If 2004 was a great year for farmers and the tire dealers who serve them, the windfall was spread among a smaller number of each.
Farm consolidation is hardly a new phenomenon. Among the country's more than 2,000 rural counties, only 420 depended on farming in 2000, according to the U.S. Department of Agriculture's research agency. In 1990, 618 counties depended on farming. In fact, Terry Francl, a senior economist at the American Farm Bureau in Washington, said the number of farmers likely peaked in the 1950s and has been falling since.
``It's a long-standing trend of consolidation in the industry, and I suspect that's going to continue to happen,'' he told Tire Business.
The diminishing numbers of mom-and-pop farms-and their replacement by corporate-owned mega-farm operations-imposes various consequences on tire dealers. On one hand, many of the casual dealers who in the past may have dabbled in the business have exited, leaving more business for those who are more focused on ag's needs. On the other hand, the rise of larger, more productive farms means tire dealers have to stock and service even larger tires and equipment, not the old bias standbys that smaller farmers used.
Tad Bauer, executive vice president of marketing and logistics for Bauer Built Inc. in Durand, Wis., said the larger tires change the service dynamics of the business. Larger farms also are on the tip of radialization-making the frequency of sale longer since radials generally last longer than bias.
Neil Rayson, president of CGS Tires U.S. Inc., Charlotte, N.C., said this service dynamic is a top reason some smaller tire dealers exit the ag business. He noted that larger farm equipment needs more expensive tire machinery, experienced technicians to use it and a sizeable inventory investment thanks to size proliferation.
``The farm business is one of these things, it's coming to the point where you've either got to be in it and invest in it or just get out of it,'' Mr. Rayson said.
He pointed out the trend is helpful for tire makers because the farm tire dealers who are heavily in the business are more likely to be well versed in farm tires and equipment and more able to communicate proper applications to customers.
Bruce Docter, operations manager for Nebraska Tire, said many tire dealers finally exited the farm business in the past few years when they decided their farm trucks were too expensive to upgrade. Mr. Docter said Nebraska Tire has bought six service trucks in the past 18 months from dealers wary of several soft farm-economy years.
Ag tires account for 40 to 50 percent of Nebraska Tire's business, but Mr. Docter is quick to point out it's not the 12-outlet dealership's only sustenance. He said Nebraska Tire carefully chooses store sites in areas with 4,000 to 10,000 people-enough to sustain the stores on passenger and light truck tire sales during slow farm months.
``Our main focus is the farm tire business, but we also are smart enough to know farmers buy three months in the spring and three months in the fall, and in the other six months you better have commercial or consumer tires,'' he said.
Firth, Neb.-based Nebraska Tire plans to open two stores in the next few months, with 10 to 15 possible in the next year due to a potential acquisition.
To grow its own farm tire business, Bauer Built plans to add more associate dealers to handle ag tires. These smaller, independent dealers could tap markets where 27-outlet Bauer Built doesn't have a physical store, and they also tend to have well-established ties with their customers.
``We're looking to grow and expand that,'' Mr. Bauer said.
Bauer Built now has about 212 associate dealers, the majority of whom handle passenger and light truck tires. A couple dozen handle only farm tires while others do a mix. The associate dealers can display farm tire signage from Bauer Built and have access to marketing programs, specialized training and volume discounts.