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Shiitake Mushroom Production:Economic Considerations

by Ohio State University Extension    

Shiitake mushrooms are cultivated from at least two different grower perspectives. First, some individuals raise shiitake as a garden crop, producing enough for personal consumption. These individuals can be thought of as "hobbyists." Second, many individuals pursue shiitake production from a commercial perspective with a goal of maximizing economic return.

The shiitake hobbyist is able to achieve success with a minimum investment since many of the "tools of production" are usually already owned or easily obtainable: hardwood logs, natural shade, electric drill, garden hose and sprinkler, etc. For many backyard gardeners, shiitake spawn is the only out-of-pocket expense necessary to get started. Although spawn prices vary, a rule of thumb is $1 of spawn per four-foot log.

The commercial grower, however, should not expect to operate a profitable shiitake enterprise using hobbyist tools and supplies. Also, the commercial grower must become an expert shiitake marketer in order to realize an economic gain.

Commercial Production Inputs

The following "inputs" are recommended for a commercial grower inoculating 4,000 logs per year for a 15-year planning period.1

Operating Expenses

• Log Covers
  • Plastic and fabric
• Tools and Supplies
  • Sawdust spawn inoculation tool
  • Staple gun
  • Log drilling stand (sawbuck)
  • Electric drill (high speed)
  • Drill bits
  • Electric extension cord
  • Wax melting pot
  • Wax baster or brush
  • Water hose/sprinkler head
  • Scale for weighing logs (to determine moisture content)
  • Mushroom picking/storage baskets
  • Laying yard maintenance materials
  • Steel racks for carrying/soaking logs
  • Office supplies
  • Tractor operation/maintenance
• Utilities
  • Outdoor - water/electricity
  • Indoor (optional indoor fruiting during winter) - water/electricity/heat
• Advertising
• Shipping
  • Packaging and labels
  • Transportation
• Interest on borrowed money

Capital Expenses

• Logs
  • Purchased logs
  • Spawn
  • Wax or plastic foam plugs
  • Aluminum identification tags and staples
• Soak Tanks
  • Concrete vault
• Laying Yard
  • Shade cloth, wooden poles, and steel cable (to hold up shade cloth)
• Tractor
  • Used farm tractor with front end lift
  • Trailer for moving logs
• Refrigerator
• Scale
  • Electronic digital readout (for weighing mushrooms)
• Building (indoor operation only)

With the management scenario noted above (4,000 logs inoculated per year for a 15-year planning period) and assigning costs to the operating and capital expenses, growers who invest their own labor and capital may produce a 6.48 percent after-tax rate of return plus equivalent annual incomes of $14,426 for outdoor production and $19,877 for indoor production after taxes. These financial returns require the input of approximately one person-year of labor annually. An outdoor shiitake grower, however, would incur revenue losses of $22,000 in the first year and would not turn a profit until the fifth year. An indoor shiitake grower would incur revenue losses of $94,000 in the first year and would not begin making a profit until the fourth year. Indoor production is potentially more profitable, but requires a much higher investment to get started. Financial returns are not sensitive to individual cost items, but are moderately sensitive to revenues. Revenues are dependent on pounds of mushrooms produced and the price per pound at which mushrooms are sold. Potential growers should read the Baughman (1989) article for a detailed description of the economics of shiitake production.

Factors Affecting the Economics of Shiitake Production

Numerous factors will have an impact on whether or not shiitake production can be a profitable business. Highlighted below are three of the more important factors.

Grower Experience Since shiitake production is relatively new to the United States, most potential growers have little or no practical experience. Therefore, grower inexperience in the early years of the enterprise will affect profitability. Most shiitake economic scenarios, however, assume the grower is knowledgeable about all phases of production.

Mushroom Yield

It is relatively easy to determine the cost of spawn or a new high-speed electric drill. However, it is difficult and risky to predict future yields of shiitake. Different strains of shiitake have resulted in significantly different yields even when management practices are held fairly constant. For example, Ohio State University Extension found an 11-fold yield difference between high and low producing strains. The Forest Resource Center in Minnesota reported yield variations between strains as high as 65-fold.

Marketing

For most individuals, growing shiitake mushrooms will be easier than selling them. Many growers invest time and money in production and devote little effort towards marketing. Even though shiitake is becoming more popular throughout the United States, growers must be excellent marketers as well as producers in order to succeed financially. Extension Bulletin #803, available from Ohio county Extension offices, provides an in-depth overview of marketing shiitake mushrooms.

References

Baughman, M. (1989). Financial analysis of shiitake mushroom production. In Shiitake Mushrooms: Proceedings of a National Symposium and Trade Show (pp. 169-179). St. Paul, MN: University of Minnesota, Educational Development System, 405 Coffey Hall.

Bratkovich, S. (1991). Shiitake mushroom production on small diameter oak logs in Ohio. In Proceedings of the 8th Central Hardwood Forest Conference (pp. 543-549). University Park, PA: U. S. Forest Service, Northeastern Forest Experiment Station.

Gilbert, M. (1991). FRC shiitake mushroom field trials conclude. Shiitake News, 8(3), 1-9.

1 Ohio State University Extension (1985) invested approximately $1,700, excluding logs and labor, to establish and maintain a small-scale, 2.5 cord shiitake research project ($680/cord). Costs included spawn, wax/plastic foam plugs, extension cords, electric drill and drill bits, chain saw, inoculation gun, brushes, hammers, gloves, plastic and burlap log covers, sawbuck, water tanks, water hose and sprinkler, pvc pipe and miscellaneous tools.


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