How bountiful ag market will be in 2010 may depend on crop prices.

The farm tire industry experienced a see-saw effect in 2009: A fairly robust first-half was marred by slower sales towards year-end.

Whether the market will improve or continue on a downward trend in 2010 is still unclear.

In its most recent farm income and costs forecast, the U.S. Department of Agriculture (USDA) estimated net farm income for 2009 will be down $30 billion—a 34.5-percent drop from a near record figure of $87.1 billion in 2008.

According to the data, the primary reason behind the decline was a sharp decrease in crop prices, including corn and soybeans. However, both are expected to reach record or near-record production levels in 2009 despite shrinking demand. Livestock commodities also fell as a result of declining exports and a lag in production adjustments for changing market conditions.

Diminished production value for the year was offset somewhat by a decrease in farm expenses, which plunged to an estimated $22.5 billion in 2009 from $34.8 billion in 2008, marking the first decline since 2002. While the forecast for net farm income is $6.5 billion less than the 10-year average of $63.6 billion, it remains the eighth largest amount of revenue generated in the history of U.S. farming.

Ken Allen, president of Bridgestone Americas’ agricultural tire division, said while some segments of the agriculture business took big hits in 2009—specifically hobbyist and other small-time farmers along with the forestry industry, which are heavily tied to the housing market—it was still a relatively successful year for the farming industry as a whole and its tire suppliers.

“In net, it wasn’t as tough a year as we perhaps thought it was going to be,” he said. “On a rolling 10-year basis we saw very good pricing on the agriculture commodities, trailing record highs.”

Farm tire producer Titan International Inc. suffered a 16-percent drop in agricultural-related tire and wheel sales through the first nine months of 2009 as many of the company’s OE customers idled their production lines, the company said in its third-quarter results.

Nonetheless, in its recent third-quarter report and conference call with analysts, Titan Chairman and CEO Maurice Taylor Jr. said he’s upbeat about 2010 since most customers will have depleted their inventories and will be in the market for new tires.

George Pehanick, president of Sacramento, Calif.-based East Bay Tire Co., echoed Mr. Allen’s response, saying that sales for the year were “down a bit, but not as dramatically as truck tires or construction-related tires.”

“(Farming’s) been the bright spot on our commercial side this year,” Mr. Pehanick said.

The fill rate problems that many farm tire dealers experienced in previous years all but disappeared in 2009 amidst slower sales, said Mike Weiss, director of purchasing for Durand, Wis.-based Bauer Built Inc.

“Last year all the tires you had on order, you couldn’t get them in, but this year it wasn’t like that at all,” he said. “Fill rate certainly wasn’t the issue this year.”

On the other hand, Mr. Weiss said that while his company hasn’t analyzed its yearly sales figures, 2009 “just feels like it was slower.”

On the manufacturing end, several tire makers had to reduce farm tire production in response to slower sales.

“We’ve adjusted some of our production,” Mr. Allen said. “We’ve been fortunate that we’ve been able to accommodate that without any permanent layoffs, which is something we’re very proud of.”

Dealers and manufacturers alike were hesitant to predict what the next year will hold for the farming industry, with most citing pricing on crops as the biggest determining factor.

“It depends a little on what they do with the price of corn,” said Gary Henry, manager for Bruna Implement Co., a farm equipment dealership in Seneca, Kan. “If corn doesn’t really come up, yeah that’s gonna slow it down.”

Mr. Henry said sales at the store have actually been up in 2009 and that farmers “have been buying tractors and combines pretty readily.” As for his expectations in the coming year, Mr. Henry said he feels sales may finally start to slow.

“To really be truthful, my gut feeling is we’re probably going to see a little resistance and there’s probably going to be a downward trend,” he said.

According to a recent survey by Farm Equipment magazine, only slightly more than half of new farm equipment dealers expect revenue in 2010 to be as good or better than 2009 figures. More than 42 percent of dealers surveyed said they expect sales to slip in the new year, with nearly a quarter of all dealers expecting a drop of at least 8 percent.

The largest concern for 2010 among dealers surveyed is the rising cost of new equipment, with more than 98 percent of dealers saying it’s an issue. Farm commodity prices were also listed as a top concern as were increasing farm input costs. About 56 percent of equipment dealers said they are not planning significant spending increases in 2010.

A report from the Association of Equipment Manufacturers (AEM) showed the downward slope in two-wheel-drive farm tractor sales continued in 2009, declining an estimated 22.7 percent from 2008 year-to-date figures. Demand for larger four-wheel-drive tractors remained relatively flat, with sales rising only a projected 0.6 percent. Self-propelled combine sales, however, jumped 16.3 percent to 8,739 units.

“What pushes that trend is the continued march toward productivity,” Bridgestone’s Mr. Allen said, adding that higher-capacity equipment is becoming more and more prominent. “…The window of opportunity doesn’t change in the spring and the fall, and (farmers) are being pressured to farm more acreage and produce higher yields.”

Top farm equipment manufacturer Deere & Co. finished out fiscal 2009 profitable despite the economic slowdown, reporting full-year earnings of $873.5 million compared to $2.05 billion in 2008. The company’s agriculture and turf equipment sales saw a 14-percent decline for the year, but the division maintained an operating profit of $1.45 billion, decreasing from $2.46 billion in 2008.

Deere forecast that its worldwide sales of agriculture and turf products will decrease by about 4 percent in 2010. The company estimated that industrywide farm machinery sales in the U.S. and Canada will drop 10 percent in the coming year.