industry experts to paint a picture of what to expect in 2016. Here’s who responded to our questions:
- Scott Sloan, agricultural product manager for Titan Tire Corp.
- James Crouch, North America farm segment marketing manager for Michelin North America Inc.
- Bruce Besancon, vice president of marketing for Alliance Tire Americas Inc.
- Jim Enyart, technical service manager at BKT Tires USA Inc.
- Neil Rayson, vice president of Mitas Tires North America Inc.
- Tom Rodgers, director of sales for Firestone brand farm tires at Bridgestone Americas Tire Operations LLC
- Brad Feeney, director of commercial tire programs at TBC Brands
MTD: What are the primary factors influencing the farm tire replacement market?
Sloan, Titan: With current commodity prices, growers are more price-conscious than usual, and they may be more likely to make purchase decisions based on up-front cost as opposed to brand preference or quality. Dealers are also feeling the pressure to stock less inventory. This means that in some cases, growers have fewer options to choose from when they go to make a purchase. On the manufacturing side, original equipment manufacturer (OEM) production is down, which may equate to a slight uptick in aftermarket sales as growers hold onto their equipment for longer periods of time.
Crouch, Michelin: The primary factor influencing the farm tire replacement market right now is a low net farm income. The sharp decrease in net farm income is a result of low commodity prices. We have had several years of some very good crops which has driven crop inventories up and the prices down. Highs and lows in commodity prices are a normal occurrence and are expected. The difference in this cycle is the compounded effect of the expiration of the Section 179 Bonus Depreciation Amendment. Farmers were allowed to depreciate equipment purchases at a much higher dollar figure than they were able to in the past. They used this to buy new equipment at incredible rates. This was great for both the OEMs and the tire manufacturers. This abnormal purchase behavior did, however, create somewhat of a bubble. When the bubble burst, the OEM assembly lines as well as tire shipments slid to a halt.
Besancon, Alliance: When we look at these markets, a huge factor that needs to be considered is the reliability of the products that a farmer will be buying. They have to have the assurance that their tires will withstand the tough conditions of day-to-day activity in the field without giving out or otherwise causing them down time. In ag tires, resistance to stubble damage is a vitally important factor contributing to tire reliability, especially with the very stiff, very durable corn hybrids that have become popular in recent years. There’s also the ability to function at the high speeds needed to get to and from the field. And more farmers recognize that they need to operate at low inflation pressures so soil is not compacted.
These factors all relate to productivity. Farmers get paid only when their products come out of the field, and everyone wants to do this as safely and rapidly as possible. That’s especially important because most harvests are also a race against the weather.
Of course, economy ties it all together. Reliability and productivity mean nothing if the tires aren’t priced at a level that delivers great value over the product’s service life.
Farmers are now coming through a second consecutive year of soft commodity prices. They had several great years when they stocked up on new equipment; now they’re trying to be as efficient and productive as possible. They’re holding onto equipment that might ordinarily have been traded in, and tire dealers are helping them understand how the right replacement tires can help their machinery perform at its best. This is exactly the environment where reliability, productivity and economy really show their importance.
Enyart, BKT: The overall ag economy is driving the replacement market. Commodity prices are very depressed, export markets are sluggish due to the increased strength of the dollar and carryover of feed grains along with overall good production from 2015. Reduced OEM production has resulted in excess supply moving from OEM channels to the replacement market at attractive prices.
Rayson, Mitas: Input costs rarely seem to decline in line with commodity prices so while corn is under $4 and is projected to stay that way through 2016, it does not provide farmers with the financial confidence to spend. That said, in the absence of bonus depreciation under section 179 in 2015 for new equipment, there should be a higher demand for replacement tires as farmers keep equipment instead of trading it. Farmers generally are cautious, which will dampen demand if there are no tangible positive developments before spring 2016.
Rodgers, Bridgestone: Lower grain commodity prices from the record highs in 2011, 2012 and 2013 have had a huge impact on the industry. OEs have dramatically reduced manufacturing on a lot of their equipment lines to right size for current market conditions, and to help their dealer manage the new versus used equipment inventories on their dealer lots. Also the reduction on the Section 179 deduction from $500,000 to $50,000 and the loss of bonus depreciations has also impacted the purchasing of new farm equipment. Drought conditions currently are having an impact in the western U.S. and a large agricultural state like California.
Feeney, TBC: The two major factors in the 2015 replacement market are OE sales are down and pricing instability. With commodity prices dropping it has created lower farm income so the demand for agricultural machinery has weakened. The OE agricultural equipment in the U.S. and Canada is down about 20% to 25% for 2015. With OE down, the major manufacturers have all come down in replacement price to move units. This has created a lot of price compression between product tiers.
MTD: What new tires will you introduce in 2016?
Sloan, Titan: Titan is continuing to introduce new Low Sidewall (LSW) sizes and expand existing product sizes to meet the needs of our customers. We recently introduced new LSW row crop sizes for MFWD tractors, including the Goodyear OPTITRAC LSW380/65R42, and LSW480/70R54 sizes. We plan to do extensive field testing in 2016 to show the performance benefits of these new row crop LSW sizes over standard sizes. OEMs are starting to see the value of the LSW design, and several new LSW sizes for combines will be available for order on 2016 John Deere and CNH Industrial combines, including LSW1250/35R46 and LSW1100/45R46.
Other product launches planned for 2016 include a new line of radial implement tires, which will serve as replacements in the aftermarket for bias sizes with 15-inch wheels, including 9.5L-15, 11L-15 and 12.5L-15 sizes. Durability is a top priority for implement tires, and this new line of radials will have higher load capacity than the existing bias tires in those applications, and will be able to run at lower inflation pressures and generally are more durable than comparable bias implement tires. We’re also releasing a new non-directional dual-traction irrigation tire, the Goodyear Raindrop 380/70-24, which provides traction in any direction when used on center pivot irrigation systems.
Crouch, Michelin: Michelin has a very aggressive launch schedule for 2016. We are launching more than 20 new radial tires for North America in 2016. Most of these tires will fall under our technical Michelin Ultraflex Technologies segment. These tires are IF (Increased Flexion) and VF (Very High Flexion) tires and will be focused on minimizing ground pressure to increase the farmer’s yield. When commodity prices are low and input costs are still climbing, farmers can really benefit from a few extra bushels an acre as a result of low compaction tires. That’s where our focus will be for the next several years. We want to make sure farmers around the world are getting the most they can out of every acre.
Besancon, Alliance: We will continue to expand our range of IF and VF (increased flexion/very high flexion) tires. The flagship in that line is the Alliance IF/VF 363 design, a tall, narrow row crop tire with high load capacity aimed at the sprayer market. In the sprayer market, speed, durability and great road handling are critical factors for farmers and commercial applicators. Those factors are all vital for safety, productivity and value.
In the flotation market, we will be launching the Alliance 398 High-Speed Flotation tire, which will operate over the road at speeds of up to 62 mph while still providing superior traction qualities in the field. With the 398 High-Speed Flotation tire, the farmer can get his work done no matter what the conditions are, and then get back home quickly and safely.
Enyart, BKT: We continually introduce new BKT branded products to the market as well as update and improve existing offerings. We typically introduce about 100 products into the marketplace each year and plan to continue the same rate of development and releases.
Rayson, Mitas: Under the Mitas brand we are continuously working on the range extension of our SFT (Super Flexion Tires). It is our key product. Mitas SFT tires are designed for high-horsepower tractors, and the largest grain carts and combine harvesters. Their main advantage is the flexibility of variable inflation pressure and optimal performance according to application. The flexible ultra-strong sidewalls allow low inflation pressures for high load-carrying capacities, gentle ground handling and higher yields.
In 2016 we also will introduce new sizes of Mitas VF (Very High Flexion) HC 2000 tires which are suitable for powerful tractors. The Very High Flexion tire’s main advantage is maintaining constant tire pressure at any speed. The VF’s larger footprint leads to less soil compaction and increased mobility under difficult and wet soil conditions. 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 more complex solution of rubber tracks. Compared with a standard tire, the VF tire enables 40% more load.
We think the future belongs to so-called low-pressure tires, which offer the solution to the issue of soil compaction. Such low-pressure tires include, for example, our Very High Flexion line: VF HC 1000 for sprayers, VF HC 2000 for powerful tractors and VF HC 3000 for harvesters due for release during 2016. Next year we will be intensively working on the extension of our VF range.
Rodgers, Bridgestone: We recently launched Firestone Agricultural Rubber Tracks for farm equipment. So we now offer the complete solution for the North American farmer on what they need whether it is tires or tracks.
We are expanding our AD2 product offering to cover more of the farmer field applications. This covers the largest IF/VF CFO tires for combines and large grain carts to small implements where we offer the Destination Farm implement tires. This provides the same technology found in the larger equipment but designed to carry the load of implements being used with the larger tractors. You are maximizing your compaction management by using the AD2 tires on both tractors and the implements.
Feeney, TBC: The Harvest King Field Pro R1-W will start in 12 popular sizes. With the increasing inventory of high powered tractors the Harvest King Field Pro fits the need for a value product segment. The R-1Ws are built to reduce soil compaction, improve fuel economy and increase traction. This offering will allow the farmer to optimize their profits without losing performance.
In 2016, Harvest King will come out with several lines in the Field Pro Bias Series. This will give our customers enhanced competitiveness while increasing the size lineup and changing some existing sizes to higher ply ratings.
For the Akuret brand we are looking to strengthen the brand by creating more value and competitiveness to the program. The Akuret brand has had a short lineup and over 2016 we will increase the sizes needed to be a player in the market.
MTD: What’s the latest tech trend for rear farm tires?
Sloan, Titan: Tractors need to carry higher loads at lower inflation pressures, and that’s where LSW technology comes in. LSW tires are capable of carrying those same loads at 40% less inflation pressure than conventional tire technology. LSW technology gives growers the benefit of lower inflation as conventional VF/CFO tires, but with the larger rim diameter of LSW, you get the added benefits of reduced road lope and power hop, two of the major problems encountered by today’s growers running high horsepower equipment.
Crouch, Michelin: IF (Increased Flexion) and VF (Very High Flexion) tires allow farmers to carry up to 40% more load at the same pressure as a standard radial tire. Michelin invented this technology over 10 years ago by utilizing Michelin Ultraflex Technologies and has been continually improving and adapting the technology to fit current market needs alongside farmers and OEMs around the world since. The initial demand for IF and VF tires stems from Europe, but is creeping up to the North American doorstep quickly. The weight of equipment today is crippling on a crop. Compaction is something that is getting a lot more attention in North America. Compaction restricts the plant’s access to water as well as those very expensive chemicals that are applied throughout its life cycle. To put it very simply, lower pressure equals more yield.
Besancon, Alliance: Technology trends go hand-in-hand with the factors that are driving these segments. In agriculture, we are seeing continued increases in radialization — not just in rear farm tires, but also in implement tires. This tells us that farmers are becoming more and more interested in the enhanced reliability and productivity that radials deliver. IF/VF tires are also becoming more important in the market as farmers look for ways to reduce the soil compaction caused by their heavy equipment. The ability to reduce tire inflation pressure can have a major impact in reducing soil compaction, a benefit that can pay off for years.
Manufacturers also are engineering and building agricultural tires for higher speeds and better road handling characteristics. Traveling among widely-dispersed fields quickly and safely is becoming more important as large farms spread out over wider geographic areas. Tractors, sprayers and other farm machines are also getting bigger, faster, more efficient and more ergonomic, and farm tires have to keep up with all that.
Enyart, BKT: Over the last several years, there has continued to be increased interest in reducing soil compaction in the ag segment. That concern in the ag market is being addressed with the “IF” and “VF” technology of carrying 20% or 40% more weight at the same air pressures as standard radials respectively.
Rayson, Mitas: The trend of manufacturing larger and more powerful machines requires the production of technologically advanced tires such as Super Flexion Tires. We use a special type of cord material, a new type of bead wire and new compounds. This technological know-how keeps us at the forefront of agricultural tire manufacturing.
Rodgers, Bridgestone: Some of the areas we are looking at with technology is the increased use of steel belts this will provide improved puncture resistance and increased load capacity. Back in 2014 we started using soy oil to replace petroleum based oils in tire production in all of the ag tires produced in our Des Moines, Iowa, plant. This is helping farmers since we are incorporating one of the by-products from their key crops into our manufacturing. And as a company it’s a green initiative that we’re looking at a manufacturing process and products to help sustain the environment and support our customer.
Feeney, TBC: VF and IF technology continue to be the main trend in farm tire technology. We are now seeing second tier tire manufacturers with the capability to develop VF and IF tires. The demand a farmer puts on their equipment is massive. Everything has to carry more, drive faster and farther, which is why the VF and IF technology is so important to the market.
The move to radial tires continues to slowly grow. Radial implements are now finding a home in the market place. ■
For farm tire market shares, click here.