South Korea, demographic trends are an "incentive" for mechanization

The aging rural population and labor shortages may stimulate investment in agricultural machinery. Higher power class vehicles more sought after. The South Korean market has both domestic and foreign manufacturers: Italy is the country's fourth-largest supplier

The demographic winter is “biting” even in South Korea. Last June, South Korean President Yoon Suk Yeol, currently under investigation for the failed coup in December, declared a national emergency to combat the birth rate crisis that is causing a rapidly increasing age in population. In 2023, according to UN data, more than 58 percent of Koreans – 30.4 million out of 51.7 million – were over the age of 40, with those over 55 making up about 35 percent of the total. Without a sharp and abrupt reversal of the trend, the UN estimates, the number of Koreans is expected to decline by 13% over the next thirty years, falling to just over 41 million by 2050. The aging population is affected not only by the increase in life expectancy, one of the highest in the world at 83 years, but also by the collapse of the fertility rate, or the average number of children per woman. In 2023, reports the Nova news agency, the index fell to 0.7%, falling well below the threshold value – 2.1% – needed to ensure demographic balance. The dynamics relating to population trends, especially when they are so significant, do not remain confined to the demographic sphere but inevitably end up having repercussions on the economic and productive sphere. The primary sector in particular suffers the consequences. According to a report produced by the IBI for FederUnacoma, in 2023 the rural population had shrunk to just over 2 million people, the majority of whom (52.8%) were over sixty-five years of age.

The data is even more significant if we consider that, despite the policies supporting mechanization promoted by the Korean government since 1972, the agricultural sector is still today characterized as a “labor intensive” sector. In the coming years, although already taking place at present, South Korea will find itself having to deal with a major problem related to the shortage of agricultural labor.

Two-speed mechanization. At present the Asian country's vehicle fleet consists of approximately two million units. In addition to the over 520,000 motor cultivators, there are 312,000 tractors, 171,000 rice transplanters, approximately 73,000 combine harvesters and 64,000 seed drills. In the past decades, the rate of mechanization, as mentioned, has increased significantly, however – warns the study carried out by IBI – there are significant differences between rice paddy cultivation and field cultivation. Whereas for the former the mechanization process may be deemed to have been completed at a satisfactory level, with the sole exception of weed-killing machines, in the latter instance this process is proceeding slowly. The gap mainly concerns sowing and transplanting machines, as well as harvesting equipment. The causes of this “two-speed mechanization”, which is satisfactory for rice paddies but not for field crops, are to be found first of all in the prevalence of mountainous and hilly terrain and in the small size of the farms which certainly does not facilitate investments in technologies, as well as in an excessive crop diversification which offers insufficient yields to support agricultural incomes. To these factors must then be added the constant loss of agricultural land, which is converted for industrial or residential use, or transformed into logistics centers. Between 1990 and 2023, the cultivated surface area decreased by 28%, losing a total of approximately 600,000 hectares, mainly taken away from field crops (-43%). The hectares cultivated with rice also showed a decrease, albeit more limited (-10%), a phenomenon that the IBI report attributes to the change in eating habits in South Korea.

Higher power vehicles seeing success. Another factor hindering mechanization here is the aging of the rural population, which is less inclined to invest in innovation and the training needed to become familiar with next-gen machinery. However, if considered from a different perspective, this phenomenon can also represent a driving force for mechanization. The progressive decline of the rural population and the consequent shortage of human labor create the conditions for an increased use of agricultural machinery, especially the more powerful types. This trend will be especially evident in the medium and long term, yet already today – as stated in the study commissioned by FederUnacoma – we are witnessing a growth in demand for heavy-duty machinery capable of carrying out complex processes more efficiently and with less human input. In 2022, agricultural machinery sales were mainly concentrated on seven types of machines – including: tractors (23%), combine harvesters (7%), rice transplanters (5%), motor hoes (3%), sprayers (2%) – all together making up 40% of the market. Korean manufacturers are leaders in the production and sales of tractors, while imports meet a significant share of the demand for combine harvesters and transplanters, and high-horsepower machinery. The four-year trend between 2018 and 2022 also showed an increase in supplies from abroad not only for these two types of vehicles but also for tractors. In value, imports went from $904 million in 2019 to $1 billion in 2023, a +14% increase.

Italy is becoming one of Korea's larger business partners. According to IBI research, the majority of the demand for foreign agricultural technologies is met by Japan (34%), which exports combine harvesters, transplanters and medium-power tractors to South Korea. Immediately behind – with 23% of the market share – is China, which mainly supplies Koreans with small-scale agricultural components and equipment. Germany and Italy are further behind – 12% and 6% respectively – though among the “top exporters” the United States occupies an even more distant position at 3%. European manufacturers – the report states – have specialized above all in the high-performance balers and tractors segments. These segments appear poised for robust growth i South Korea, especially in view of the aforementioned labor shortage. The fourth-place Italian manufacturers and suppliers to the Asian country, in particular provide the country with engines (Italy is the market leader among foreign producers), tractors in the 75 to 130 kW power range, balers, tracked forklifts and cultivators.