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Steady Demand Floats Ag Tire Market

In 2020, a ‘Flat’ Market Is a Good Thing, say Manufacturers

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“We’re optimistic heading into 2021,” says Paul Hawkins, senior vice president, aftermarket sales, Titan International Inc.

The COVID-19 pandemic left no tire industry product segment untouched. But the ag tire segment was impacted less than others. At least that’s the general consensus of major ag tire manufacturers in North America.

It hasn’t been smooth sailing across the board, though. Some equipment manufacturers, including John Deere, enacted temporary production shutdowns early in the year. Others, like Kubota, experienced “minor disruptions,” but managed to maintain deliveries. 

Through it all, demand for tires in the six categories that MTD tracks - radial rear OE, radial rear replacement, bias rear OE, bias rear replacement, small farm OE and small farm replacement - remained steady, resulting in what several ag tire manufacturers have described as a relatively flat market, year-over-year.

MTD recently caught up with executives from several ag tire manufacturers that operate in North America for a look at how their business was impacted by COVID-19, plus the state of ag tire demand as the year winds down. They also provided a preview of 2021 and identified market trends that ag tire dealers should track.

MTD: How has the COVID-19 pandemic impacted your ag tire business in North America?

Nick Phillippi, national product manager, agriculture, Alliance Tire Americas Inc.: Farmers have done a great job of keeping North America and the world supplied with food, feed, fuel and fiber, despite the pandemic, which means their equipment has been rolling this whole time. Our supply of tires to the North American market remained very stable in spite of the nationally mandated shutdowns of our factories in India for about three weeks in the spring as part of a national COVID-19 lockdown. That affected our bias-ply and conventional radial farm tire production to some extent. But our high-tech, increased flexion (IF), very high flexion (VF) and flotation radial tires are made at our plant in Hadera, Israel, which remained in production, so there was no interruption in supply of those tires. 

On the OE side, there was some slowdown in the farm equipment market. Part of that was probably the impact of the early stages of the pandemic lockdown. But I think more of it had to do with overall poor margins in agriculture, which cleared up as the year went on.

Doug Kershaw, vice president, BKT USA Inc.: Overall, we are ahead of where we were a year ago at this time. It has been challenging to call on customers and work with them to build their businesses because of COVID-19-related restrictions. 

The biggest challenge with COVID-19’s impact on worldwide business is the shipping industry disruptions, with container shortages, freight increases, poor after-sales service and the pooling of resources by shipping companies. This indirectly hurts the flow of raw materials to finished products. As far as BKT as a company, our ag team has remained fully intact. We remain focused on growth.

Tony Orlando, president, Bridgestone Americas Inc./Firestone Ag: Certainly, this has been a challenging year - not just for our business and the industry, but also for our teammates, customers and the communities where we operate.

Despite the pandemic, our business has remained relatively resilient as farmers provide an essential service. Our Firestone ag tire plant in Des Moines, Iowa, has been back up and running since mid-April, following a brief, three-week closure at the beginning of the pandemic. Today, we remain focused on delivering the tires that farmers need to keep their operations up and running, while also mitigating the spread of the virus in our facilities.

Ijay Gambhire, chief executive, CEAT Specialty Tyres Ltd.: Farmers have certainly become more cautious with their spending. CEAT has found greater consideration among farmers and this has resulted in a growth in our business, even during COVID-19.

Matthew Futrelle, head of sales and marketing for the Americas, Continental Specialty Tires: Continental relaunched our agricultural line in the U.S. and Canada in 2018. From that starting point, we have been able to add new distribution, sell more into our commercial dealer network and take advantage of our OE fitments on tractors that make their way to the U.S. and Canada. Our business has continued to grow, despite the COVID-19 crisis. Agriculture is a bright spot for us.

Rick Harris, regional manager, Global Rubber Industries (Pvt) Ltd. (GRI:) GRI’s agricultural business continued to grow through the uncharted waters of COVID-19 in North America. The Sri Lankan government considered the manufacturing segment as an essential sector, enabling GRI to continue production with strict COVID-19 preventive measures in place. Continued production allowed GRI to satisfy market demand for agricultural and industrial tires in North America.

Bill Dashiell, senior vice president, commercial tire division, TBC Brands LLC: TBC Brands has continued to experience year-over-year sales increases on the ag tire side of our business throughout the COVID-19 pandemic. 

Paul Hawkins, senior vice president, aftermarket sales, Titan International Inc.: Initially, we did see a slight dip in the aftermarket in March, largely because most tire dealers were trying to learn how to continue servicing their customers safely during that time. That said, our aftermarket performance has been good since then. We have been well-positioned to support (customers) throughout the pandemic for several reasons. First, both our tires and wheels are made right here in the U.S. We are less reliant on the global supply chain, so our dealers have been able to get a consistent, dependable supply from us. Secondly, because we are a global company, we had the benefit of applying learnings from our facilities in countries that were hard-hit by the pandemic early.

Andrea Masella, commercial director North America, agriculture, Trelleborg Wheel Systems: All our sites dedicated to the production of agricultural tires remained open during the height of the pandemic. This was possible thanks to continuous investment in processes, tools and staff training. As a result, we have been able to support our customers and the entire supply chain throughout the pandemic and at the same time, we have built an efficient and flexible global production platform.

Tractor

Weather, trade and commodity prices are just three of the many factors that could influence ag tire sales next year.

 

MTD: Can you describe the current state of overall ag tire demand in the U.S. and Canada?

Phillippi (Alliance): When farmers keep their current machines running an extra season or two or invest in used equipment, we pick up replacement tire business. Our replacement farm tire business, which helps farmers get more life out of older machinery, has gone very well over the past several years and this year was no different.

Kershaw (BKT): There has been very strong demand for products in the ag market, but the challenge has been meeting that demand. We have a very strong and loyal customer base, so we work closely with them to help sell and stock the products they need. Ag tire demand also has been influenced by government policies, with regard to the exporting of farm products, assistance given to farmers through farm bills and the tariffs imposed on imported tires.

Orlando (Bridgestone): American farmers continue to navigate the economic impact of COVID-19, which includes managing the effects of low commodity prices. The effects of COVID-19, combined with tough winter conditions, has resulted in a slight decrease in demand for agricultural tires in 2020.

Gambhire (CEAT): COVID-19 has definitely impacted the ag economy adversely. Farmers, carrying on last year’s trend, are actively considering value brands vis-a-vis premium brands. We are pleased to see a decent uptick in sales. 

Futrelle (Continental): On the micro side, our ag tire demand is increasing as we rebuild our brand and our distribution. Continental has a strong name, a strong team, strong products and a strong distribution network to support our growth. On the macro side, the total ag tire business also seems to be growing, which is good for farmers and good for those of us in the ag tire business.

Harris (GRI): We believe that overall agricultural tire demand in the U.S. remains stable. Even though new OE tractor sales have slowed down, the replacement market has been growing in the U.S., thereby stabilizing the market.

Dashiell (TBC): In 2019, farmers battled weather and suffered setbacks due to difficulties with major trade partners.However, the ag business has experienced some recovery in 2020. Despite the impact of COVID-19, the overall ag economy - especially for value brands - remains healthy. We continue to see increasing demand for our products and expect it to remain strong.

Hawkins (Titan): Weather is always a major factor in farmer profitability and thus, ag tire demand. We’ve been much better off this year as compared to last year. The flooding across the western corn belt last year had such a major impact on planting and harvesting schedules. Our aftermarket business in ag remains quite strong. As we close out the year, we’re excited to see how the additional round of $14 billion in coronavirus aid to farmers announced in September will impact farmer spending.

Masella (Trelleborg): Compared with other industries, the agricultural market was only moderately impacted by the health crisis, as it is seen as an essential industry. However, during the first half of 2020, some agricultural machinery manufacturers had to temporarily shut their production units down, which led to a drop in the supply of OE tires. On the other hand, the demand for agricultural tires in the first quarter continued in the replacement market.

MTD: What will 2021 look like?

Philippi (Alliance): I think we will see a nice bump in farmers’ investment in equipment in 2021, whether it’s in new machinery sales or in buying good, used machines. There should be some pent-up demand in the market and if we don’t have any major events, 2021 should be a strong year for farm tires. We’re also expecting significant increases in our replacement tire sales for 2021.

Kershaw (BKT): We don’t feel that the first quarter will look much different than it does right now. If government policies remain the same, demand will remain strong. It is very hard to say what the remainder of the year will look like at this point, as the advancements in the development of a COVID-19 vaccine will play a part. Weather conditions always have a huge impact on the industry. But worldwide markets - and the production and purchasing of agricultural products - will be a large factor, also. 

Orlando (Bridgestone): We continue to monitor the ongoing COVID-19 crisis, weather conditions and other market dynamics closely and are cautiously optimistic about 2021. We expect to see additional recovery in the ag tire segment in 2021 and beyond, with sales slightly better than this year.

Gambhire (CEAT): We are very optimistic about 2021. We also hope that the overall economy finds itself out of the pandemic-induced slowdown.

Futrelle (Continental): We anticipate that the ag tire market will be slightly up for North America, at least in the replacement business. On the OE equipment side, we predict an uptick from 2020, which will most likely finish slightly down from 2019. OE could easily be affected if farmers have any uncertainty regarding financial conditions from the economy, taxes, tariffs or even COVID-19-related shutdowns.

Harris (GRI): GRI expects the current COVID-19 situation and related business outlook to continue into much of 2021. GRI expects the current demand for agricultural tires to remain the same in 2021 as it is in 2020. 

Hawkins (Titan): Based on a really good year in the aftermarket, we’re optimistic heading into 2021. We’re continuing to invest in product development that will open up new opportunities for us.

MTD: What trends should ag tire dealers monitor as the new year begins?

Phillippi (Alliance): The most basic driver is whether farmers are making money. Of course, another COVID-19 lockdown would be rough on the farm economy, especially in its effects on food service supply chains, like we saw this year. We’ll be watching the commodity markets to see whether crop prices stay decent and watching the news to see how trade is going with China and our other overseas customers. 

But most of all, ag tire dealers should be listening to what their customers are saying. Tires are so vital to farmers’ livelihoods that they really represent a great opportunity for dealers to shine.

Kershaw (BKT): Equipment is continuing to get larger and larger, carrying heavier and heavier loads. IF technology and VF technology in tires are becoming more and more popular in order to be able to carry heavier loads without increasing soil compaction. Also, with more equipment being driven on roads, more implement tires are moving from bias construction to radial construction and from a standard compound to a stubble-resistant compound to improve the life of the tire.

Orlando (Bridgestone): More and more, farmers are asking for better performance from their ag tires. Trends such as the move to radial tires will continue throughout the coming years. Now more than ever, farmers understand the benefits of radial tires - longer tread wear, reduced soil compaction and better comfort and traction - lead to greater productivity and improved yields.

Plus, as equipment continues to increase, more farmers are looking to IF and VF solutions, which are designed to carry the same load at lower inflation pressure or heavier loads at the same pressure as equivalent-sized, standard tires, thereby reducing soil compaction.

Gambhire (CEAT): Overall, the ag economy will be influenced by post-COVID-19 recovery, demand recovery from consuming industries, international trade dynamics, etc. However, the premium-to-value shift is one of the irreversible trends showing now. It also will be important to watch developments on the supply side. Some manufacturers are more adversely impacted than others. Ensuring supply security and stock availability will be key.

Futrelle (Continental): We see a consolidation of farms. While large farms make up less than half of the entire farm population, they continue to grow. As farm families look to pass farms down to the next generation, they can have difficulties dealing with the tax burden and struggle, in some cases, with the reality that their land is worth more as something other than a farm. Another reality is that more and more tire manufacturers are entering the farm tire market segment. Lastly, there is also the trend of digitalization. We are working in the direction of “smart” farm tires that can tie to the vehicle’s information platform and into its telematics solutions.

Harris (GRI): Weather patterns are at the forefront as unplanted ground reduced demand. Any U.S. trade negotiations with other countries - as well as tire tariffs on foreign imports that could have an impact - must be tracked. COVID-19’s impact on rural farm communities is worthy of tracking, as cases in the Farm Belt are on the rise.

Dashiell (TBC): With the uncertainty of the economy due to COVID-19, farmers will continue to migrate more heavily to value-tier products to supplement major brand offerings and improve their bottom line, especially in commodity sizes. We also expect to see continued growth in IF tires as the market continues to embrace lower inflation/compaction tires.

Hawkins (Titan): It’s going to continue to be about having a reliable, high-quality supplier close to home. 

Masella (Trelleborg): It is abundantly clear that to manage both future population growth and environmental challenges, we need larger harvests per cultivated area and significant investments in more efficient agricultural machinery. The agricultural industry is undergoing remarkable change, as emerging technologies reshape farming operations to provide more sustainable and productive systems.

 

Sprouting up: Commodity prices, other factors spur investment

Is the farming industry on the upswing? Purdue University thinks so. The Purdue University/CME Group Ag Economy Barometer rose nearly 30 points in October 2020 - an all-time record for the index.

“The late-summer/early-fall rally in commodity prices - combined with government program payments arising from the second round of the Coronavirus Food Assistance Program - provided a boost to many producers’ income,” said the university.

“Corn and soybean prices continued to rally, even though U.S. corn yields are expected to set a record high.” 

Meanwhile, soybean yields are predicted to be the fourth highest on record.

The university’s Farm Capital Investment Index also hit an all-time high in October, up 9% from September. “The percentage of producers expecting to increase their purchases of machinery in the upcoming year rose to 14% from 11% a month earlier.”

 

2020 farm tire market share by brand and segment

Radial rear OE

Estimated shipments for 2020: 190,000

Brand

Share

Firestone

37.5%

Goodyear

30.0%

Michelin

15.5%

BKT

5.5%

Titan

4.5%

Alliance

3.5%

Trelleborg

2.0%

Mitas

1.0%

Others

0.5%

Total

100%

 

Radial rear replacement

Estimated shipments for 2020: 295,750

Brand

Share

BKT

26.5%

Firestone

25.5%

Michelin

16.0%

Goodyear

13.0%

Alliance

8.5%

Titan

5.0%

Trelleborg

1.5%

CEAT

1.0%

Harvest King

1.0%

Mitas

1.0%

Others

1.0%

Total

100%

 

Bias rear OE

Estimated shipments for 2020: 320,000

Brand

Share

Titan

33.0%

Firestone

28.5%

Goodyear

24.0%

Alliance

7.5%

BKT

3.5%

Trelleborg

2.0%

Others

1.5%

Total

100%

 

Bias rear replacement

Estimated shipments for 2020: 390,000

Brand

Share

BKT

38.5%

Firestone

23.0%

Alliance

12.5%

Goodyear

7.0%

Harvest King

7.0%

Titan

5.0%

Carlisle

1.5%

American Farmer

1.5%

Trelleborg

1.5%

CEAT

1.0%

Others

1.5%

Total

100%

 

Small farm OE

Estimated shipments for 2020: 311,000

Brand

Share

Goodyear

26.0%

Titan

19.0%

Firestone

16.0%

BKT

13.5%

Carlisle

10.0%

Alliance

10.0%

American Farmer

2.0%

Trelleborg

1.5%

Others

2.0%

Total

100%

 

Small farm replacement

Estimated shipments for 2020: 1.25 million

Brand

Share

Firestone

22.5%

BKT

18.0%

Goodyear

15.5%

Titan

14.5%

Carlisle

10.0%

Harvest King

10.0%

Alliance

4.5%

Trelleborg

2.0%

American Farmer

1.0%

Deestone

1.0%

Others

1.0%

Total

100%

*Ag tire brands must have at least 1% share of market to be listed.

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