"America's farmers deserve the policy certainty that a five-year farm bill would provide," said Bob Stallman, president of the American Farm Bureau Federation, in a press release regarding the introduction of the bill.
"We need a flexible, reform-minded bill that draws its key risk management tools from crop insurance provisions. We are encouraged that the process is starting early, and we look forward to working with leaders and committees from both houses and both parties to get this long-term farm bill done."
Though the previous bill has been extended, the status of the new bill is creating an air of uncertainty in the farming community, Mr. Haney said.
"It's still in flux. It's still not been decided, and as a result this has a—I'm not going to say either a negative or positive effect—but it has a questionable effect.
"People are stalling or holding off on purchases," Mr. Haney continued. "It was supposed to be resolved at the end of the year, but it's part of the fiscal cliff problem. It has not been addressed yet, and how soon or when they'll do that is anybody's guess."
Mr. Haney said the status of the farm bill influences decisions on tire and equipment purchases, and without a new one being passed it's difficult for farmers to predict their income in the future. With the last few years being overwhelmingly positive for farmers, many of them now have the ability to wait before making purchases.
"It's always been kind of a boom-bust cycle," Mr. Haney said. "You either have lots of money and buy lots of equipment or they have no money and buy nothing. What we've been into here is we've had several good years, and for once in a long time farmers now have the ability to manage their funds beyond just their immediate equipment needs. They're looking at retirement planning, real estate purchases, things other than just getting the next crop in the ground.
"As a result, they have the luxury to kind of hold off," he continued. "They can make decisions the way we non-farmers make decisions. They look at the total picture rather than their immediate farm needs. That's a trend I see happening right now that I have not seen in a long time, if ever."
Because of this, farmers aren't as quick to pull the trigger on equipment expenditures as they have been in past years. Mr. Haney said if farmers prove to be cautious on their purchases, it could lead to a contraction of business for larger farm tire manufacturers—something which BKT could take advantage of.
"If and when there are contractions in business, manufacturers tend to cut unprofitable product lines and do a little housekeeping," he said. "All of a sudden, shortages in different types of tires can be created. I've seen this…. On the low end, we may see a lot of tires being discontinued. What this does is it creates shortages. It then creates opportunities for newer companies to pick up these products that others have discontinued."
Mr. Taylor, however, said he isn't concerned.
"I never watch the farm bill," he said. "Who really thinks that the politicians mean anything? It doesn't mean diddly crap. There're so many egos there. We'd be better off if they just shut down."
Harry Rowold, co-owner of Harry's Farm Tire Inc., a four-location farm tire dealership with its headquarters in Wheatland, Iowa, said he's not anticipating a drastic change in business this year, one direction or the other.
"We just kind of follow our business here, and our sales are as good as expected," he said. "What's coming as far as the real world goes—in other words, what the politicians are doing and what effect that has on the farmer—I wouldn't have a clue.
"But come the end of March the wheels are going to turn, and there's going to have to be rubber on the tractor."
Supply meets demand
Mr. Rowold said lately prices on farm tires have begun to drop and the tires have become easier to acquire, as industry supply has improved.
"We see kind of a trend in farm tires coming down in price instead of going up, so that's been a bright spot," he said. "…I think for the past five years most of the production has been going to original equipment, and I'm not sure whether that slowed down or whether this new Mitas brand...built in the United States is picking up some of the slack and loosening up some of the inventory that we haven't been able to buy in the last three to five years. Consequently, I think prices are coming down."
Mitas Tires North America Inc., a subsidiary of Czech tire maker Mitas a.s., began producing farm tires at its Charles City, Iowa, plant last April. As of the beginning of 2013, Mitas has made approximately 1,700 metric tons of tires and sold to customers primarily in North America.
Annual capacity at the plant is 13,500 metric tons, Mitas said. The tire maker uses both the Mitas and Cultor brand names.
The company recently added six curing presses and eight tire-building machines and instituted around-the-clock production at the facility.
Mr. Taylor noted Titan's capacity has increased over the last year and he doesn't expect shortages to be a problem going forward. In addition, the company has plans to launch more than 100 tire and wheel sizes just on the agricultural side in 2013.
"I'm going to take the bouncing ball out of the industry," he said. "That's my goal."
Mr. Taylor said he believes true demand in the automotive aftermarket is often less than what it appears to be.
"Say a guy wants a set of duals, so he's out shopping around," he said. "He'll probably call three or four different tire dealers, and of course none of them will have that inventory because it's too much money. Most of those guys are car and truck.
"What they'll do is call up the big wholesaler, so you might have each of them calling one or two big wholesalers.
"Then what happens is, say, two of them call the same guy," he continued. "You're taking the demand, which was one, and you've exploded it to four.
"That's why there're such wild swings in the aftermarket."
Mr. Haney noted that BKT will be expanding its farm tire lines as well this year, adding more large-size flotation radials and likely introducing implement radials.
"It's basically a radial world, and it's growing," he said. "We keep filling in where needed on the bias-ply tires.
"It's certainly a large market for bias tires, and we don't really see any big changes, but the growth is really in radial tires utilizing concepts like better rolling resistance, less compaction, better ride."
While supply has improved in the last few years, he said, there certainly isn't excess capacity.
"For these dealers, it's in their best interest to have the right tires at the right time," he said.
"If they order too late there's a good chance they won't have them, so they might hit a financial target but they won't hit a sales target."
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To reach this reporter: [email protected]; 330-865-61
