It is my pleasure to welcome you to AGCO's 2023 analyst meeting. A really big thank you for those of you that braved the weather and are here with us in Manhattan this morning. We also wanna welcome our virtual guests. We're pleased that you're both here. We're gonna go through a lot of slides this morning, so if you're watching virtually, you can obviously follow along, and then we'll upload some slides at the end of the meeting today, and everybody then can have access to those. Let's look at what's in store today. As you can see, Eric is gonna start us off. He'll have a quick overview of our strategic priorities focused on our farmer customers and then, of course, a big focus on creating value for our shareholders.
Following Eric, Seth Crawford, who's the general manager of our precision ag and digital business, will give us an update on some of our technology innovations and our path forward for our precision ag business. After Seth, Louisa Parker-Smith will give us an update on the progress we've made on our sustainability program and our priorities going forward. After Louisa, we've scheduled a short break. Following the break, Damon will wrap up the show with some information on the financial implications of our strategy. He'll talk about uses of our cash flow. He'll finish up with a quick look at our 2023 financial goals. Not on the agenda here, we have some pretty neat technology on display in the library.
A lot of you, I think, have seen it on your way in, but Brad Arnold, who runs our Precision Planting business, is here to explain what we're doing with retrofit for sprayers, for planters, and then he can take whatever questions you might have in terms of our precision ag strategy. Also today, we have, actually outside on 46th Street, we brought our fully electric Fendt e100. After the show, I encourage you, out the main doors to the right and down the stairs, is the tractor. Andrew Sunderman, who's one of our key corporate development folks, will be there to take your questions on the tractor as well as whatever precision ag questions you might have.
Lastly, wanted to thank another member of our team that isn't on the program today but has had a major contribution, not just to today's program, but to AGCO's evolution over the last 26 years. Andy Beck is here, so I encourage you to say hi to him after the meeting. With that, let's look at our legal obligations here. Our presentation this morning will include some non-GAAP metrics. These non-GAAP metrics are reconciled to the GAAP metrics in the appendix of our presentation. We'll also make some forward-looking statements this morning, including information about our strategic plans and initiatives as well as their financial impacts. We'll discuss demand, product development, and capital expenditure plans and timing of those plans, and expectations with respect to the costs and benefits of those plans.
We'll discuss production levels, share repurchases, dividend rates, and our future revenue, price levels, margins, earnings, cash flow, tax rates, and other financial metrics. We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31st, 2021. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. These factors include, but are not limited to adverse developments in the agricultural industry, including those resulting from COVID-19, including plant closings, workforce availability. They also include supply chain disruption, weather, exchange rate volatility, commodity prices, and changes in product demand.
We disclaim any obligation to update any forward-looking statements except as required by law. A last bit of housekeeping. We'll ask that you hold your questions until the very end. All the speakers will then be available for a Q&A session, and we're gonna do that electronically this morning. That means the folks in the room can access that Q&A platform. There's a QR code on your tables, so please use those. The folks that are joining remotely, virtually, on the bottom of your, of your viewer, there's an access to the Q&A platform. What I'd encourage you to go ahead and get your questions submitted during the presentation to give yourselves a place in the queue. With that, let's get started.
Change is constant, and the pace of change is accelerating. For the world's farmers, the stakes are getting higher. At AGCO, our 25,000 employees are united by our passion to help farmers rise to these challenges. We're committed to putting farmers first and living our purpose every day. Change is constant, and the pace of change is accelerating. For the world's farmers, the stakes are getting higher. At AGCO, our 25,000 employees are united by our passion to help farmers rise to these challenges. We're committed to putting farmers first and living our purpose every day. Farmer-focused solutions to sustainably feed our world.
From family farms to large-scale producers, our brands deliver the industry-leading innovations farmers need to solve their most pressing challenges. The world's farmers are uniquely positioned to address climate concerns and feed our growing population. As the world's largest pure-play farm equipment manufacturer, AGCO is uniquely positioned to offer the solutions farmers need to rise to the occasion. We're growing together with our farmers, our employees, and our shareholders. Together, we're advancing the future of AGCO and agriculture.
Ladies and gentlemen, please welcome AGCO Corporation President, Chairman, and Chief Executive Officer, Eric Hansotia.
Good morning, everybody. It's so great to be back with you among our investment friends and be able to share our story, give you an update. It was almost two years ago that I was able to spend some time with you, with my team and share with you our refresh strategy. Where's AGCO going? What's our North Star? Today, the strategy hasn't changed. We're just gonna give you some updates on some milestones that have been achieved, some deliverables that we've achieved already, and we're gonna raise the bar. We're gonna raise the bar on our technology commitments, raise the bar on our margin performance, and some other areas. We've got an exciting story to tell you. I'm looking forward to sharing it with you. Let's just do a little refresh on who is AGCO.
You know, we've been in business since 1990. Got about $12.6 billion in sales this year, $10 billion in market cap. About 23,000 employees go to market through multiple brands, and those brands are differentiated because we're going after different customer segments with different value propositions. This multi-brand offering allows us to cover the entire marketplace with differentiated solutions. That piece in the middle is what I wanna just spend a minute on here, and that's AGCO's investing an enormous amount of money, effort, and leadership on being very, very good at technology development all the way around the crop cycle. From before we plant the crop, all the way through the season, harvest, even post-processing in terms of grain handling and protein production.
We're going to spend a lot of time on that today, sharing with you the areas of focus we have, how we're investing, the results for our farmers and the results for our investors. The industry and market we operate in has a lot of tailwinds. Just as a quick reminder, again, we've got a tailwind with just more mouths to feed, more population. We just passed 8 billion. We're going to 10 billion. That's going to happen. That's one demand driver. Second one is the fact that as economies mature and get more prosperous, they add more meat into their diet. Meat is a multiplier on the demand for grain, anywhere from two to 12, depending on whether chicken to beef. That's a second demand driver for our industry.
Third one is biofuels, whether it's corn, soybean, canola, other things. Over the next few years, that's expected to increase by about 20%. You've got all of these three ushering in demand requirements for more yield, more productivity for our farmers. At the same time, there's pressure on those farmers to create that output with less inputs. That pressure comes in the form of higher costs. Some of the costs for these inputs have risen. Also society is saying, "We just want a more sustainable system. We want you to generate higher yields, but use less inputs." There's no more acreage. That's the squeeze that the farmers are under. The only way to solve that equation is through new technology where the machine can perform more optimally to get higher yields with lower inputs. That's the macro setting.
In the micro setting over the next year or two, we are very bullish about the industry strength. You look at all of our end markets, prices are high, farmer profitability is strong, and we've got an installed base of equipment that is still thirsty for not only new technology, but refreshing that fleet. We feel like we've got a good environment to operate within. Once again, a little bit on the history of the company. We've essentially had three chapters in how we've operated. The first chapter was building the company, putting the pieces together. Lots of acquisitions, assembling the full portfolio of equipment to have a full suite of solutions for our farmers and a full kind of geographic coverage. That was the first chapter. Lots of acquisitions, pulling it all together.
Second chapter was making more of an operating company out of that holding company, starting to spend more on organic development, synthesizing those products into global platforms, consolidating dealer networks and rationalizing, things like that, getting more common processes and getting the company to perform better. Now we're entering our third chapter, where we're really focusing in on the farmer- first mentality, being the most farmer- focus company in the industry, understanding their pain points, and then using technology on our machines to make them more productive, more capable in the hands of these farmers so that they can get more done with less inputs. That's the big focus of the company and changing how we think about distribution. We're gonna talk a lot about that today.
This one-pager is very, very similar to the one-pager I shared with you almost two years ago, it's essentially our one-pager on our strategy. This is what all 23,000 employees, we want that in their hip pocket or their shirt pocket or their notebook. This is what our North Star, this is what guides our company. At the top is unchanged. A couple years ago, we redefined the purpose of why we exist. That is to deliver farmer-focused solutions to sustainably feed our world. Farmer-focused, to be most farmer-focused company in the industry. Solutions is more than machinery. It's about all of the data and other connectivity and digital solutions around the machines. Sustainably, sustainability is a key, is going to weave through our entire strategy. Feeding the world gives us energy in terms of what our purpose is.
We also set a milestone along that journey on what our vision is, that's to become the industry leader in smart farming solutions. Smart farming solutions are just machines that have sensors on them that can understand their environment and make onboard calculations and changes. We wanna become the industry leader, we think we're well on the way to doing that. We're gonna share some more information on that. We had to build some muscles in the company, build some new capabilities, those are highlighted in the middle there. The first one is about if we're gonna be the most farmer-focused company, we gotta start measuring that and get our company glued to our farmers. We wanna create exceptional customer experiences for each of our brands as they operate around the world.
We're measuring that through Net Promoter Score, and our intention is to be the partner of choice for our farmers. The second one is to invest more, excel, and become really great at developing these smart machines. We'll talk a lot more about that. The third is think differently about distribution. Our industry has been one of largely brick-and-mortar. The farmer goes into the dealership to research the machine, buy the machine, all those types of things. Well, we think many other industries have already gone digital. Farming will too. Our customers are thirsty for this. We've been investing in digital tools to create pathways to our farmers so that they can choose what mixture of brick-and-mortar versus directly— direct online digital that they wanna use. Let them interface with the company that they wanna, the way they wanna interface. We identified some initiatives.
Those are either in the growth category, in the optimization category or/ and some focus on our culture. In the end, we wanna end up being the partner of choice with our farmers, the employer of choice for our employees, as measured by employee engagement, and the investment of choice, as measured by return on net assets. We want all those to rise through the measurements we're driving. Sustainability was the bar that ran right through the middle of that strategy. I'm gonna start with sustainability. Louisa's gonna talk a lot more about this.
She led our group, two, three years ago as we launched this effort to essentially look across the landscape are all the areas that are changing and are important to the industry relative to sustainability, measure where we're starting, then we picked four focus areas that we're gonna pick to be a leader in. They're on this slide here. The first one is about soil health and carbon sequestration. We're an industry that has an opportunity to not only reduce how much we emit but also contribute to helping get some of that carbon that's already out in the atmosphere, trap it through photosynthesis of the plant, get it down in the soil. That's good for society in that we're helping with pollution. It's good for the farmer in that when you trap that carbon in the soil, soil health improves.
The fertility of the soil actually improves, allowing that farmer to get more yield. What we're all about now is to try and help the farmer change their farming practices, adopt some new technology and other things to change their way that they do farming, that they can monetize this opportunity. Many industries around the world are investing in carbon credits. We want those carbon credits to flow to the farmer. Number two is decarbonizing operations. This is all about our machines and our factories, we've got some ambitious goals there. We set the goal a couple years ago for our 2025 target for our factory emission efficiency. We're already gonna complete that by the end of the year, Louisa's gonna talk more about that. Number three is health and safety.
Even though there's been all these supply chain challenges in our operation and that creates some out- of- process activity, we've been driving down our safety results. Last year, 12%. This year, on track for 15%. We're driving down the safety incident rate. We think that's an important message to our employees about how we care about that issue. Finally is animal welfare. Finding that intersection of helping the protein producers of poultry or pork have higher productivity and higher animal welfare. We invested in a robotics company where this system travels across the roof of the barn with imagery systems and look down at the animals, the amount of movement, the drop in consistency, and identifies through artificial intelligence when there's an issue before it really emerges.
Allows the farmer to be able to take action early, move from reactive to proactive. Sustainability is woven through the fabric of our company. We also... I talked to you about thinking differently about distribution. We've got a global network of dealer, dealer partners around the world, and we're very proud to have some great dealers out there. What we did this last year is we created a common way of measuring how a dealer performs in the AGCO network, no matter where they are in the world. Common set of measurements, and we applied those to the dealer channel, significantly raising the bar on our performance expectations about how we work together to deliver solutions to our farmers, our customers. That's been a great thing. We've accelerated significantly the number of performance improvement activities and the dealers that are moving forward.
That's kind of the focus on our existing dealer channel. At the same time, in parallel, we've been investing for probably four or five years now on digital tools for everything a customer would wanna do. Research a machine, buy a machine, order a service part, set up a service, schedule opportunity, finance the machine, all those things. We've deployed those now through much of the global geography. That allows us to change the game and allows us to digitize that whole customer experience and allowing them to shift to either a direct experience or through the, through a brick-and-mortar channel or a combination of the both. We intend to lead in this area. We think it's a big deal. We think this is an industry ripe for change.
We've also talked a lot about within the company about the fact that we have. One of our advantages is our culture. It's why many of us in the room today came to work for AGCO in the beginning. It's entrepreneurial spirit, willing to try new things, fast on making decisions and care a lot about the customer. Well, we wanted to double down on that culture and raise a couple areas up, really getting great and becoming a global leader in this farmer- first element. We've identified that we've created a lot of farmer panels, got customers out with, or got our employees out with customers a lot more and identified many ways to bring those two groups together. Teaming up, I'm gonna talk to you a little bit about taking our Fendt brand global.
We had a regional organization before. Fendt was largely successful in Europe. Well, now to take that full Fendt product line global, we've really tapped into encouraging people to work cross-function, cross-geography to make the most out of that business, just as an example. We've been working hard on optimizing our Massey Ferguson business. You know, it's probably our most well-known brand globally. We celebrated our 175th anniversary this year, one of the oldest, most prestigious brands in the industry. We feel like there's even more potential in front of this old legacy brand. We've been focusing on streamlining the product, the channel, and the business. We've already taken 26 machine platforms down to 18, simplified the offering, and there's several more steps along that journey that are still in front of us.
We're consolidating and streamlining the dealer channel as well, getting stronger dealers to deliver the Massey Ferguson experience. Those two, along with some other measures, are improving the cost structure. Massey Ferguson is all about delivering a straightforward and dependable value proposition to farmers that want that kind of an outcome, and so we wanna make sure that whole business is wired to deliver that. Now I'd like to talk to you about our growth engines. You've seen us talk about this slide a few other times. We introduced it early in the year. We essentially have three engines firing in parallel. We're gonna cover them all here now. First one is about taking our Fendt business global. Second one is service and parts growth, and the third one is our precision agriculture business.
If you talk about taking Fendt global, Fendt is a premium, best of the best brand. Historically, it's been predominantly a tractor business in Europe. Our first step was to expand that product portfolio through innovation and have the full line served through the Fendt brand. Planters, sprayers, tractors, combines, hay equipment are now all in the market under the Fendt brand, all market-leading products in their segment. We are very excited and proud about our product portfolio under the Fendt brand. It's excellent. It's second to none. The second step is to take that product line and offer it globally to the customers that want the best of the best in their farming operation. There's a lot of those farmers in North America, South America, South Africa, Australia and other places.
We've been selecting dealers carefully, judiciously to make sure that they can deliver the best of the best Fendt experience. Even a given dealer organization, maybe they have 20 stores, we may only allow them to sell Fendt through a handful of those stores that have met this high bar of delivering the Fendt experience. This is on track. We've doubled our business in North and South America over the last couple years. We aim to double it again in the next five or a little after. It's a very strong growth engine. Once you get Fendt product in the customer's hands, they don't wanna go back. You don't have to believe that from me. Let's hear from some of our customers, some of our big customers in South America, and then some of our customers in North America. Please roll the video.
Júlio Cézar Busato . I'm an agronomist, farmer, and President of the Brazilian Cotton Producers Association. Here in the Bahian Cerrado, we are a family group and today we cultivate an area of 60,000 hectares of soybeans, cotton and corn, as well as having an irrigated area of 6,000 hectares. Our group has prioritized, over time, sustainable agriculture and social responsibility. Today, we generate more than 1,000 jobs. We, Brazilian farmers, use only 8% of the territory to produce all the grains and fibers we produce. We have a huge amount of degraded pastures that can be inserted into the production system.
I am certain that in the future Brazil will have a great opportunity to be the largest provider of food and fiber in the world. I also see a great opportunity for Fendt to occupy a space in this scenario, as it has the best technology worldwide in machines. We decided to invest and be a Fendt dealer, first because we believe in the Fendt brand. We believe in the products it has.Segundo, podemos asociar a nossa experiência como agricultores, que nós sabemos o ponto onde dói, e juntos com a tecnologia e a experiência, investiremos em infraestrutura, investiremos em pessoas e tenho certeza que ocuparemos uma parte grande do mercado de tratores e máquinas que só cresce cada vez mais aqui no Brasil. Olha, eu vejo o agro brasileiro como uma grande oportunidade para o futuro, porque nós temos terra, nós temos tecnologia, nós temos pessoas.
Hoje, o que se vê aqui no Brasil são famílias que trabalham no campo. Olha, nós do Grupo Nossa, junto com a Fendt, com certeza vamos contribuir para cada vez mais aumentar a produção e aumentar a produtividade no cerrado baiano e no cerrado brasileiro.
It's Fendt. Porque entendemos de agricultura.
We'll hear from our North America farmers.
When I think of Fendt, I think just raw power and efficiency and reliability, I think would be the top three things that kinda come to mind. You don't need the smaller one. You'll still get that good fuel efficiency and only have to own one tractor. As far as parts, it's not a big of a concern 'cause they're so reliable. You hardly ever broke down.
The thing I've noticed that's different about this tractor compared to similar tractors in the past, different brands, is the MAN engine, low- rev engine that's extremely quiet in the cab, good fuel efficiency.
The 1,000 series ability to now perform the competitor, it's just, it's unmatched. I've been in the field and ran against competitors and, you know, we're doing a mile, mile and a half faster. Our hydraulic capacities are higher. We're running at a lower RPM. There's just so many benefits that these owners are seeing, and it just starts clicking in their head, like, you know, "This is Fendt. This is maybe something we should seriously consider."
All of our other X brand equipment has been failing on us, and I was wanting something new. Had a salesman come to me, and I told him at first, I said, "There ain't no way in heck I'll try one of them, you're the new kid to the block." Well, I have, and I like it, and I've got another one on order right now.
People don't wanna drive old equipment. You try and hire somebody, you know, to fill in, and you show 'em an old tractor that's falling apart, and they're not interested.
Our salesman, David, I give him a lot of credit. He knew his stuff, and he knows the computer on it, and he made it real easy for my men to catch on. He told me, he said, "Hey," he said, "I don't care whether it's three years from now on the same tractor." He said, "If you got an employee that comes to the field and he's new on it," he said, "you call me and I'll come out, and I'll show him how to run it." If you buy something and you can't get good service, I don't care what brand it is, it's not worth having.
Our second growth engine is all about growing our parts and service business. Now, over the last few years, we've invested a lot in what we call parts fill. That just means when a customer comes up to the counter and says, "I'd like to have a part from you," we can fill that order. We've raised our parts fill performance such that we are now the market leader in both North America and South America and have been for a few years in a row. That builds confidence in the customer base that says, "That channel will have the part when I need it, and they're easy to do business with." In South America, we've raised our performance significantly. We're right now in the top with the pack, too, is in that business. That's the foundation. That built the confidence.
Now we're moving from reactive to proactive. We wanna leverage the fact that we've got 45,000 connected machines out in the marketplace transmitting data off the machine real time. We can use that fleet to start looking at when is their upcoming service interval coming. I can contact the customer and say, "Can I order you in advance the parts that you're gonna need for that maintenance interval or for a part that's gonna break before it happens?" We've got a lot of opportunity here to grow this business even stronger. We're expecting something on the order of 8% growth rate that we've had to continue on into the future. The neat thing about service parts is they're high margin, and they may grow at different rates, but they never decline.
We've never had a year yet where we've had the sales in this year be less than the sales in last year. They're steadily growing. That evens out, it's a great thing for our farmers, high-margin business, and it evens out the cyclicality in our business. Third growth engine is all about precision agriculture. You've got an opportunity here. If you haven't done it yet, please walk around the demos that we've got out here in the lobby. Some really exciting technology to get your hands on. If you look over here on the side of the conference room that we're in, you see some 55-gallon drums. That's a reflection of input savings on fertilizer and chemical and diesel fuel that a farmer would save based on the use of these new technology tools.
Just the examples that we have out in the lobby here for a typical, like, 4,000-acre farmer would save... There's six barrels there. You multiply that by 100. 600 barrels of inputs, and that's not including the savings on seed. That's not including the increased harvest that they're gonna get, the increased yield that they're gonna get, and the benefit from these technologies. It's just the direct savings on these particular inputs. If you stack those just since we're in New York, you stack those barrels one on top of another, it's a little bit higher than the Freedom Tower. It just gives you a kind of a feeling of the massive amount of potential of opportunity here for the farmer. We're investing all the way around the crop cycle, from planting through the crop cycle, through harvesting, and into grain and protein solutions.
We've tripled our budget over the last few years, not only in organic development, but we also bought six companies, invested in two more. We are all in on developing precision ag solutions. Our business has been growing because of it. Since 2020, we've been growing steadily. When I was here almost 2 years ago, we talked about this business growing to $800 million. Earlier this year, we raised the bar and we said we're gonna grow to $900 million. Here today, we're proud to say, that we're confident enough, we're raising the bar again, and we're gonna have this business be over $1 billion in sales, high margin, high value to our customers. This thing is clicking. Just this year, we're gonna, we're gonna grow probably 30%-35% within 2022. We're really excited about our innovation engine.
It's not only us excited about that, the industry's excited about it. We are getting so many awards by these neutral parties out in the marketplace about what's coming out the back of the pipe on our innovation. Tractor of the Year multiple times, Machine of the Year multiple times. Along the left there's this thing called AE50. That's the top 50 awards that the U.S. market gives out for the innovations for the whole industry. Well, we got 10 of them, just AGCO, compared to all the rest of the players. That's more than anybody else. That's the third or fourth year in a row we've either tied or been single as the most awards won.
Not only are we excited about our products, not only are farmers excited about the products, but the industry standards are saying, "You guys are doing a great job of listening to farmers, understanding their pain points, and driving great solutions that will make them more productive." With that, gives us great confidence that today we're gonna plant some flags. We're gonna make some commitments to the market about our technology going forward in the areas of autonomy, targeted spraying, and clean emissions. In autonomy, we will bring to the market by the end of this decade, solutions in every step of the crop cycle, all the way around for the farmer of a fully autonomous solution. We'll also be in the market even sooner with retrofit solutions. Retrofit is part of our precision ag business.
Our Precision Planting channel is all about retrofit, meaning we take the solution, the technology module, and we take it directly to a farmer and put it on their existing machine, making a dumb machine smarter. In this case, we're gonna take an existing machine and make it autonomous, and already do that by 2025. The other thing about our view about retrofit is that we do that for all brands. We retrofit not only AGCO brands, but our competitive brands as well. We serve every customer in the marketplace, and we're doing that globally. The second category is about targeted spraying. We're gonna have retrofit solutions in the market for sale already in 2024 that are been out running this year and next year. We're really excited about the solutions that we've had.
We launched those at the Precision Planting Winter Conference last year to our customers. Right behind that will be our OEM solutions direct from the factory. This is when, through vision systems, the sprayer can identify the difference between a weed and a plant and spray only the weed with targeted chemical. Finally, there's clean emissions. You got to walk by the prototype or the early machine of our e100, is what we call it. First purpose-built to the market, all electric tractor. We'll be having that for sale in 2024. It's already gonna be in the market next year with customers. It allows us to not only be clean emissions, but starting to grow this population. We've already launched our new CORE engines. They're in the marketplace in our Fendt machines.
These engines are already future-proof for alternative fuels. They're designed to be able to have that capability going forward. They already have lower carbon emissions than the engines that were replaced. This is a platform that is future-proof. We've got lots of other projects in parallel to these on hydrogen fuel cells, on hybrid electric, and other electric solutions for different size class machines. We believe that different parts of the world and different customers are gonna need a different solution for clean energy at different times.
We're creating a whole suite of solutions to make sure that wherever the situation is in your part, your part of the world, we've got a great solution for you to enhance not only your productivity with smart machines, but your clean energy solutions with clean energy machines. Those are really exciting technology flags that we're planting today, and they also give us then the confidence to plant some flags on margin. Let me give you some background now on where we're coming from. From 2013 to 2021, our company has performed in terms of margin anywhere from 4% at the worst industry year, when the industry was at its low point, to 9.1% last year, and then numbers in between. The average from 2013 to 2021 was 6.3%. We're already committed to you that we're gonna be delivering 10% at mid-cycle going forward.
Today, we're gonna raise the bar and create a new commitment that we're taking that mid-cycle commitment from 10% all the way up to 12% by 2026 on our journey to even higher numbers. That means a few things. That means that if the industry is stronger than mid-cycle, we could very well get to these kinds of numbers sooner. It also means, Damon's gonna unpack this for you in great detail, it also means that not only are the mid-cycle numbers are gonna go up, mid-cycles get higher, but our trough numbers get higher, and our peak numbers get higher. This company will no longer deliver the low end of the margin range anymore. Historically 6.3%, moving up to 10%, moving up to 12% on our journey to even higher numbers beyond.
To pull it all back together again, we are super excited about our strategy. Our North Star has served us very, very well. The entire company is aligned around this. We spent a lot of time getting ownership of our employees around their part of it. We think this farmer-focused strategy is perfect for the market to deliver great value for our farmers, it's exciting for our customers, and it's generating higher and higher returns for our investors. To get there, we're leveraging technology, and we are super excited about how we're doing this. We've been investing a lot more, but more importantly, we're creating great outcomes coming out the back end. Our technology is working for farmers, it's getting recognized by them and the industry. Sustainability is a big deal.
It's running through the heart of our company, and Louisa is gonna spend some time with us in a little bit talking about all the dimensions of sustainability. We think of it as an opportunity to not only reduce how much we emit, but be part of the value creation going forward for our farmers to clean up the environment. Finally, when you bring all this together, we are confident in our ability to grow margins and grow the top line. We've got a strong business today. It's only getting stronger. Our best years are in front of us. Thank you very much. I'd like to invite Seth Crawford up to the stage.
Please welcome Senior Vice President, Precision Ag and DCX, Seth Crawford.
Thanks. It's great to be with you today. I'm Seth Crawford. I lead our Precision Ag and Digital Business unit for AGCO. I'm excited to be here today because we have so many positive things going on in our business. One of the things that's not gonna change from what you've heard in the past is what we're trying to do for our farmers. We are trying to improve their outcomes. We wanna enhance their agronomic capabilities, we wanna enhance their economic outcomes, and we wanna give them products that make them more sustainable. We think we're in a great spot to be able to do that.
To do that, I wanna start by giving you a little bit of a glossary of terms, because one of the things we heard from the feedback sessions that we had from previous events is we don't quite understand yet what you guys mean when you talk about integrated and when you talk about retrofit and when you talk about aftermarket. First, integrated. Integrated technology is technology that we build into the machines from the factory. All right? Retrofit. Well, first let me go to aftermarket. Aftermarket is, okay, we put a machine out in the field and you need to fix it. You need to bring it back to its original form. Maybe it's a broken bolt on a tractor, maybe it's a disc opener on a planter, something like that.
You put it, you replace it to replace the worn part, but it brings it back to its original state. Okay? When we talk retrofit, what we mean with retrofit is performance-enhancing retrofit. If this was the original bar at how that equipment performed, up here is the new bar of where that equipment performs. That's why retrofit, in our terms, is so much better than aftermarket, and why the margins also come along to reflect that. This is why we're so focused on developing that retrofit business, because we believe it truly is disruptive. It's disruptive because we focus on enhancing the equipment that's out there in the market. That means all makes and all vintages to take the performance of those machines up to a whole new level. We believe we can do that, add value to farmers and help make them more sustainable.
Today, the topics that I'm gonna cover with you, first, I wanna talk about the foundation that we've established with our tech stack and the investments that we're making both organically and inorganically. I wanna share with you how that then turns into profitability for our farmers, how we help them improve their net farm income, and how that turns into results for our business, and how we're increasing the velocity of our developments. I'm gonna share why we're confident that the numbers Eric laid out there for us are real and very much achievable. Eric talked about the three phases of AGCO. I wanna talk about our precision journey quick as part of those phases. Prior to 2015, AGCO was buying third-party precision ag products and adding them to our equipment.
Simply a supply relationship, not integrated, that caused several challenges for us. Number one is it wasn't integrated, so it wasn't something that in some cases, that our dealers even sold. Sometimes they even had to go through a third-party channel to get it. When we talked to the farmers, they were very clear that, you know, you have a good product, but this technology, it doesn't fit, and when I have a problem, you can't support it. We made a dramatic change. We made a dramatic change to better serve our farmers by integrating the technology, by establishing our foundational architecture and building that to now where we're taking that common electronics architecture across all of our machines. The next step on our precision ag journey was buying Precision Planting in 2017.
What that did was it opened our eyes to what truly retrofitting products could bring to us. These are two huge steps, both on the whole good side of our business and on the retrofit side to see the value you can bring to a farmer by having integrated technology that you can sell and support across the life cycle, and also the retrofit technology to be able to enhance any product they have to take it even above what they bought originally. These were two, I'd say, aha moments and great business moves because they also deliver significant margins compared to our traditional businesses.
We've invested in this tech stack through the foundational architecture, through our guidance and machine control products, through our connectivity, managing that data that's ever so critical, and then automating features, and then being able to leverage the artificial intelligence and manage that machine from anywhere that's so critical as we build towards full autonomy. That's why we've made the investments that we've made. Apex.AI helps with that functional safety layer so that as we're building towards autonomy, we have a common approach. That's built in, and we can take our products globally and reach that autonomy market. We bought Appareo Systems, our connectivity provider.
We know that the products are becoming more and more critical to be connected. Eric talked about the numbers that we have for connectivity of 45,000 units today, and that's just our OEM, our machine brands, our tractors, combine sprayers. That doesn't include all of our retrofit machines, which are also connected. You add them all up, we're well over 100,000 connected machines. We bought Headsight. I'm gonna talk about how we're going around the crop cycle. This helps in the machine control area. We bought JCA Technologies.
JCA is special because of their work on autonomy, not just for us, but if you look at all the autonomous work that's happened in the industry, in the early days, JCA has worked with all of those companies, many of which have been purchased by others now, but JCA was at the heart of it. Let's take a look at what JCA can do.
Autonomous agriculture machines are now possible through advancements in several emerging technologies. This is right at a time where farmers are faced with challenges, availability of skilled labor, as well as pressures for improvements on sustainability practices, all while needing to increase yields and maintain profitability. Autonomy provides the opportunity to address these challenges by fundamentally reimagining agricultural equipment to bring about a whole new level of value to farming.
Our people and culture have been shaped by the need to constantly prove ourselves to our OEM customers to demonstrate they are getting value. JCA has learned over many iterations and hard lessons on how to deliver on a consistent basis. Our experience has shaped our autonomous framework, which is a deep technology stack that starts with hardware and spans across machine controls, mission management, navigation and positioning, perception systems, and cloud and user interfaces.
Our Eagle is the world's most advanced agricultural edge computing platform. It combines all of the components needed for autonomy and AI applications. FlightPath is our mission management software. It brings together traditional precision ag capabilities with emerging autonomy features. These are just a few of the components of our tech stack which allow us to move fast on many programs in parallel. Joining the AGCO family has allowed us to expand our approach into retrofit solutions in addition to our OEM systems. Retrofit will enable existing tractors to perform autonomous tasks such as grain cart operation and tillage without needing an operator in the tractor. These are some of the applications that we're bringing to market in the near future.
The last five years in autonomous agriculture was about the emergence of the enabling technologies. The next five years are about using these to solve farmers' problems. Beyond that, autonomy will reshape the agricultural machine industry. Our strategy at JCA is to deploy a wide set of solutions across machine formats, factory and retrofit, and diverse agricultural tasks. Through this approach, we will connect farmers with meaningful solutions that contribute to solving their key challenges.
Well, there you can see why we're investing in these capabilities. All of the investments that I showed, those are investments we've made over the last 18 months. We see our velocity continuing to increase from where we started in 2015 to now really driving ahead. We're not gonna stop. We're gonna continue to increase our spending in R&D. When you look at our growing sales, you look at our growing R&D spend rate, those are significant increases in absolute dollars. We're investing in small firms, startups, and the reason is we want to be closer to them to the technology. We wanna strategically understand this space better and cast that net wide. We've made multiple venture capital investments, and we plan to continue to do that.
We're engaging with universities on sustainability practices, working with those universities that are on the leading edge of various fields of technology. That also helps with our talent pipeline that's ever so critical. This results in driving our revenues higher and making our machine park much more competitive overall and very much on the leading edge. When you look at our R&D and engineers, just the sheer count of engineers focused on our precision ag portfolio, since 2018, we've increased the number fivefold. Please remember that we purchased Precision Planting in 2017, so this was after the Precision Planting. We've already increased it fivefold, and we continue to recruit heavily in this area.
That's why when Eric shows on the screen that we're going to deliver autonomous machines to the market across the full crop cycle by 2030, we have confidence that this is going to happen. That means they're gonna be commercially available across the crop cycle in an integrated form by 2030. That is absolutely critical for us. We'll have some machines running in the field with... I think if you go to JCA, you might see some activity there, lots of it. We're gonna have those machines ready in the retrofit market by 2025. On the targeted spraying, Eric shared the date, but these are all steps towards delivering on our mission.
One of the things that I think you all want to know is, okay, we see how you're delivering the farmer value, but what does that mean to shareholders? The important part is we're not waiting until 2030 to get returns on these investments. The way we're going about it is year by year, our farmers believe in better, and we're ready to deliver and monetize that along the way. This is where we're truly unique. We have a multi-channel approach. We have a channel focused on retrofit. That channel's called Precision Planting. We have a farmer-first digital enablement effort that we call ONE Digital.
ONE Digital allows farmers to do business the way they wanna do business, digitally enabling as much of that customer journey as we possibly can, enabling us to deliver a higher level of customer experience, reducing that variance of the customer experience, and lowering that cost to serve farmers, so we're able to cover more farmers with the existing channels that we have in place. We have our specialized brands. Eric talked about the focus of the Massey Ferguson brand and the Fendt brand globally. This is critical because that gives us a mid-tier brand and a higher specification brand, and we're going to provide the technology on each of those platforms, which gives us more growth over the long run. Then we'll talk about the full line. We not only have tractors, we have tractors and combines and sprayers and planters.
We now have the full portfolio for farmers, and on top of that, we have the technology. For the integrated technology that we offer in our whole goods, we call that our Fuse portfolio. It's the Fuse- connected services and technology. Why we think the retrofit business is so attractive is because there's a huge total addressable market. There are many estimates out there, but, you know, it's a $150 billion-plus, to say the least. Some numbers go a lot higher than that. Far too often, we just get fixated on the farm equipment business. As Eric shared, we're more than that. We're far more than that because we're helping farmers optimize their inputs at each stage of the crop cycle, and we plan to do this with our retrofit approach.
That's why we bought a company like Headsight that allows us to go into this area with harvesting solutions. It's why we bought the, Appareo for connectivity. It's why we're working through the automation with JCA and bringing that in. Those are the investments that we've made. What's really important here is to look at the right-hand side of the slide. When we studied the planter market, about 7% of the customers buy new planters each year. 100% of farmers wanna get better year- to- year.
When we survey those farmers, we ask them, "How many of you believe you're losing yield by the current state of your planter?" 71% said, "Yes, I know I'm losing yield because of the current state of my planter, and by next year, I'm gonna do something about it." That's why with our approach and our dual channels, we're going after the ones buying new equipment, and we're going after those that believe in better. Our approach to the market. I talked about the total addressable market. The other thing that the technology-rich retrofit approach brings is we're not building new castings. We're not building new toolbars. What we're building is the technology to go on existing machines, so we can go out and innovate sometimes multiple times a day with different iterations.
That gives us tremendous speed to market, where we can take that, go out in small batches, test, learn, and as that matures, launch it more broadly. Then after a few years in the market, that's when the customer pull, pull comes for those products to go through other OEMs and our own products out of our own factories. That's why we sell to over 30 OEMs today with the technology because their customers are demanding that technology is on the machine out of the factory. It also enables farmers to buy this incrementally. They can start with a small purchase. Maybe they're just changing their seed meters in the first year. Maybe they just wanna monitor the activity and sense what's going on throughout the field. Then once they see what's going on, they wanna take that next step.
That next step is to be able to control it and optimize it. We allow that scalability path where they can make incremental investments depending on their budget. Finally, it really improves the farmer's profitability. Most of our retrofit products have a payback of one to two years, so it's very attractive for the farmer to make those investments year- to- year. That drives to the sustainability. When you really look at our approach, one of the keys here is how we go about it. Edge processing is critical in this space because there's so much information coming in when you're going through the field with high-speed planning. With our sensors, it's essentially like you're taking a flashlight and shining it on the problem.
Our sensors on the machine are picking up all kinds of measurements, and we have to make those adjustments fast. To do that, on a 24- row planter, a high-speed planter, we're picking up 13,000 measurements a second and making those adjustments in real time. That's why we have to use edge processing to take that information and process it and act on it as close to the source as possible. We also collect that data for use later, but edge processing and being a leader in this space is absolutely critical for us. Now what I'd like to show on the screen, you'll see our FurrowJet product working. I hope you're able to stop by the library and see this. We have a demonstration of it.
What's so critical when you're going through the field is to get the nutrients right where the seed needs them. For some nutrients like phosphorus, the phosphorus isn't gonna travel to the root. The root's gotta go get it. If the root of the plant is too far away, it's not going to get that nutrient. What we do with our FurrowJet product and products like vApplyHD, is we put the right amount of fertilizer in the proximity to the plant where it can reach it. That's so critical for the initial root growth and to establish that early base to give it the feeding. Think of it as spoon-feeding through its early development stages. That's where the difference is between broadcasting fertilizer across the field.
When you have FurrowJet and you have the liquid application, you get to the savings that Eric talked about with the barrels that we have in the back of the room. When we're talking about for a 40-acre field, you can save $1,200 with the technology when you fully deck out your planter and you use our turn automation and our machine control features. That's 40 acres. Think of the savings when you're a 4,000 acre farmer. That's why this technology is in demand. That's why our retrofit growth is going as fast as it is. When you look at the years up to 2017, we were introducing about one product a year. We were selling primarily in North America. Since that time, we've accelerated our product launches. We're also looking at about seven to 10 product launches from 2023 forward.
It's dramatically more than what we've had before. Our sales in South America continue to increase as well as growing sales in Europe. With the full look at the crop cycle, we believe there's a very bright future in this business. Let's look at what that means for the full crop cycle. As you can see, the future's bright as we go around the crop cycle. Our integrated technology. One of the things that's exciting here is the growth in our subscription business. We've nearly doubled our subscription business since 2018. On the beginning of the video we just watched, you saw our Radicle Agronomic Lab, where we're doing soil sampling. As that product comes to market, that will have a subscription revenue with it as well.
Whether you're talking about the Precision Planting business or our integrated technology with the Fuse products, we will grow our subscription base. We're continuing to grow our penetration on our own products as we go around the world, and it's more than just the whole goods growth. That part's very exciting as well. To keep that going, we're gonna bring additional innovations. We're going to increase our market penetration, especially where we're going to new geographies, where we haven't had our technology ready before, such as South America. Finally, we're continuing to work with our channel on developing more precision farming specialists, because that's an additional way we make farmers more comfortable with our products. When you add all that together, it means that a great product gets even better. The Fendt 700 is one of our flagship products.
When you talk about machine control, Eric talked about the awards we're winning, three of them were for advancements in machine control, for waylines, for automatic turns at the end of the field. That's why we're continuing to invest because if you're gonna have an autonomous tractor someday, it's gotta drive through the field, it's gotta turn at the end, it's gotta execute every single operation. We're leading edge across the board on precision, guidance, rate control, section control, and overall machine control. Then connectivity. We obviously need to connect our machines to be able to support them when they're running autonomously. We're making advancements there with the connected machines we have, our ability to diagnose as we work towards being able to fully manage a fleet from anywhere. We're executing our plan. I talked about how that total addressable market's getting bigger.
You may wonder on a FurrowJet product, why are you focused on the fertilizer? Well, fertilizer is 27% of the money a farmer spends. Equipment's 12%. There's a huge opportunity just there. The other piece, I'd encourage you to go back and check this. In, I think it was March of 2021, we had our virtual meeting at that time. We talked about our focus areas. The same ones are listed in the center of the slide. The plan is working, and we're doubling down on it and driving forward. That's what gives us confidence to drive to the higher margin target or higher revenue target with this margin-rich environment. To sum it up, we believe the investments we've made to establish that solid foundation are stronger than ever, and we continue to invest.
We believe we're giving farmers the added value, both agronomically and economically, where we're gonna draw more farmers to the AGCO family of brands. That's gonna lead to better results for AGCO. In the end, that's what gives us confidence about where we're going in the future. Thank you. Right now, I'm gonna turn it over to Louisa Parker-Smith to talk about our sustainability journey.
Please welcome to the stage AGCO Corporation Global Head of Sustainability, Louisa Parker-Smith.
Well, good morning. It's great to be with you here. My name is Louisa Parker-Smith, and I'm responsible for sustainability at AGCO. You've already heard from Seth a lot about our precision ag and digital, and hopefully, we've given you a good sense of how precision agriculture is integral to our business strategy going forward and also how it's really critical for sustainable outcomes for farmers. AGCO's motivation is to serve our farmers, to grow profitably, but also to go beyond that and make a positive contribution to society and to the environment while facilitating a pathway to global food security. Eric told you all that sustainability is core to our purpose as a company and why we exist, and our purpose is farmer-focused solutions to sustainably feed our world.
As I mentioned, the precision ag and digital being core to one of our growth levers is incredibly important in setting this foundation for sustainable outcomes for farmers going forward. Traditionally, we've looked at this more from the economic aspect, building profitable and viable livelihoods for farmers, and also the yields, which links very closely to food security. Now we're increasingly starting to look at the environmental impact, and so we've really added a third dimension in how we think about the products that we take to market. Fundamentally, we want to be a strong support and a strong partner for the farmer. We want to solve their current pain points here and now, but we also want to anticipate their future needs as we look ahead to the future.
This is becoming increasingly challenging when we're seeing global food systems being completely reimagined and in the context of a low-carbon future. Really just building on that theme, we all know that agriculture is highly impacted by climate change. We know agriculture is a significant contributor with around about a quarter of total greenhouse gas emissions coming from the food and ag sector. We also know that global crop yields are highly exposed to the physical impacts of climate change. Here we're talking about increases in global mean temperatures, but also the severe weather effects and acute physical impacts like floods and freezes, wildfires, and heat waves which are increasing in frequency and severity.
Most importantly, and I think what gets the whole of the AGCO team really excited, is that AGCO and agriculture can be a really key part of mitigating the climate-related impacts. We've got an opportunity really here to start to rethink a farmer's relationship with carbon. We've heard Eric talk about soil carbon sequestration. Really here, we've got to focus on getting the economics right for the customer, getting the right data in their hands, and then giving them the tools in their toolbox to actually change their farming practices, and also giving them the confidence to do that as well. I think here AGCO has the opportunity to touch on each of these points. You've already heard a lot about our four pillars of sustainability, so I won't go into too much detail on these.
Really the key focus here is to get the whole of the organization behind our sustainability program, give some energy and some direction to our focus areas, and really drive forward concrete action. I'm gonna touch on each of the four pillars in the next couple of slides. Just before we do that, I want to take a moment and really just take stock of where we got to after only two full years of our corporate sustainability program. We've delivered early and solid results across a broad range of holistic KPIs on both the environmental and the social aspects of sustainability.
Eric already mentioned that at the end of this year, we're hopeful that we'll achieve our six-year target, which is to reduce our emissions intensity across our manufacturing operations by 20% by 2026, and actually we are pretty much already there to do that. We've also listened to many of your feedbacks and met with many investors and many of you also in this room. Greg and I have done the rounds and been out and talked to you all. We've strengthened our disclosures and our transparency around our performance on sustainability, and we've also integrated four key global best practice frameworks into our reporting. As a result, we've seen year-over-year improvement in our ESG ratings, and I'm really proud to say that for Sustainalytics, we're actually in top quartile. We're very close to that in a number of via the framework, so we benchmark ourselves against our peer group.
Lastly, and hot off the press, we are incredibly proud that we've been placed 71 out of 500 ranked companies in Newsweek's America's Most Responsible Organizations, Responsible Companies. Just turning our attention to decarbonizing our operations and products, our focus until this point has mainly been on our Scope 1 and 2 emissions and on our own factories and our own operations. It's a really good starting point. It's something that we control directly. We've made some good progress through energy conservation programs and renewable energy programs. 2023 will really see us pivot and focus on the broader value chain emissions and our Scope 3 emissions. This is where we think we can have a really strong impact and take a leadership role.
We've been evaluating our Scope 3 emissions, both upstream and downstream over the last months, and it's not surprising when you compare us to other industrial companies that the majority of our emissions will be in Category 1, which is purchased goods and services, and Category 11, which is use of sold products, so the tailpipe emissions from our self-propelled machines. We are planning on setting a Scope 3 target in 2023, and we'll be announcing more on that in the new year. We're currently assessing various options for target setting.
We've also started to look at the various levers that will be available to us to decarbonize across the value chain, and the majority of this will be focused, particularly when we look downstream on the next generation of zero and low- emission machines. The future will likely include a broad combination of approaches. There's no one-size-fits-all, including ongoing enhancements to fuel efficiency, alternative powertrains like mild hybrid and full hybrid, and the full electric tractor. I think you've already heard we have the e100 out on the road for you to take a look at today. That will be available in the market in 2024, which is actually earlier than we originally announced in our sustainability report in 2020.
We also newly announced the AGCO Power CORE 75 engine family, which is our most efficient engine on the market. It's biodiesel and HVO compatible. It's also been future-proofed for use with other alternative fuels in mind. Then on the upstream side, this is really where we're focusing on work with suppliers. Of course, we'll be looking at the materials that go into the machines, the weight of the product. There are a variety of opportunities for innovation in this area. I'm pleased to say that we've kicked off a partnership this year with EcoVadis to really understand the sustainability performance of our top 500 suppliers by set spend, so our top 500 tier one suppliers.
This will give us a sense, a bit of a baseline as to how our suppliers are performing on key environmental and social dimensions, and will give us an opportunity then to work with them on specific areas where we see opportunities for improvement. Really just doubling down on the topic of soil health, so we've mentioned this multiple times this morning. We see this as a really important foundation for sustainable agriculture. On the slide, you can see the virtual cycle of focusing on soil health with farmers, but it's an increasingly hot topic. The FAO, the Food and Ag Organization of the UN, announced earlier this year that they were concerned that up to 90% of the Earth's soils would be significantly depleted by 2050 if we're unable to take rapid and significant action.
There's a real opportunity here for us to address the challenges that we see in the future around food security, but also to ensure that we secure profitable livelihoods for farmers. Our starting point is really to help the farmer understand the state of their soils, to help them understand the accurate measurement and establish a baseline from which to measure improvements to soil health over time. This is critical for fertility management, but it's also the most basic and fundamental requirement that's needed for soil carbon credits to generate high-quality carbon credits that can really attract the kind of pricing that we need to get the adoption from farmers. Earlier this year, we launched Radicle Agronomics, and you saw a little clip of that in the video that Seth played.
It was launched through Precision Planting, and I would encourage you all, if you have not already, to go onto the Precision Planting website, take a look, because we feel like this is a real game changer for the industry. It's something unique. We've not seen anything like this before, and we're incredibly proud of this product. We see an opportunity to really simplify the whole process of soil sampling, and also to speed up the process, take out some of the inconsistencies, and ultimately provide high quality, quick results to the farmer. Radicle Agronomics covers a number of different products and tools, but one of them is the Radicle Lab, which is a fully automated soil lab with a small enough footprint that it can be housed at the location of the agronomist.
It's a slightly different target market for AGCO because we're working in this case with the agronomist rather than the farmer. Now, the image that you see on the slide here is the MicroFlow technology, and this is effectively the chemistry that sits within the Radicle Lab and fully automates the whole process. You're effectively removing the touch points, and with that, inconsistencies in the process. This really builds on a foundational belief that we have that is accurate measurement is as, if not more important than modeling when it comes to delivering high-quality, credible carbon credits. We really see our investment into Radicle Agronomics as a great starting point and leaping off point for AGCO to take a more active role in the carbon credit space.
Shifting our focus a little bit to our grain and protein organization, particularly the protein side of the business is really seeing now the opportunity to leverage some of these precision livestock technologies and also monitoring data to drive improvements in productivity, but also for animal welfare as well, with a strong focus on the care, the nutrition, and the health and well-being of the animals. Over the past year, we've worked really closely with our independent expert animal welfare advisory panel to really start to dig into some of the specific animal welfare areas that can be addressed through precision livestock technology. Examples include thermal comfort, air quality, litter moisture, and sound levels. Our intention is to start to integrate these dimensions into our product development plans going forward.
One example is Scout. Again, this was in the video that Seth showed just now. This is a ceiling suspended robot that makes its way through the poultry barn, sensing and measuring with a variety of different sensors, various attributes as it goes through the barn, and really helping the farmer through AI to take decisions about things that they can't necessarily see with their own eyes. It gives a huge opportunity, again, to address animal welfare opportunities, but also to increase productivity. Eric's already talked about our cultural beliefs and our purpose. AGCO has a really great culture. I can say that firsthand. I've been with AGCO 10 years.
I've worked in three different global regions in the U.K., in the U.S., and also in Africa and Zambia. As part of our farmer focus strategy, we're really doubling down on how we can leverage our culture as a competitive advantage, but also how we can leverage this as an employee value proposition as we compete for talent in incredibly hot markets. We're also confident that if we can connect our employees to our purpose and get them passionate about why we exist as a company, we can deliver not just financial outcomes for the business, but also sustainable performance. The only other point I would make here is the great work of our AGCO Agriculture Foundation, launched in 2018.
In just a few years, they've launched 20 global programs supporting over 20,000 individuals, mostly farmers across the globe, and impacting more broadly 200,000 farming communities, primarily in the areas that we operate, in the communities that we work in. The work doesn't stop here. We have a responsibility also as a global employee to take diversity, equity, and inclusion seriously, and it's a priority for AGCO. With the support of our new CHRO, Ivory Harris, we've put new goals in place for 2030 to address the number of women in leadership positions in the business, and more broadly, the number of women in AGCO, and then also to set some targets around minority representation in our U.S. business. We also believe that safety as a value is non-negotiable.
We expect that our employees can come to work in the morning and expect to go home at the end of the day safely. In 2021, we established a new health and safety program called Focus 2.0, which was really to sort of catalyze our activities in this area and take it to the next level. It's been going great the last couple of years, and we really want to set the next level of targets. We've set a target for ourselves to achieve an incident rate of below 1.5 by 2025, and this would take us to a leading position within the industry. There you have it. AGCO is committed to a sustainable future. We've delivered early strong results across a broad range of sustainability KPIs. We've listened to you, and we've increased our transparency and our disclosures.
We have a clear path forward driven by the four sustainability priorities that you see on the slide. The world is changing and so is AGCO. We've embedded sustainability into our corporate strategy, and we're taking steps to be more resilient and more competitive in a dynamic marketplace. We want to deliver value through sustainability, not just for the farmer of today, but also for the farmer of the future. Thank you very much, and I'll hand over to Greg.
Thank you, Louisa. As we head into break, let me just give you a gentle push to get your questions into the queue. Far, we've collected 10 questions from Jamie. Although we love Jamie, we know the rest of you have some great questions. Please go ahead and do that. QR code's on the tables, online, the link underneath the video box, please get those to us, let's do five or six minutes break. There's coffee, good stuff outside. See you in five minutes.
As Eric, Seth, and Louisa mentioned, our farmer-first strategy continues to be focused on driving improved performance, not only for us, but for our farmers and ultimately for our investors as well. I'll start my session this morning with an overview of the financial goals supporting the strategy that Eric outlined earlier.
First, our 12% mid-cycle operating margin, which is a significant increase from where we are today. We're excited, and we're confident in achieving this new target. In a moment, I'll walk you through our performance over the last several years and why we are confident in our path to hitting this 12% target, but also, as Eric said, continuing to take the bar to that next level. There's two key metrics that are critical to help us achieve this target. One, we're going to outgrow with our high-margin businesses, Fendt, precision ag, and parts. Two, we're going to consistently generate cash across the cycle that will enable us to do continued internal investment as well as external investments, while also continuing to return cash to our shareholders. You'll be able to track our progress with two key metrics.
One, we're targeting to outgrow the industry by 4%-5% per year. Two, we plan to generate free cash flow that averages between 75%-100% of adjusted net income on an annual basis. Before we go into details on our new targets, I wanna spend a couple minutes sort of reflecting on the history and what we've accomplished over the last several years and how we measure our performance to ensure we're delivering on the incremental value regardless of where we are in our cycle. The slide behind me, it plots the operating income margin over the last 10 years relative to where we were in the cycle.
As you can see on the slide, there are several years below the mid-cycle and four years above the mid-cycle, with operating margins ranging from 4% in 2016 up to our current forecast of 9.9% in 2022. We used this 10 years of data, and we pulled it together to create what we call the value creation line. The point of this value creation line is really twofold. One, the placement on the line sort of reflects our average profitability over this timeframe relative to the industry cycle. Two, the slope of the line, and again, this is based on this 10 years of data, this slope effectively represents the incremental or the decremental margins that as sales volumes increase or strengthen, as well as the decremental margins as our industry is weakening.
We look forward, we use this value creation line to help guide us to ensure that we're delivering the right incremental margins as our markets are strengthening, but also, and equally probably more important, that we're cutting our costs or reducing our cost as we're seeing our industry weaken over time. With that value creation line, we've taken 2013 through 2018 using the slope of that value creation line, and we've brought that to the mid-cycle. You can see that as we bring those different points at mid-cycle on that slope, it shows that our margins were effectively flat during this period of time. AGCO's actual margins actually moved or ebbed and flowed depending on where we were in the cycle, but really showed no real structural improvement over time.
I would mention during this period, however, we did increase our R&D and our engineering as a percentage of sales, which ultimately led to some of the future margin improvements that we'll talk about here. As we began to execute in the early days of our initiatives, we began to drive the structural improvement to our profitability in both weaker market conditions as well as in some of the stronger markets. You can begin to see the improvements as we look at the average of 2018 to 20— Sorry, 2013 to 2018 average. When you compare that to 2019 at mid-cycle, you can begin to see the benefits as we began to focus on technology and the Farmer- First solutions. You can see that step up there.
As we move to 2020, despite still weaker absolute market conditions, we began to deliver improved margins by driving further growth in our South America business, and this was driven by the Fendt full line being offered in South America the first year, as also selling some higher margin products in that part of the region, like our Momentum planter. We also saw good growth in our Precision Ag and our parts business in that year. In 2020, North America also saw good performance in Fendt as we continued, as Eric said, to roll out the full product portfolio both in North America and in South America. As we move to 2021, t he market strengthened, well, so did our absolute results as you see on the slide.
We saw strong demand for the high horsepower tractors, in 2021, coupled with solid pricing, which allowed significant growth, again, for our Fendt brand, both in North America and in South America, while we saw good growth in our Precision Planting, Precision Ag, and our overall parts business. The high margin growth drivers that Eric touched on really allowed us to continue to raise the bar on this value creation line, going from 2019 to 2020, and again to 2021. This year, we expect to deliver our best results ever. We're planning operating margins of 9.9%. When you bring that using the slope of that value creation line to mid-cycle, you look at a mid-cycle margin of around 9%. It's through the disciplined execution of our strategy, and I think it's clear, that we've made significant progress.
We've structurally improved the profitability of our company by around 300 basis points when you compare our performance this year to where we were at the average of 2013 to 2018. It's this type of improvement that we've demonstrated, along with the opportunities that you heard from Seth, Louis, and Eric, that make us very confident in delivering our new targets. Now let's talk about the future. Eric touched on our three high- growth margin engines, and so I'll only mention each of them briefly. Globalizing the Fendt full line brand will continue to be a growth engine for us, growing the premium farm equipment market segment as farmers look for the highest and the best technology.
Our growth focus, as you know, is both in North America and South America, with still the largest opportunity for us here in North America. The Precision Planting business has been fantastic, delivering above market results for the last five years for AGCO, and there's still more opportunity for us to grow here in North America, as well as growing in South America and in Europe. Precision Planting will continue, as you heard from Seth, will continue to execute its unique retrofit approach. Seth talked about the strong ROI for our farmers, but it also presents a large addressable market for us to capture. The Fuse brand is our Precision Ag portfolio that we leverage on our Fendt, Massey Ferguson, and Valtra products. We've seen tremendous growth in our technology portfolio, which is a key to further penetrating the large ag segments of the market globally.
Parts and service, that as Eric talked about, as we get closer to our customers, we can become a better partner to them digitally. We expect our service and parts business to continue to increase and grow, as well as we increase our penetration rates with them. We expect these three primary growth drivers to help drive AGCO sales 4%-5% above the industry growth when the markets are strengthening, but also to dampen our decline when the markets are actually weakening. Our operating margins from cycle- to- cycle is that basically we will generate higher highs and higher lows. The bars on the left here reflect AGCO's margins through the existing cycle.
As Eric said earlier, when you see our cycle, we were at 4% trough margin in 2016, at a high point this year of 9.9% in 2022. As I mentioned, using the slope of that value creation line, that puts us at about a 9% mid-cycle in this current cycle or in this current position. More importantly, if we look at the bars on the right. Based on the operating margin progress that we've made over the last several years and the growth plans that Eric, Seth, and Louisa talked about, our plan is to improve our mid-cycle operating margin to 12%. That's a 300 basis point increase from where we expect to finish 2022.
Using the slope of that value creation line, that would translate to a trough margin of around 9% in 2026. As Eric said, this is not the old company you remember of AGCO. This is a new company delivering higher highs and higher lows. He also touched on, again, based on the state of the market, if we were to see the market where it is today and the strength of where it is today, we would expect to deliver margins in the mid-teens. Overall, I would tell you these are very strong results, and we will be delivering above our cost of capital regardless of where we are in the cycle in 2026. Historically, farmers have allocated a relatively small percentage, let's say around 10%-15% of their total spend on agriculture equipment.
As we focused on precision ag, farmers see technology as really the key way to increase their yields and reduce a number of their costs, like fertilizer, seed, crop protection, labor. As a result, we see the opportunities that farmers will continue to invest well beyond their historical levels to capture the benefits which allow us to participate in a much larger addressable market than we have historically. Eric and Seth discussed some of the new technology targets that really reaffirm us as a major player in this growing segment of the market. Now let's shift to our strong financial position that AGCO has really established over the last decade and the investments that we've been making to really support these strategic initiatives.
Our investment-grade balance sheet can— and strong free cash flow generation with really limited calls on our cash provides a tremendous opportunity for us to continue investing in growth and returning cash to our shareholders. We've averaged between 75%-100% of free cash flow conversion. We expect to continue at that pace in the coming years. The pie graph on the right details our capital allocation priorities— historical allocation priorities. Over the last five years, we've committed nearly $3 billion to support our strategy and also returned a significant amount of cash back to the shareholders.
We've also added on this pie chart our engineering spend in that red part, which is around $1.9 billion, just to put in perspective that in addition to all the ways we've allocated cash, we've been adding a significant amount of cash into engineering, trying to fuel our pipeline going forward here. We've increased, as I said, we've increased our capital expenditure in engineering to focus on new product introductions, and we've been growing our precision ag capability, which has really helped deliver on those margin improvements and the technology advancements and portfolio expansions that I've talked about in the past. We've done some bolt-on acquisitions, really to focus on technology and bring further expansion to our portfolio and really to accelerate that farmer-first mindset that you heard from Seth, Louisa, and Eric.
Finally, we have remained committed with direct returns to our shareholders, including our normal quarterly regular dividends, our special variable dividends, and then periodic share repurchases. Overall, we've been very balanced with our capital allocation. We've been investing organically, we've been adding inorganically, and we've also been providing sizable direct returns to our investors. Given our historical approach, we would expect to remain balanced going forward. We've built a strong capital structure, and I would say we will strive to maintain our investment grade. We continue to invest in our business, and we expect to continue to increase our engineering spend as a percentage of sales in this year, both on a percentage of sales basis and an absolute dollar basis.
We remain opportunistic, as you would expect, with our acquisition opportunities as we look to accelerate technology and really add new products. Finally, with our healthy balance sheet and our strong free cash flow generation, we would expect to continue to return share, capital back to our shareholders. This year, as you know, we increased our quarterly dividend by 20% to $0.24 per share, and we paid our second special variable dividend of $4.50 per share. Future returns to our shareholders will be based on free cash flow generation, our internal investment needs, as well as that looks at things like CapEx, as well as inorganic opportunities and our overall market outlook. Speaking of our market outlook, let's go to the next section, which I know most of you are waiting for.
Let's talk about our assumptions for our 2023 forecast. The slide behind me shows our retail forecast for our three major regions. Globally, driven by strong commodity prices, we expect healthy farm economics to support another year in 2022. For North America, we expect similar demand compared to the healthy levels that we have here in 2022. We expect continued growth in the high- horsepower row crop equipment segment to be offset by softer demand for smaller equipment after the several years of strong growth that we've seen. The increasing interest rate environment is expected to continue, and this has been slowing the small equipment segment of the market this year and likely into next year. In South America, we expect sales to be flat to up 5%, really moderated more by supply chain constraints.
This region remains one of the strongest end markets for us, especially in Brazil, where they are forecasting record profits and strong farmer profitability in 2022. Shifting to Western Europe, industry is forecast to be relatively flat compared to 2022. The farmer fundamentals in the region are generally healthy with grain prices continuing to outpace input inflation. Meanwhile, the supply chain constraints that we in the industry have seen here in 2022 are really extending the equipment cycle into 2023. With this as a backdrop, let's look at our 2023 financial goals. Currently, we expect net sales to be around $14 billion next year. With those sales, we're expecting effectively slightly higher modest global sales volumes to increase.
Pricing for us at this point, we think will be in the high- single digits next year. Based on the current FX rates, we would say that foreign currency will be around a 1% headwind year-over-year for us. With those sales, we're projecting earnings per share of around $13.50, up significantly from where we expect to finish here in 2022. We're targeting capital expenditures at around $375 million, and we expect free cash flow conversion in the range of 75%-100% in line with our long-term targets.
As I close my section, I want to remind you of the 12% mid-cycle operating margin target, which I said earlier is 300 basis points higher than where we expect to finish this year at the mid-cycle, as well as our per annual performance metrics, which are also critical for our long-term success. I'm hopeful that after our presentations today, you can see why we're excited and why we're confident in our new targets. Let me wrap it up. We've highlighted our optimistic long-term view of our industry. You heard Eric, Seth, and Louisa talk about why we're excited about AGCO. You've heard from them that we're well positioned to win. We've reiterated our long-term strategy aimed at growing our business, improving returns for our farmers, for ourselves, and for our investors.
As you saw on the value creation line that I walked you through, we've proven that we deliver on what we say year- after- year. We've demonstrated the ability to get stronger every year, regardless of where we are in the cycle. We've outlined some new long-term financial targets. Seth and Eric set some new technology deployment goals that will help deliver higher levels of profitability, higher highs, higher lows, and more consistent earnings through the cycle. All of these things will deliver long-term value to our shareholders. With that, I think we're ready for Q&A.
Okay, Eric, I'm gonna ask you to kick it off for us. We have a couple questions that I'd like for you to cover for us. The first one, involves digitalization. Particularly, does the digitizing the customer experience create conflicts with dealers, number one, and does the dealer share in the profit stream associated with the digitalization?
These digital tools we're creating really benefit the customer and the dealer. I'll just use a simple one to give an example. When we do e-commerce on parts, allows the customer to order a part, it gets shipped to them directly, but the dealer still makes a margin. That's just one example. When we have these sales, funnel management tools, it used to be even at a dealer level, the relationship with the customer was in the salesperson's hands. It was in a notebook or wherever it happened to be. It was very distributed. The dealer didn't even know, how much activity do I have out there in the marketplace? Do I have enough demos planned? Do I have enough inventory on hand? All those types of things. These tools help the customer experience.
They help the dealer manage the overall sales process. They keep the dealer in the margin stream. Most importantly, it creates a higher level experience for the customer and a more consistent experience for the customer. Sometimes our farmers will span two different dealer organizations. We wanna make sure that through these tools, they get to interface the way they want much more consistently.
Awesome. Eric, the next one, we're gonna stick with distribution and particularly, let's talk about our dealer strategy, in the context of dealers selling both Fendt and Massey brands. How do we maintain brand governance and how to think about potential for channel friction?
We have different strategies of our brand positioning or channel positioning based on region. In Europe and in South America, fundamentally, we have an Massey Ferguson channel that's full-line Massey Ferguson, and then a second channel that is Fendt and Valtra. Two channels to go to the market. In North America, since we don't have Valtra in this market, we're allowing dealers to sell both Fendt and Massey. Largely the way that works is that the Fendt is going after the premium production producer, and Massey is going after the straightforward, dependable consumer, and oftentimes, the smaller farmer. You may have a farmer that would want to buy products from both brands. They wanna buy their combine and planter and their sprayer from Fendt. That's to cover large acreage.
They may have some dairy operations or farm yard activity where they wanna buy some Massey tractors to do some mowing or around in their dairy. You know, for the customer, it works well. What we do with the dealer is to say, "We want you to have different sales focus." Back office in terms of service and parts and things like that, those can all be combined because we really wanna create a great experience for both brands. It's the sales focus that we wanna keep separate in terms of different salespeople.
Awesome. Seth, I have a couple questions for you. The first one asks specifically, does the way you monetize equipment with precision ag change over time? The second part of that is, do we move to a pay-per-usage or pay-per-acre model?
That's a good question. I think the first thing to understand is that it already has been changing over time. With technology and with the connected fleet out there, we can monetize our products after the whole good left the factory. We also, with our Precision Planting products, we can also scale up over time. It's not like you need to buy it all at once or you miss out. You can actually determine year- by- year what you wanna do. It's actually quite exciting because it enables us, if we see a farmer is going through their field, taking care of a certain task, and we know we have some optimization products that can help them, we can offer a demo over the air.
We can offer the unlock for that over the air, we can incrementally charge for that. Whereas the old way was you ordered up front or you never got it. With some of our turn automation, you know, just the guidance accuracy correction signals, those have long, for a long time been products where we could get recurring revenue and additional revenue. When we jump to the other end with our Radicle Agronomic Lab, our approach there is to go to market with a service approach, with a service fee by the sample, we think that will be a nice recurring revenue growth opportunity for us, going forward.
Great. Then, as a follow-up to that, what type of adoption do you anticipate in your early autonomous products in grain cart and tillage? Then, a follow-up is, will the first release of your autonomous grain cart be able to unload?
Yeah. Somebody here is a farmer, I think, because if there's a hard operation in the field, it's not just getting the grain cart full but pulling up to a truck without hitting the truck. That's very astute. As far as the adoption, what we're looking at, and there are a lot of debates about this, we look at what was the adoption with guidance. When guidance got to the point where it was truly productive and reliable and easy to use, we believe that automation will follow that same adoption path. You could look at that path from the early 2000s through to about 2010, North America adopted fully over that period. Europe was really the next continent that had the adoption curve really spike up.
South America is still in the middle of the adoption curve. That's the way I would look at it. As far as committing specifically to the features, we're not ready to do that. You can rest assured that with our farmer focus, we are examining those pain points and making sure that we're gonna bring a product that will truly be value-added.
Great. Thanks, Seth. Damon, I have a couple financial- related questions for you. The first asks, the goal is to double our Fendt revenue in North and South America over the next five-seven years. What is the mix of that Fendt revenue today between North and South America, and what type of a mix do you see by the end of that five- to seven- year period?
Yeah. I think today, right now, our mix is around 75, 25 directionally between North America and South America. As you've heard Eric and I talk about, we see tremendous growth opportunities in both. You know, I think there's a larger opportunity here in the North American market in absolute dollars, as we migrate further north in Brazil into the Mato Grosso region to more of these professional farmers. We've seen significant growth there, we still see great growth potential in South America. I think from an absolute dollar perspective, we see more opportunity here in North America as we grow our share with the Fendt brand.
Awesome. The next one, references our 12% mid-cycle margin target. They'd like you to discuss what needs to happen within the grain and protein portfolio to support that 12% mid-cycle margin.
Well, let me step back a little bit and sort of talk about the components of going from this mid-cycle 9% that I talked about when we move 2022's adjusted fore— or current forecast to mid-cycle up to the 12%, so that 300 basis point increase that I talked about. What I would say is about half of that is expected to come from those three growth drivers that Eric and I talked about. Fendt, precision ag, and parts really outpacing. Again, these are our high margin businesses, so you think about half of that 300 basis points we would expect to come from there. The other half is gonna be a combination of what I'll call the optimization. Eric touched a little bit about Massey Ferguson and what we're doing to further optimize the profitability.
I will put grain and protein in that same segment. This year, we know our grain and protein business has been challenged by steel prices and how that's influenced some of the projects of what the customers have been able to order. We have a large business in China that's been influenced by the COVID lockdown there. We know that the grain and protein group today is not performing to where we expect it. The team has done several things to restructure to improve its profitability and position it for further improvement as the markets recover. As we've seen steel come down, we're hopeful that the order pattern for some of these large projects will pick back up. We know that as China starts to loosen its COVID-19 policies, we're hopeful that we continue to see improvement there.
As part of the optimization that I would put underneath that bucket, we're expecting the grain and protein team to really start to improve its profitability back up to some of the historical margins. Those would be the two parts of the optimization. The third part that's really underpinning that, is going to be sort of the overall productivity improvements. We still see opportunities within our factories to drive incremental productivity, to reduce our cost of sourcing as we try to move to more low cost or more in region, for region where appropriate. When you put those three between Massey Ferguson, grain and protein, and then I'll call the more of the manufacturing optimization, that's about the other half of this 300 basis point improvement that we're planning over the next several years.
Damon, while we're on the topic of that 12% mid-cycle target, I have another question that relates to the growth aspect of it, the 4%-5% outgrowth of the industry. Can you give us a sense for which of the three buckets that Eric talked about, how those contribute to that 4%-5%?
Sure. I think if we look at the three primary growth buckets, what I would say is about half of that 4%-5% we would expect to come from the Fendt brand. That's going global, full line, about half of it would come from there. Directionally, we'd say 20%, 25% of it comes from our precision ag team here, about, you know, 10%-15% from parts. I would also say there's a small percentage, when you do the math, around 10% that's gonna come from our other parts of our teams, right? This is not lost that Massey Ferguson is getting stronger, introducing high- horsepower tractors. We have our Valtra brand, which is doing quite well in other parts of the world, we touched on grain and protein.
We're expecting improved mix from some of those businesses as well that will help contribute to the 4% or 5%. The majority of it comes from Fendt, and then from precision ag, and then parts.
Great. Thanks, Damon. Let's shift a little bit. Louisa, I've got a couple for you. The first one, thank you for your transparency into your progress, and what they want to know is when are you gonna set some goals around science-based targets, and what are some of the initiatives that are underway there?
Well, we've had a team working on evaluating our Scope 3 emissions, as I said earlier, for the last couple of months now. We absolutely recognize that the Science Based Targets initiative is the sort of best practice for setting credible long-term targets. Right now, we're being guided by that methodology, looking at both the guidelines around setting near term and long-term targets, so sort of 10 years and then out to 2050. We're looking at the sort of target lines for a well below 2- degree scenario and a 1.5- degree scenario, again, within the scope of the guidelines from Science Based Targets. And then also looking at the different target setting options around absolute and intensity targets as well. We're still sort of evaluating those options.
We want to do the full due diligence on that. As I said, we're being guided by the SBTI methodology and process. As I said, we look forward to announcing our Scope 3 targets in 2023.
Louisa, the second question I have for you, talks about the growing interest in the carbon credit trading by farmers and asks about what kind of incentives farmers will need in order for them to continue to improve the sustainability of their operations.
I guess global uptake of carbon credits, soil carbon credits is still. Well, firstly, the data's pretty patchy. There's not a huge amount of data on soil carbon credit uptake, but the numbers are still relatively low, I think, in the U.S. No more than a couple of percent. In Europe, similar sort of 4%, 5%. I guess the main barriers are really the transition costs, so changing your practices and then also the impact on yield. There's still a cost to the farmer and whether the economics sort of balance out at this point in time is a challenge. We've had the opportunity to see some research which talked to around about 4,000 farmers in Europe and North America.
It's clear to see that more farmers are certainly looking at this as a viable option for the future. They ask about, you know, "Are you currently using carbon credits now? Are you looking to do in the next two years?" The numbers went up significantly, particularly in Europe, to sort of around about that 20% level. The rationale, sort of why haven't you taken up the option of carbon credits at this point in time, around about half of the farmers surveyed were basically saying that they hadn't been approached about it. They didn't really have any information about it. There's still a huge opportunity to educate and inform around the programs.
I think around 40% were saying that the ROI wasn't high enough, then about 30% saying that they were really waiting to see what would happen with the price. Particularly when you think about the fact that a lot of these contracts are 10 years in length, it kind of makes sense while everything's in a bit of a state of transition for farmers to hold back a little bit. We also talked to farmers directly ourselves. We ran a farmer panel on soil health and carbon sequestration, the key point that came through from that research was a trust element actually, because it's a long-term commitment. There's not a huge amount of clarity. There are still things that need to be figured out about how the whole process works.
I think there's sort of various options and opportunities to improve that. As I said before, getting the economics right, getting the data, the right data in the farmer's hands, helping them with the right tools to bring down the cost of the transition. Also looking at transition financing I think will be key.
Great. Thanks, Louisa. Seth, I have another question for you. You earlier highlighted our separate retrofit channel. This question would like you to elaborate a little bit about that channel. Just, you know, what exactly is it? How is it separate? Why is it so successful?
Sure. One of the things that we do as we go out and look for our channel partners in this space is I don't want you to think about massive buildings and overhead cranes and all these types of things. What I want you to think about are individuals who like to get out in the field and teach. You know, if the knees on their pants aren't a little dirty, they haven't been down in the field digging up seeds to see how things are progressing. They need to be able to listen to the farmer's problems and really help them shine a light on it and get to the solution. That's very different than the traditional OEM model, which is heavy infrastructure, looking at the big sales.
The other piece is the retrofit channel, they're very much, I would call sales engineers. They're very good at teaching, they're very good at listening, and they're very good about during the peak season being out there with the farmer to make sure that it works. Those are the types of individuals that we're going after. In general, they're smaller organizations. They're less well capitalized than a traditional dealer, but with the business where we offer such tremendous growth opportunities and low overhead needs, it's very interesting to them. Of our channel, less than 10% of our dealers for the Precision Planting business are actually also equipment dealers. It gives you an idea, 90% are not in that space.
It's not to say that equipment dealers can't be good at it. We have some that are fantastic. We found that to really go out and be hungry and go after this business, it's a different type of individual or a different type of dealership. We're finding that to be consistent as we go from North America to South America to Europe.
Great. Thanks, Seth. Eric, I have one for you. It asks for a little bit of discussion around the revenue model for autonomy and how it will differ from our traditional model for selling farm equipment.
If you go back to answer that question, think about what Seth talked about the adoption curve, and we use guidance as our pattern. If you look at the guidance pattern of how fast it got adopted, we can also learn about how it got adopted. Guidance showed up as a retrofit solution first or an aftermarket solution first. The customer had a tractor, and then they bought a guidance package, put that on their existing tractor, and that's how the market worked for a number of years. Over the course of time, then OEM started integrating that and offering guidance from the factory. We think that autonomy will also have multiple paths to the market. Retrofit will be a key path. It'll look a lot like guidance did.
That's why we're investing heavily with JCA and others to create a really great retrofit autonomy package for all brands, delivered through our Precision Planting channel that Seth just talked about. I wanna underline that channel. That channel is different than anybody else in the marketplace. Everybody's got OEM channels. We're the only ones who have also, on top of our OEM channel, a retrofit channel. We think autonomy will come to the market early as retrofit, certainly. It can be priced as either just a hardware sale like most of our retrofit solutions are today, or some customers in certain situations will also want to buy it as a subscription model. Over time, I think we'll be also seeing this technology coming to the market through an OEM. Somebody will want just a turnkey solution delivered directly from the factory.
That's, that's a simpler offering that way. We'll be offering that too. Again, I think that will also come in two forms, either as a option package or as purchasing it as a subscription model. Multiple channels, multiple financial models, depending on where we are in the world.
Great. another precision ag question for you, Eric, and Seth, you may wanna jump in too. Pretty straightforward. It just asks, do you have all the pieces in place today to deliver on the full crop autonomy by 2030? If not, what pieces do you still need to put into place, and how would you plan to solve those?
Well, I think we've got an awesome team. The team that we've invested in and the team that we've invited in over the last year through the six acquisitions, I'd stack them above anybody else in the industry. I really excited about the team we have. Having said that, we're also inviting more in. We have a trajectory to grow that team over the next several years through the various tech hubs that we're establishing, we'll be bringing on more talent. In terms of skill sets, largely we have what we need, but I think the work in front of us has a lot of machine learning, artificial intelligence work in it. You took a look at the bias of who we're gonna be hiring, who we continue to bolster in those areas.
Strong bench today, but that's where most of the future work is, and so that's where most of the future additions will be. Anything you wanna add?
Well, I would say we have a lot of the foundational elements that I talked about. Now it's the, like, the digital area. It's deploying that globally, getting that to be our platform around the world. We've done well in Europe. North America is the target for next year for very strong deployment, then South America. That's the model we're going after. Then through that, developing the capabilities to also support this, leveraging the digital tools, leveraging the connectivity and enhancing that over time, because that's gonna be absolutely critical for the adoption, because farmers are gonna look for productivity, which we think we for sure can deliver, but it's also gotta be the reliability and the ease of use.
If they set off an autonomous machine to till a field, and yet they have to run back and forth to it 10 times before it completes that field, they're probably not gonna use the product much. If they put it in the field, and they can trust that it's gonna reliably get the job done, and it performs, and it was easy for them to execute, we see that going very quickly. That's where we're gonna iterate over the next few years and continue to invest.
Thanks, Seth. Eric, another precision ag question for you. We talked about the opportunity to expand or extend our precision business outside of North America. Can you add a little more color as to what type of slope you envision for that growth, both in South America and in Europe? If there's changes you need to make to your international distribution to make that happen?
Our precision ag business, I'll start and Seth can tag team this one with me. Historically, it had its strongest foundation in North America. Its next evolution was into South America, and our newest market is Europe. That essentially takes a few layers to generate. We said it's a whole new channel. There's establishing the people, but it's also establishing the on-the-ground capability in terms of research plots, data from those research plots, and all of that type of thing. That's what we've invested in the first two or three years after we bought Precision Planting in 2017, is establishing the data and the people in Europe, 'cause that's largely where our most unpenetrated market was. Now we're able to really grow, and we're growing 50%+ in Europe.
We feel like now we've got critical mass for sure in North America, and it's mostly an optimization opportunity. We have, we have some more growth in South America, and it's filling out the rest of the markets in Europe. Europe is also a little bit more fragmented. If you think about the situation, we're selling a technology module onto an existing planter or sprayer or combine. In North America and South America, the existing planters, sprayers, and combine market is highly consolidated. There's kind of three to four major players. In Europe, there's more players. When you think of that market, there's one more degree of difficulty in that we need to adapt our technology onto more platforms, more planter platforms, more combine platforms, things like that. That's something that's also in the works to aid our growth. Seth, anything else?
Yeah. I think Eric hit that one well. You know, today from a mix standpoint, we're at a little south of 75% still in North America and about 15% in South America, and then Europe is 5%+, and then the rest of the world takes up the remainder. You could say, "Well, boy, you're not doing a lot in the other parts of the world." You've got to remember that we feel that we're only on planters alone, maybe half penetrated in North America. We still see tremendous growth just in planters in North America. That demand, we've been allocated with our demand throughout all of 2022, and we're working through those issues.
Those markets are all growing very rapidly, and there's no doubt there's upside f rom all the global markets where we are, especially where we're well established, and there's a high concentration of those machines that we've traditionally retrofit. That's why you see North America, Brazil, Argentina, and then Central Europe being very good markets, growth markets for us.
Great. Thanks, Seth. Damon, I have one for you. It asks specifically, it says, it seems like the 12% target is mostly based on sales mix. Should we expect a restructuring or cost-cutting program as well?
Well, again, I think as we look at that value creation line, one of my comments was that we have to make sure that we're controlling our costs as we see our markets move from where they sit today, which is above mid-cycle to the below mid-cycle at some point in time in the future. Again, none of us can predict when we'll see that, but we know historically we operate in a cyclical industry. You know, we'll do our best to flex our costs, try to maintain as much variability. Again, in a cyclical industry, to the extent we were to see a significant downturn, you know, I think what you're hearing from our team, from Eric and myself, is that we've improved the structural bar on an annual basis, and we'll look for those opportunities if we have to, if the market's getting weaker.
Our goals are to react as quickly as possible. As I mentioned, we use this for ourselves to see where we are and how we're managing our costs to ensure that we're at that level or above that bar on a regular basis. You know, we'll flex our cost structure as much as we can, variability-wise, but at the end of the day, we're gonna try to make sure we stay on that line. If that means we have to look at a restructuring at some point in the future, we'll do what we need to.
Great. Thank you, Damon. Eric, another ag-strategy-focused question. It says, we didn't spend a lot of time talking about our grain and protein business today. It asks pretty straightforward, is it still part of your central strategic plan?
Yeah, as part of the portfolio, we think that there's a lot of upside in that business. You know, Damon talked about the fact that if markets just get back to normal, that business has a lot more margin potential. Over the last two or three years, we've been restructuring that business and having it come together, perform better, much like we committed that we would do in South America. You see the results flowing through in South America. Our margins are really strong there. We've consolidated a lot of factories, product, added more technology to the business, both in grain and protein. We've been doing all the things on our transformation plan. Unfortunately, there's been some headwinds with steel, China shutting down and a third one. I'm just—
Cyber.
The cyberattack. When we shut down from cyber, we brought grain and protein back on latest. 2022 was just a bit of headwinds for that business. We think as 2023 comes in, these things all level out. Steel's already coming down, China's coming back. Let the results from that business just flow through like they should, and we think that's gonna be a much better year for grain and protein next year. We have a lot more value to add to that business yet.
Great. Eric, maybe one more for you. This asks about the replacement cycle for ag equipment, appears to be getting shorter. Do you agree with that, number one? Number two, what role does precision technology have influenced that?
I think To the degree there's any shortening, it's all about the technology. It's all about customers seeing these new features, 600 drums of inputs that they can save if they add a little bit of a feature onto their new machine, which that's why there's this addressable market expansion that we talked about today. The customers see that big time. They see the rising cost of their inputs, they see what new technology can do, and they say, "You know what? I need to get into that new technology, either through retrofit by increasing the capability of my machine or buying a whole new machine." It's really a technology-driven situation. Where are we in the cycle?
I think, you know, Europe stays a little closer to the midpoint, and so they don't get too extended or, you know, ahead or behind, on their buying behavior. North and South America do, and we've still got an extended fleet out in the marketplace, both in North America and South America. Europe's closer to target.
Great. In the last few minutes we have, Damon, we've got a few questions on our 2023 targets that you talked about. The first one asks, is the expectation for supply chain embedded in your 2023 guidance? Does it assume a significant amount of improvement?
We've seen the supply chain start to get modestly better here in the back half of our 2022 period here. As we looked at our 2023 outlook, we expect it to get better. I would not say completely better. You know, what we do expect as we move through 2023 for the supply chain to ease, allowing us to produce more units and become more efficient in our factories. We've assumed some level of disruption, but not to the degree that we've experienced in 2022.
The follow-up to that, Damon, is, your pricing assumptions for 2023, is it mostly carryover, or is there some incremental pricing associated, again, in 2023?
It's gonna be a combination of both. As we've talked about this year, we are expecting to finish 2022 with pricing in excess of 10%. There will be a good percentage of that will carry over into 2023. You know, two points, we are planning some incremental where we feel it's appropriate, the other one is our South American markets. As you've heard us talk over the last couple quarters, we tend to open those windows one quarter in advance to make sure that as we look at the cost of the products there and the demand, we're ensuring we get the right pricing. Again, depending on the strength of that market, that's one that will be more variable as we move through the course of 2023. A lot of incremental carryover and then some incremental, already built into that high single-digit number.
Great. A question about incremental margins in 2023, asks if we're making specific investments that have caused that to be lower than our typical 25%. Why don't you answer that one first?
We are. There's a significant amount of investment, as I made in my comment. We are increasing our engineering and R&D, not only on an absolute dollar year-over-year, but as a percentage of sales. Last quarter on the call, I think I mentioned engineering was trending a little bit lower than what we would've normally expected. Part of that was just the hiring rate of our ability to hire all these engineers we're looking to do, plus some of the currency fluctuation. Next year, we are expecting engineering to go up as a percentage of sales. Again, I think this year we'll probably finish at this, call it 3.5%, 3.6% of sales, which is lower than where we want it to be.
As we go into 2023, we'll be ratcheting that up probably closer to 4%, 3.8%, 4% of sales. There's a large amount going into engineering. We're investing, as you heard Seth talk about, we're moving into Europe on the precision ag space. There's some upfront investment we're doing there on the SAG side of the house, which again, we know has the returns that we've seen in our precision ag business. We're doing some investments there as well. The other comment that I guess I would make for the audience, which is a little bit below the line, not to the incremental margins, but as interest rates have continued to rise, and we saw this last quarter, and we sell the receivables through AGCO Finance, we've seen a significant increase in the cost of that.
We've tried to factor that in as we look at the interest rates and the selling of those receivables. Again, that's gonna be below the operating line, but again, we know that that'll be an incremental cost that we'll expect to see year-over-year in 2023 versus 2022.
Great. The other piece, next year that's impacting our margins has to do with price cost in South America. We did a really good job of getting pricing in early in Brazil this year. Now we're feeling some of those costs associated with that pricing. While we had good success price cost in 2022, we won't have that same benefit in 2023. That'll be more year-over-year as a headwind. Those two factors play into it as well. Eric, maybe as a last question before some closing remarks, we have a question on the war in the Ukraine, what the end of that war might mean for European ag equipment demand.
This one's a crystal ball question. You know, it's been a pretty big disruption in that area, especially originally. Now with some of the agreements that have happened, a lot of that grain is flowing out of the region, it looks like that over the next, say, four-six months, that they'll be back kind of where they normally would be in terms of getting grain exported out. There won't be grain stuck in the region. That's dimension number one. Dimension number two is the crop that's being planted and harvested, it's been damaged and a lot of the cropping area is in the eastern side of the country, not so much the western side. In the area where most of the conflict is where most of the crop is.
You've got crop damage, farm damage, storage damage, and then some of that area's been taken over, and that crop is getting removed. You know, we certainly hope that conflict comes to an end as soon as possible. That's absolutely our top priority. But a lot of damage has been done. You know, if the conflict were to end soon, I think there's gonna be a lot of work to go back in and rebuild those farms, the equipment, the storage, bring them back to product— productive capacity, and I think that's gonna be a heavy investment and a multi-year journey to bring them back. It's naturally fertile ground, so the world needs that ground to be productive, but it's gonna be a bit of a long pull. We certainly hope it starts soon.
Maybe wrap up.
Okay. Yeah. We just sure appreciate the tremendous turnout here today. We love the enthusiasm and interest that you have in AGCO. Hopefully, you heard today the excitement we have in our future. We started a little while back by refreshing our strategy. Spent a lot of time on that. The entire leadership team spent several months going from one end to the other, turning over every rock. We've locked in on that strategy now, and you see we're staying on the same direction. The second step was reorganizing the entire company, and that was a huge effort that we completed. We took two layers of management out and collapsed, we call it the Farmer-F irst operating model, and essentially got all of our employees and our managers closer to the farmer.
Flattened our organization and took cost and made the organization even more decisive and clear and consistent around the world. Start working on culture. We thought that was an advantage. We wanna turn that into an even stronger advantage to attract employees in. We have the right plan. We wanna have a fire in the belly to go get that plan fast. Then within the plan, we're seeing the results happen. Our growth engines are all driving. You can see from the results that it's happening in both technology, the awards for that technology is turning into farmer satisfaction and productivity, and it's turning into margin. Damon's chart showed the margin steadily coming up. Margin doesn't happen on its own.
It happens because of more value being generated, and it's coming from the key ingredients in the strategy. We have the right plan. We've got the right team. We've got the right first, early initial performance steps to give us really good confidence that got a very bright future in front of us. Thank you so much for your participation today. We look forward to talking again soon.
Thank you.