Recycled Pizza
Submitted by Atlas Indicators Investment Advisors on August 31st, 2022
Everyone knows many pizzas are circular. But did you know an economy can be as well? By one definition, participation in the circular economy means designing products for durability, reuse, remanufacturing, and/or recycling. Implied in the reuse portion of the definition is purchasing used goods, like clothes. Why might this be of interest to you? One word: cotton.
The fabric of our lives is in short supply. According to this August release from the United States Department of Agriculture, cotton production will be the lowest since 2009 this year. Drought conditions shrunk it by nearly 5-billion bales with virtually all of the decline being accounted for in Texas. Shortages could mean the prices for everything from denim to terrycloth towels might be moving higher, not something an economy struggling with inflation needs.
It's not just cotton that has a problem. Tomatoes are suffering a similar pasting. This Bloomberg article details the problem facing canned goods. California leads the world in production of processing tomatoes like those used in pizza sauce. A lack of rain is once again the issue, and California produces one-quarter of the world’s tomatoes. Corn is another crop with challenges caused by a dearth of water, and corn goes into a lot of stuff, including many cars. Limited supply is pushing up the cost of both tomatoes, corn, and even lettuce. But don’t think these farmers are living high on the hog, their costs have gone up considerably (e.g., water and fertilizer).
Food demand is generally stable. As we’re beginning to experience here in America, however, its supply is subject to the vagaries of the hydrological cycle. It's one thing to buy a previously owned pair of jeans from a website or mobile app to help dampen the drought-related impact on your household budget, but it doesn’t work that way for produce. There is no circular economy for gently-used food, although if you do order your favorite pizza tonight, slices might taste better tomorrow.