Yoon Seok-yeol Government Benefits from Selection of Smart Agriculture and Food Security National Tasks
Population and Food Demand ↑, Farmland and Agricultural Workforce ↓ Solved by Agricultural Machinery
June Corporations' First Half Sales Increase 56%... Export Growth Expected
[Asia Economy Reporter Park Hyungsoo] As the Yoon Seok-yeol administration presents smart agriculture and securing food sovereignty as one of South Korea's "future growth engines," Aseatech's technology is drawing attention. The increasing occurrence of abnormal climate worldwide is also expected to lead to a rise in demand for agricultural machinery amid growing food crises.
According to major foreign media on the 3rd, India, the world's second-largest wheat producer, is forecasted to see a decrease in wheat production ranging from 10% to as much as 50% due to heatwaves. This is delivering a shock to the grain market, as India had been expected to supplement the global wheat supply shortage caused by Russia's invasion of Ukraine.
Recently, temperatures in New Delhi, India's capital, soared to 43 degrees Celsius, while Mumbai recorded 35 degrees Celsius. Indian meteorologists predict that the abnormal high temperatures will subside only after the onset of the monsoon season in May.
Aseatech is a comprehensive agricultural machinery manufacturer. Its main products include cultivators, SS machines, binders, and parts, with its multipurpose cultivator recognized as the world's best product, ranking first in global production and sales. The company has grown by producing high-quality agricultural machinery to support food self-sufficiency and agricultural modernization. As of the cumulative figures for the first half ending December 2021, Aseatech, a corporation with a fiscal year ending in June, recorded sales of 44.3 billion KRW and operating profit of 1.1 billion KRW. Sales increased by 56% compared to the same period last year, and operating profit turned positive.
Aseatech exports customized products through regional selection and concentration to Europe, the Middle East, Africa, Asia, and Latin America. It is also considering creating new overseas markets in major agricultural countries such as China and India. Due to rising international grain prices and labor costs, demand for agricultural machinery in these countries is expected to increase.
Agricultural machinery is evolving by integrating various ICT and smart technologies to realize precision agriculture and enhance agricultural productivity. Leading companies provide real-time monitoring and maintenance services using GPS systems and telematics technology, and support optimal work plans for users by collecting and analyzing information on weather, soil conditions, and crop status through sensor networks. They adjust the input amounts of water, fertilizer, and pesticides, as well as work speed according to the situation. Technologies enhancing user convenience include automatic transmissions, autonomous driving and driving assistance systems, smartphone-based applications, and agricultural machinery platooning control. The United States is evaluated as having the most advanced technology level, with Germany, Japan, and the Netherlands belonging to the top-tier group. South Korea's technology level is about 80.5% of the U.S., with a technology gap estimated at 3.5 years.
The agricultural machinery market is a large-scale market that steadily grows due to population and food demand increases, as well as shortages of arable land and agricultural labor. According to the "Global Agricultural Machinery Industry Trend Analysis" by the Agricultural and Livestock Machinery Newspaper, the market is expected to grow from $102.5 billion in 2018 to $135.2 billion by 2025. Demand for agricultural machinery continues to rise due to food demand, policies supporting agricultural productivity improvement, new technology applications, and precision agriculture. By type, tractors account for about half of the total market at $48.7 billion, followed by implements at $36.4 billion, and combines at $14 billion.
Asia and Oceania, with large populations, extensive arable land, and high food demand, represent the largest markets, with China holding the world's largest market share of 23.2% based on tractors. The domestic market has stagnated since surpassing 2 trillion KRW in 2000. The market share of foreign agricultural machinery, including major items like tractors, continues to rise.
The largest market segment, tractors, is expected to grow centered on high-powered models of 130 horsepower or more, increasing from $48.7 billion in 2018 to $63.6 billion in 2025. The market is expanding mainly for medium and large-sized tractors rather than small ones. The large tractor market exceeding 250 horsepower is expected to grow faster than tractors under 30 horsepower. Currently, unmanned autonomous tractors are being introduced at some exhibitions. The market is expected to form in earnest from this year and grow to $5.7 billion by 2030.
At the end of last year, Aseatech signed a financial business partnership agreement with NH Nonghyup Capital. To ease the burden of agricultural machinery purchases for farmers, loans of up to 100% of the purchase price will be provided. The agreement was promoted to expand the distribution of eco-friendly agricultural machinery and fulfill social responsibility toward farmers. When purchasing agricultural machinery sold at Aseatech's 150 dealerships nationwide, farmers can receive loans up to 100% of the purchase price based on their credit. Compared to typical agricultural machinery loan products, which require farmers to bear about 50-60% of the purchase price, this higher limit is expected to receive a positive response from farmers considering machinery purchases and contribute to sales growth.
Aseatech operates the Asea Agricultural Machinery Technology Research Institute, certified by the Korea Industrial Technology Promotion Association. Dedicated R&D personnel conduct research and development for combines, rice transplanters, and cultivators. The company holds numerous intellectual property rights related to core technologies, providing complementary means for protecting these technologies. The average R&D investment ratio over three years is 1.07%, somewhat lower than the industry average of 2.31%.
Aseatech is leading the development and distribution of electric agricultural machinery for carbon neutrality. Following global agricultural machinery industry technology trends, it aims to enhance ▲driver convenience and safety ▲machine performance and efficiency ▲environmental friendliness ▲local adaptation models, component lightweighting, cost reduction, and fuel efficiency. It is developing eco-friendly power source systems to meet environmental regulations, high-efficiency transmission systems for power sources to improve energy efficiency, continuously variable transmissions based on complex control for agricultural machinery, and complex control work equipment.
Choi Yoo-jun, a researcher at Shinhan Financial Investment, explained, "The new government aims to foster seven future growth industries, including energy, defense-aerospace, bioindustry, artificial intelligence, carbon neutrality response, smart agriculture, and cultural content industries." He added, "While Korea has focused on advanced manufacturing such as semiconductors, its external dependence in agriculture has increased. The food self-sufficiency rate is on a downward trend, and the grain self-sufficiency rate is in the low 20% range, ranking among the lowest in OECD countries."
He said, "Detailed strategies include smart agricultural innovation, building data platforms, and fostering export-oriented items," adding, "Through these, stable agricultural product supply and productivity improvement can be expected."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
