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Economics and Markets

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While many growers focus heavily on the technical aspects of production, it is the post-harvest handling and sales that counts in making for a profitable enterprise. Growers can fetch a premium price for specialty mushrooms species including shiitake, oyster, lions mane, and others, provided they can maintain quality throughout the post-harvest process.

Anyone who is serious about making money with the sale of mushrooms should plan on devoting equal time to learning 1) how to grow well and 2) how to run a small business.

Building a successful enterprise requires a few key steps:

1) Understanding the safe handling of product from harvest to market.

2) Following any relevant regulations for produce and food products.

3) Determining the most efficient market channels to get product to market.

Ultimately, the first two if these aspects can be considered universal for all growers, though depending on the state you reside in, the specifics around regulations will be different. The third aspect, market channels, is by far the most nuances and is unique to each location. The best market channels not only meet your economic goals, but also align with your values as a grower.

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Download our FREE guide "From Harvest to Market" and learn all the considerations for post-harvest handling, packaging, weighing, and sales of mushrooms. This guidebook was informed and reviewed by multiple educators and growers in the specialty mushroom industry, providing a roadmap for new growers to get started.

Log Grown Shiitake: What we Know

Research based at Cornell University in partnership with University of Vermont, Chatham University, county cooperative extension agents, and farmers has led to a significant increase in demand and interest for forest mushrooms over the last five years. This effort was boosted by almost a decade of research by recently retired Cornell professor Dr. Ken Mudge on the specifics of shiitake and lions mane production including species selection, harvesting protocols, and management logistics that have greatly improved understanding of cultivation.

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Figure 1.1

This base research fed into a three-year SARE sponsored project Cultivation of shiitake mushrooms as an agroforestry crop for New England where over 250 farmers were educated in the basics of cultivation and forest management. 55 completed a 5-year enterprise plan for a shiitake operation, and of these 27 were selected to inoculate 100 logs and keep data records on time, expenses, and sales of product. 15 farmers actually followed through on log inoculation and provided complete datasets. Of these, 10 of the 15 reported net profit after expenses.

Labor & Expenses in Shiitake Cultivation

One aspect of the study focused on the breakdown of labor (Figure 1.1), where it is notable that 53% of labor was spent felling trees for inoculating bolts, 32% for maintenance tasks and harvesting, and 15% for marketing and distribution related work. This snapshot provides some good characteristics for shiitake cultivation; much of the labor is accomplished in the colder months of the year as forest management is least cumbersome in winter months and inoculation can happen at any time after harvesting, though there is some evidence that the sooner, the better. This means that farmers can put the bulk of the work into the enterprise in a time of year where other farm activities are at a minimum. A well-designed laying yard means that maintenance and harvesting tasks can be efficient and equate to a morning chore rather than eating up precious parcels of time during the growing season. All told, growers spend just over 1 hour per bolt throughout the entire process, a useful measure to think of when deciding on a scale of operation. Also notable is that much of this time is an upfront “investment,” as felling trees and inoculation take the majority of time. This process occurs only once in the lifetime of a log, and a good log can continue to fruit for 4 or more seasons.

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Figure 1.2

Another dataset summarizes expenses and earnings, which were quite variable. The average cost per bolt was around $4.74, although approximately half of participant’s expenses went toward “durable goods,” equipment and supplies that are often a one-time purchase. This means that after some initial investment, the cost per log could go down as much as 50%. One element that skewed the data, for instance, was that 22% of costs were for tree cutting equipment (chainsaws, safety gear, etc) which may be something a farmer already has or may not be necessary if logs are purchased from an outside source. Actual supplies essential to inoculation, harvesting, and sales are around 75%, or less of the total above.

Equally important is data where log-grown mushrooms are sold successfully, and for how much. Whereas conventional, indoor grown shiitake sells for $4 – 8, log-grown shiitake has commanded a much higher price, ranging from $10 – $16 per pound. Most mushrooms (46%) were sold to restaurants, followed by direct sales (19%), farmers markets (15%), groceries (15%), and other (5%). Most growers report that in their local markets the demand far exceeds the supply, indicating ample room to expand operations as well as support additional growers.

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Figure 1.3

The bottom line of the economic analysis is that farmers can make income from shiitake cultivation. Of the 15 participants who submitted full datasets, 10 made a profit in just the second year of production. The profits ranged from $1.39 – $11.88 per log, depending on the expenditures the farmer chose to take (Figure 1.2). This means an average profit of $5/log per season, or $15 – $20 per log over its productive lifespan. Along with this data, extension specialists crafted some sample budgets for a small operation where 100 logs are inoculated each year, until a total of 500 logs is reached. As shown in Figures 1.3 and 1.4, one could expect to produce a profit in year two, and over $4,000 in profit in year five. Total profit over the five years is estimated to be around $9,000. 500 logs is considered a small operation; most commercial growers manage between 1,000 and 3,000 logs.

It’s important to note that while we were able to establish some trends in the economics, there is high variability in the choices farmers make, how efficient they are with their time, and other constrains of location and farm particulars. Those interested in commercial shiitake cultivation should keep records on income and expenses and track their own progress in relation to the above data.

READ MORE: https://smallfarms.cornell.edu/2015/01/12/mushrooms/

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Indoors: What We Are Learning

Most specialty mushrooms are best cultivated in controlled environment agriculture (CEA) scenarios. In contrast to CEA systems used for greens and herbs, mushrooms can be produced in locations with minimal infrastructure and capital to start and sustain production. Mushroom production can be adapted to abandoned and underutilized farm infrastructure including barns, outbuildings, high tunnels, and storage facilities. In an urban environment, basements, shipping containers, and warehouse spaces can be easily retrofitted for production. This positions mushrooms to be a system that is accessible to both rural and urban farms and those farmers with limited capital for start-up.

As a result of these opportunities, active CEA mushroom growers consulted for this proposal report better profit potential for indoor production as compared to outdoors. They provided estimates of $1 to $3 per square foot net income, representing a potential $43,560 to $130,680 income per acre. These values have not yet been verified in well managed, high through-put systems, as was done previously for outdoor log-grown shiitakes. Research is needed to validate costs of startup and production. In addition, yields from well-managed indoor production systems are needed to calculate the return on investment and potential for expansion.

A CEA mushroom system has several advantages, including 1) consistent temperatures (65 to 75 F) can be maintained; 2) automation and monitoring can manage relative humidity, air flow, and lighting; 3) production per square foot can be predicted and altered by modifying the climate; and 4) sanitation can be managed to reduce cross contamination and food safety risks.

In addition to a comprehensive, research-based guide on CEA mushroom production, we lack data modeling the start-up costs (e.g. infrastructure, labor, materials, and yields per unit substrate) and clear strategies for expanding CEA production. This data gathering is a major focus of the current project.