While trade negotiators from the U.S. and China have been busy the past few months working out deals to address trade imbalances, charges of currency manipulation and the controversy over intellectual property rights, financial markets have quaked and quivered with each news cycle’s pronouncement on the talks, worried of higher tariffs on both sides if the discussions break down.
With the imposition of the first round of tariff hikes on Chinese goods in 2018, U.S. agriculture producers — and the folks who build the equipment they use — realized fully they have a big stake in a peaceful resolution to the redrawing of trade agreements between the world’s two largest economies.
The tariff “skirmish” had an immediate effect on soybean markets as China hiked customs on U.S.-produced beans in response to U.S. tariffs on various Chinese manufactured goods and raw materials. When push came to shove, however, both nations agreed to renegotiate a trade environment that had become the status quo for most of 35 years and, to a growing number of Americans was a one-sided affair not in their best interest.
Separate high-level talks by both nation’s leaders saw China resume purchases of U.S. soybeans, and the trade talks seemed to catch their second wind.
Regardless of the eventual outcome of the talks, U.S. farm equipment makers wishing to sell their products to China’s rapidly-modernizing agriculture industry need to keep a close eye on advancements in Chinese technology and the Chinese government’s avowed goal to produce China’s agricultural machinery domestically by 2025.
Based on technology trickling down from an aggressive space program that saw a Chinese lunar lander set down and become active on the far side of the moon in January, China has created its own satellite navigation system, Beidou, which rivals the U.S. GPS system. In addition, Business Insider reports the Chinese government is developing its own satellite-based internet system for eventual nationwide coverage.
Using knowledge transfer from the space and broadband development efforts, Chinese engineers are running full bore at automated farm equipment with 2019 field studies already underway in the northeastern province of Heilongjiang and in hill country around the southwestern city of Chongqing.
In a mid-January Reuters report Alexious Lee, head of China Industrial Research at Hong Kong’s brokerage firm CLSA, says China is expected to climb the autonomous technology ladder very quickly, mainly because of the efficient availability of the Beidou system, and the fact the Beijing government is supporting trials of such technology with state-owned tractor maker YTO Group, navigation systems producer Hwa Create and Zoomlion Heavy Industries Science & Technology Co.
Zoomlion Heavy Industries was instrumental in the development of an automated combine rice harvester tested in late 2018 near Xinghua, China, in cooperation with Jiangsu University.
Lee also noted Beijing has included agricultural machinery in its “Made in China 2025” campaign, meaning the vast majority of China’s farm equipment should be produced at home by that year.
The Chinese effort to automate farm equipment isn’t without its challenges to the Beijing government, however, given the fact 90% of the nation’s farms currently are under 2.5 acres – leaving little room in farmers’ budgets for an automated tractor that is estimated to cost roughly $90,000.
Also, the report notes trends in China indicate farms will be growing in size as liberalization of land right regulations are relaxed allowing farmers to begin leasing additional hectares to expand their operations.
At Jiangsu University, the school’s deputy director of agricultural equipment engineering says in addition to machine automation, sensors that help monitor crop conditions also need to be improved so such machines can adjust more quickly to varied field conditions and other situations found on small farm plots.
Still, YTO developed a driverless tractor in 2017 and says, in the face of China’s aging workforce and the predisposition of young people in the country to move into careers outside agriculture, it plans to mass produce them soon, depending upon the market.
That decision is logically tied to the government’s efforts to push manufacturers to develop fully-automated machinery capable of planting, fertilizing and harvesting each of China’s staple crops -- rice, wheat and corn.
Such an engineering juggernaut could have significant effects over the coming years on farm equipment OEMs from other parts of Asia, the Americas and Europe.