Home Indiana Agriculture News Commentary: Chip Shortage Forcing Farmers to Plan Ahead

Commentary: Chip Shortage Forcing Farmers to Plan Ahead

SHARE

By Gary Truitt

The biggest factor impacting the ability of U.S. 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.  Almost every piece of farm equipment, like most everything else in our lives, needs a computer chips to operate. Due in part to the Covid 19 Pandemic, there is a massive worldwide shortage of chips; and the industry is unable to meet the skyrocketing demand. Industry sources say the current shortage will not be resolved until sometime in 2022.

Meanwhile, farm equipment manufacturers have halted shipments to dealers because they don’t have the chips to put in the equipment.  Reynolds Farm Equipment, one of Indiana’s largest John Deere dealers, says they are unsure about when thy will receive the new equipment that is on order. Bane Welker Equipment, which handles Case and  several other brands at their dealerships in IN and OH, are urging customers to plan ahead. They indicated that not only have combine, planter, tillage, and tractor sales been impacted, but even ATV supplies are limited. Parts, even non-electric parts, are also in short supply because the manufacturers of those parts use the chips in the manufacturing process. As farmers integrate technology into all aspects of the farming process, these highly sophisticated semi-conductors have become the backbone of almost every farming operation.

In the U.S., we love our quick-fix solutions which usually involve federal government bailouts. This time, however, that solution will not work to solve the shortage. Most of the world’s chip production does not take place in the U.S. The share of chips manufactured in the U.S. has fallen from 37% in 1990 to 12% today, according to the Semiconductor Industry Association.  This is because, over this time, foreign governments have offered subsidies to chip makers to move their production out of the U.S.  The world’s largest chip production facility is located in Taiwan.  The newly formed Semiconductor in America Coalition, made up of chip buyers including Amazon Web Services, Apple, Google, and Microsoft, and manufacturers like American Micro Devices, Intel, Nvidia and Texas Instruments, has asked Congress to provide funding for the CHIPS for America Act, which authorizes domestic chip manufacturing incentives and research initiatives. The Biden Administration is urging Congress to authorize tens of billions of dollars to ramp up chip production in the U.S. With these small devises playing such a big role in things from combines and trucks to cell phones and washers, increasing domestic chip production needs to be a national priority.

The make it in America rhetoric espoused by many conservatives gets criticized as being protectionist.  While free and fair world trade is important, there is value in having adequate domestic production of vital things like computer chips, energy, vaccines, and, of course, food.  This is something our leaders need to be thinking about before the next shortage reaches crisis proportions.