Wednesday, May 19, 2021

How the Silicon Valley Chip Shortage is Leading To a Spike in Potato Chip Prices

It is going to get more expensive to be a  couch potato. 

Hoosier AG reports:

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...

Here is  Rabobank's Global Economics & Markets on the Hoosier story:

[T]echnological wonders of a global economy based on just-in-time supplies of a few key inputs from only a few locations; and then demand surged due a virus that ran rampant through said global economy; and supply chains got snarled for that, and other reasons; and now a lack of silicon chips even impacts on the price of potato chips (in the US) and chips (in the UK)."

Another result: used farm equipment prices are about to skyrocket in price. Also, chip giant Taiwan Semiconductor Manufacturing Co. is warning that the shortage will continue throughout this year and maybe extended into 2022. 

Bottom line: As I have been pointing out in the EPJ Daily Alert, there are all kinds of not readily apparent bottlenecks in the economy as a result of the shutdowns. Only over time will we learn about them. But this is the supply side factor in the upward pressure on prices.

We are going to be in for quite the price inflation this summer. 


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