Bigger farms expected to boost agricultural drone maker's earnings

BEIJING－China's largest agricultural drone maker XAG Co Ltd expects to double its sales next year as the government pushes for the creation of bigger farms that will require more of the technology.

XAG forecasts domestic sales volumes to rise to 50,000 drones in 2020 from about 25,000 this year, said Justin Gong, co-founder of the Guangzhou-based company, adding the drones are used for seeding, fertilizing and spraying pesticides.

"More farmers are transforming their small plots of land into large farms," Gong said. "That makes drones more popular."

The Chinese government is encouraging smaller farmers, which make up the majority of the rural landscape, to consolidate and become part of large-sized collective farms in a bid to improve efficiency in food production.

The shift follows some 288 million farmers that have moved to cities to seek better paying jobs, leading to some empty villages, Agriculture Minister Han Changfu said last month.

"We've seen a big decrease in the rural population, especially as the younger generation are leaving the countryside for cities," Gong added. "We have to find a solution for farmers to produce better food for our urbanization demand."

XAG is also launching a self-driving utility vehicle, which is about 20 percent cheaper than drones, and aims to expand its business to villages where small household farmers can easily learn to use the vehicles. The ground vehicle can be used in fruit gardens and crop fields in North China where the land is flatter, said Peng Bin, the company's CEO.

DJI, the world's largest commercial drone manufacturer by market share, is also devoting a great deal of attention to agricultural drones, with the goal of helping farmers improve the efficiency of spraying pesticides and increasing the use ratio of intelligent agricultural equipment.

The company announced it plans to further invest 10 million yuan ($1.4 million) in agricultural drones and on cultivating drone operators in 2019, open 1,000 brick-and-mortar retail stores, train over 20,000 professional drone operators and establish more than 600 training branches across the nation.

"We don't focus only on profits but also on training people to operate the agricultural drones in the short term, as well as helping them develop a business model, which is in accordance with our corporate culture and medium-and long-term strategies," Luo Zhenhua, president of DJI, said in an earlier interview.

Last month, DJI launched its latest agricultural drone, the T20, which features a more dynamic system to increase working efficiency and accuracy. It is bullish about the prospects for agricultural drones as the demand for such gadgets is huge and the whole industry is still in exploration mode.

The Chinese government has also issued policies to promote the use of modern agricultural machinery, such as offering subsidies to encourage the use of drones in agriculture.

With the modernization of agriculture, the demand for advanced farming devices has been growing significantly. Data from the Shenzhen-based Qianzhan Industry Research Institute said the value of the domestic agricultural drone market will exceed 12.8 billion yuan by 2021, at an annual compound growth rate of 38 percent.

Bloomberg - China Daily