The silicon chip shortage is impacting agriculture now, and could inflate food prices for years to come
05/25/2021 // Lance D Johnson // Views

Since the lockdowns began, there has been an increased demand for computers, gaming systems, handheld devices -- and the microchips that power these technologies. With schools, medical systems and businesses turning to electronics to maintain operations, the demand for silicon chips has skyrocketed. Companies that make semiconductors have prioritized consumer electronics, because technology companies like Apple and HP are able to pay top dollar for chips straight from the silicon foundries. The shortage has impacted the automobile industry, forcing the world’s top automobile manufacturers to restrict or shut down production of new vehicles.

Now the chip shortage is starting to impact the agriculture industry in a big way. Experts say the shortage has already had an impact on the price of potato chips in the US and the UK. The shortage is expected to last at least two more years, and could cause the price of other food commodities to go up. The price of farming equipment is bound to skyrocket as well.

Farm equipment manufacturers unable to ship new tractors, combines, etc.

In fact, farm equipment manufacturers have already halted shipments to dealers. New combines, planters and tractors all rely on the chips. Hoosier Ag Today reports, "The biggest factor impacting the ability of US farmers to produce the food we need has nothing to do with the weather, the markets, trade, regulations, or disease. The worldwide shortage of computer chips will impact all aspects of agriculture for the next two years and beyond...”

One of the largest John Deere dealers in the country, Reynolds Farm Equipment, is currently turning customers away because specific equipment is unavailable and the order times are unknown. Farmers across Ohio and Indiana are being told to “plan ahead” due to a chip shortage that is causing shortages of everything from tillage to combines to ATVs. Bane Welker Equipment typically supplies Case farm equipment to Midwest farmers, but is unable to supply the basic equipment this year.


The economic impacts of government lockdowns will continue, and the feds can’t fix it with more bail out money

The lockdowns will cause many different problems with the economy and the food supply in the coming years. The technology enables farmers to produce higher crop yields, decrease water usage and properly distribute pesticides and fertilizers. If farmers aren’t able to get the equipment needed to do an efficient job, then the environment and the food prices are directly impacted. The federal government can usually cover up the problem with free bailout money, but this situation is unique.

The government cannot bailout out the agriculture industry to solve the chip shortage. The federal government will be unable to bail out consumers and protect them from a shrinking food supply and rising food prices in the coming years. Even if the government intervened directly in the marketplace and made it harder for HP and Apple to get the chips, this too would disrupt the functions of businesses across the country, causing a ripple effect for many other industries that rely on computers.

America is also more dependent on the global marketplace for these chips than ever before. In the 1990s, 37 percent of the world’s semiconductor manufacturing took place in the US. Today, the US only manufactures 12 percent of the world's supply. The economic policies of the past twenty-five years have pushed critical technology infrastructure jobs overseas, making the US and its agricultural system more vulnerable than ever before to something as simple as a semiconductor shortage.

Intel's CEO Pat Gelsinger warned that this issue could go on for several years, “Anybody who looks at the supply chain says, 'That's a problem.' This is a big, critical industry and we want more of it on American soil: the jobs that we want in America, the control of our long-term technology future.”

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