AKRON—Tire demand is falling with the economy, but the agricultural tire sector should continue to buck the trend in 2009, according to industry and government forecasts.
Last year, record high commodity prices fueled a 4-percent rise in U.S. farm income, which caused high demand for farming equipment, including tires. The U.S. Department of Agriculture expects that to slip some this year, as the soft economy has reduced commodity prices, but the equipment market should still be comparatively strong.
Sales of U.S. combines in 2009 are expected to surge 9.3 percent, four-wheel-drive tractors to jump 4.4 percent and two-wheel-drive tractors with 100-plus horsepower engines to increase 3.3 percent, according to a forecast from the Association of Equipment Manufacturers.
About 75 percent of surveyed manufacturers estimated net farm income will increase or remain the same, while 94 percent expected the demand for replacement equipment will either rise or stay the same, despite the economic problems facing the nation.
“The commodity prices have retreated from their record high levels in 2008, but they're still above a 10-year average,” said Ken Allen, vice president of Firestone Agricultural Tire Co. The USDA reported that net cash income for farmers in 2008 will be 33 percent above the 10-year average of $68 billion.
“Debt equity on the farm has never been better,” Allen said.
While demand for farm tires has been high, manufacturers faced difficulties in 2008 making enough to supply their customers.
“I still have tires on back order from last year (2007) so the problems that we had in '08 haven't been resolved yet,” said Mike Weiss, director of purchasing for Durand, Wis.-based Bauer Built Inc.
Michelin has ramped up efforts to make ag tires at its three plants in Europe, and Firestone also has increased production. Titan International Inc. plans to boost its farm radial capacity by a considerable amount, according to Maurice Taylor, the company's chairman and CEO.
“We expect at least a robust first six months in the large row crop tractors and four-wheel drive,” Taylor said.
“That and we've added to capacity, 130-inch cure presses are starting to arrive and all this stuff is starting to click,” the Titan executive said.
Weiss predicted that the first half of 2009 will remain good for the agricultural business, but economic problems could begin to rub off on the market by late spring.
“It's kind of a wait-and-see because you have the farmers with their pent-up demand,” he said. “We're kind of cautious as we've moved forward in '09.”
The AEM, however, said in its report the association expects demand for farm equipment to remain high throughout the year.
“Certainly, recent economic conditions are testing the market's confidence,” said Charlie O'Brien, AEM vice president of Agricultural Services. “But people need food.”
With population increases, O'Brien said food production will need to increase by 50 percent by 2025 and double by 2050, and demand for energy also will continue to rise.
“Equipment will be needed to plant and harvest crops to meet both food and fuel needs,” according to O'Brien.
“Consequently, while we will certainly see some short-term impact as a result of the overall economic slowdown, agriculture can rely upon these sound fundamentals for business longer term.”