May 29, 1998 Missouri Alternatives Center's Bimonthly Electronic Newsletter 800-433-3704 "AG OPPORTUNITIES" May-June 1998 (Vol 8 No 6) * Small Farms * New Family Farms * Agricultural Alternatives Medicinal Herbs are Popular, But Are They Profitable? (Reprinted with permission from "Growing for Market" March 1998) "Can I make money from medicinal herbs?" Who can blame a grower for asking? With Echinacea and St John's wort so mainstream you can buy them at the checkout in Wal-Mart, it's only natural that growers want to learn more about these enormously popular new crops. Unfortunately, there is no simple answer to the profit question. Certainly, there is money to be made. But success hinges on a number of factors over which the grower has little or no control. In reporting this article, we heard the phrase, "You've got to be in the right place at the right time" from three different sources. So how do you get there? Here are some of the facts about medicinal herbs that you have to consider. Demand and Supply The market for herbal remedies continues to grow. Herb supplement sales rose 14 percent from 1994 to 1995, to $3 billion a year. That's when interest in medicinal herbs really started to go mainstream. Today, with Echinacea and St John's wort available at drug stores and discount stores, the rate of growth is even faster. Industry estimates predict sales of herb supplements will exceed $5 billion by the year 2000. Even with such healthy growth, demand is finite. Steven Foster, an herb expert and author of Herbal Renaissance, says that despite the demand for Echinacea, "there is room for only a handful of dedicated commercial growers in the world marketplace." No one knows how many herbs are being grown in this country, but it's certain that the acreage is already much higher than it was three years ago. Because many of the most popular medicinal herbs are perennials that don't produce the first two to three years, supply is also uncertain. "It is also a crap shoot," said Alan Braun, who grows 25 acres of medicinal herbs for the Herb Pharm in Williams, OR. "You're planting now and you don't know if some guy in Texas is planting 1,000 acres. On the other hand, the market for medicinal herbs is exploding." Finding a Market Lyle Craker, an herb expert at the University of MA at Amherst, said that marketing was the most difficult job for herb growers. "It's not like corn, soybeans or wheat, where there's a ready market for it," he said. "I don't think anybody should be growing it without a contract." Getting a contract won't be easy, though. Alan Braun said that buyers won't sign up new growers until they know they can depend on them for a high-quality product. So that means growing herbs on speculation until you've established yourself as a good grower. Three primary markets are available to the medicinal herb grower: * Pharmaceutical companies - These folks aren't going to mess around with 500 pounds of herbs; they're more likely to want to buy crops by the ton dried weight. * Smaller herbal supplement manufacturers - Many of them have minimum requirements of 500 pounds or 1,000 pounds dried weight. * Local herbalists - Small-scale herbalists may make their own tinctures or powders and be open to buying herbs fresh. So how do you go about locating these potential buyers? Dr Craker recommends attending the National Products Expo to talk to the many herbal companies that have booths at the giant trade shows. There are two Expos each year. For more information about the shows, call New Hope Communications in Boulder, CO at 303-939-8440. Another option is to start writing to the companies whose product lines include the crops you want to grow. Start collecting names and addresses from labels of supplements you find in natural foods stores, herb stores and drug stores. Address your inquiry to the Botanicals Purchasing Director. In January, Johnny's Selected Seeds sent a newsletter to its commercial customers that listed a dozen potential buyers, along with information for each company about desired crops, form and volume. You can still call the commercial department and ask for a free sample of that newsletter. Johnny's, by the way, sells seed for almost any medicinal herb you might want to grow. Finally, you can find local herbalists through several directories that are published each year. Cultural and Harvest Requirements Any number of herb books are available that can tell you how to propagate and grow specific herbs. None of them pertain to large-scale commercial production. Although much of the information for the gardener or small-scale grower is transferable, the commercial grower is still left casting around for efficient ways to plant and harvest these often difficult plants. And methods are specific to each plant. The stratification requirements for Echinacea make it much different to produce than, say Feverfew. And digging those big roots requires different equipment than the rake you need to harvest chamomile flowers. You may find help with production methods at your state land-grant university. Many Extension specialists are aware of the booming interest in medicinal plants, and should be able to get on the Internet and find resources from other states. Harvesting is also species-specific. Potential buyers may have guidelines for the particular crop you plan to grow, or may have to make several sample harvest and have the samples analyzed to determine their potency. Also, all buyers except possibly local herbalists will want to buy your herbs dried. That means you're going to need a clean place where the herbs can be dried out of sunlight down to 7-10 percent moisture content. (Leaves will usually lose 80-90 percent of their fresh weight when dried.) And many buyers want the herbs milled, another big expense for a small grower. How Much Can you Make? Writing a business plan or production budget for medicinal herbs is difficult because information about yield and prices is scarce. There's just not enough history of growing these crops in North America to predict yields with any degree of accuracy. Dr Craker is compiling what information is available into a book that will be available this summer. Prices are impossible to generalize about because they vary so much from one herb to another. Even for one herb, we are told, prices fluctuate wildly, and one company will pay twice what another will. Alan Braun said that last year his Echinacea brought double the price that another Oregon grower got; but then he heard of a third grower who got twice what he got. His advice is to shop around. Once you have a contract or agreement with a certain company, he said, the price remains fairly stable over the course of the year. So find out what each company is paying for whatever crop you're growing before you decide where to sell. Trish Flaster, a consultant in Boulder, CO, has a contract with the Kansas Value Added Center to report on the economic potential of medicinal herbs for Kansas farmers. When she attempted to compile a list of prices, she was quoted prices that varied by as much as 400 percent for a given herb. For example, fenugreek seed ranged from $4 per pound to $8.60 per pound for organically grown, to $2.40 per pound for non-organic. Echinacea prices ranged from $12 per pound non-organic to $35 per pound organic. Wildcrafters in Kansas reportedly were paid $15 per pound for the dried root last year. Those are big differences in prices and certainly nothing so definitive that you can base a business plan on them. Rhonda Janke, agronomist at Kansas State Univ, has attempted to put together a cost/return analysis for Echinacea despite big gaps in the information about production costs such as irrigation, equipment, fertilizer, labor and transplant production. Basing her analysis on the lowest yield and price information she received, this is what she came up with: 17,525 plants per acre at 20 roots per Dry Weight pound = 871.2 lb/acre yield x $15/lb = $13,068 gross. That's the conservative estimate. Alan Braun estimated $50,000 gross from an acre of Echinacea. Both ends of the scale sound pretty good - until you consider that Echinacea can't be harvested for three years. When you divide the gross revenue by three, you get a range of $4,333 to $16,666 per acre. When Does it Make Sense? Obviously, farmers who are already making $10,000 to $20,000 an acre on vegetables, fresh herbs, or cut flowers would be foolish to turn over that valuable land to medicinal herbs. "If you're into vegetables and culinary herbs and making money there, I wouldn't be switching," Dr Craker said. However, you may have additional land that you don't want to put into more produce, either because of the labor demands or because of market saturation. Or perhaps you live in a rural area and can't direct market produce, so are able to gross much less per acre on produce. Or perhaps you're a row crop farmer grossing under $1,000 per acre from your crops. In those cases, medicinal herbs may look good. And for those who do intend to pursue the medicinal herb market, here's a tip from Dr Craker, "Grow Chinese medicinal herbs. We think those are the coming thing." Very few people are currently growing them in the US, but many of the most popular ones can be grown here. Medicinal Herb Resources Buyers of Herbs: * Wilcox Natural Products, PO Box 37, Eolia, MO 63344, 573-485-2400. * Wilcox Natural Products, PO Box 159, Ellington, MO 63638, 573-663-2400. * American Botanicals, PO Box 158, Eolia, MO 63344, 573-485-2300. Seed Sources: * Johnny's Select Seeds, Foss Hill, Albion, ME 04910, 207-437-9294. * Prairie Moon Nursery, Rt 3, Box 163, Winona, MN 55987, 507-452-1362 * Pure Prairie Natural Foods, 108 E Washington, Norton, KS 67654, 785-877-3610 * Richters Seed Co, Goodwood, Ontario, Canada, L0C 1A0, 905-640-6677 * Native Seed Foundation, Star Route, Moyie Springs, ID 83845, 208-267-7938 * Elixir Farm Botanicals, General Delivery, Brixey, MO 65618 * Horizon Herbs, PO Box 69, Williams, OR 97544-0069, 541-846-6704 Associations and Directories: * American Herbalists Guild, PO Box 746555, Arvada, CO 80006, 303-423-8800. Herbalist referral list available for $5.00. * American Herb Assn, PO Box 1673, Nevada City, CA 95959, 916-265-9552. Membership includes quarterly newsletter. * International Herb Assn, PO Box 317, Mundelein, IL 60060, 847-949-4372 * Northeast Herbal Assn, PO Box 479, Milton, NY 12547, 914-795-5431. Membership includes newsletter. * Herb Research Foundation, 1007 Pearl St, Ste 200, Boulder, CO 80302, 303-449-2265. Membership includes subscription to HerbalGram. * Herbal Gram, quarterly newsletter, American Botanical Council, PO Box 201660, Austin, TX 78720, 512-331-8868 * Herb Growing and Marketing Network, PO Box 245, Silver Spring, PA 17575-0245, 717-393-3295. Benefits include Herbal Connection newsletter and Herbal Green Pages, a resource guide. In The News Extension Information on Alterntaives on the Web - Looking for alternative information on the web and having a hard time? Look no further. The Missouri Alternatives Center (MAC) has collected University Extension guidesheets from across the country and put them in one location. Go to the MAC website address at http://agebb.missouri.edu/mac/ Click on "Extension Information on Alternatives" and you will be connected to the letters of the alphabet. If you're interested in ginseng, click on the letter "G", scroll down until you see ginseng and you find 5 University Extension guidesheets on this topic. This is just a beginning of the collection. If you come across any University Extension information on alternative agricultural opportunities that you feel could be added to the site, please call, write or email the website and we'll see that it gets added. Marking its 12th round of grants awarded since 1998, the USDA's North Central Region (NCR) SARE program is calling for innovative researchers, educators, institutions and organizations to apply for competitive grants in sustainable agriculture. Approximately $1.3 million will be available in 1999 to fund creative, 1-2 year projects addressing long-term enhancement of food and fiber systems in the 12-state region. Research and Education Priority Areas for 1999 will be outlined in the Call for Preproposals, but will contain topics such as diversifying farming systems, sustainable livestock systems, networking, marketing sustainable products, and environmentally sound management practices. Applications are available July 15, 1998. Contact the NCR SARE office at 402-472-7081, sare001@unlvm.unl.edu or www.sare.org/ncrsare. Preproposals are due on Sept 11, 1998. The Administrative Council will invite project coordinators to develop preproposals into full proposals in Dec 1998; selected full proposals will be recommended for funding in April 1999, and funds will be available Sept 1999 to begin project work. After receiving more than 200,000 comments from farmers, environmentalists, consumers and others, the US Department of Agriculture (USDA) announced that it is backing down on its proposed national organic standards. The standards would have allowed farmers to use a wide range of toxic, synthetic substances, and left open the possibility of allowing use of genetically engineered organisms, sewage sludge and irradiation in organic production. Almost all comments submitted to USDA criticized the standards for being far too weak and for compromising the integrity of the organic label. Red plastic mulch-developed and patented by ARS and Clemson Univ-is increasingly appearing in garden seed catalogs as a way to boost tomato yields. Red plastic mulch reflects onto plants higher amounts of certain growth-enhancing wavelengths of sunlight. In 3 years of ARS field tests, red mulch boosted tomato size up to 20 percent by increasing the plant's growth above the ground, especially in the fruit. The new mulch also conserves water and controls weeds. And the technology works on other fruits and vegetables, including strawberries, beans and turnip greens. For more information, contact Coastal Plains Soil, Water and Plant Research, Michael Kasperbauer, 803-669-5203, kasper@florence.ars.usda.gov (Quarterly Report, Jan-March 1998) After trying a new approach on herd worming suggested by an ARS researcher, PA dairy farmer, Larry Lohr saw his cows gave an average of 4 pounds more milk/day in 1997. Plus, the cows' body weighs stayed up and they excreted less nitrogen, a potential pollutants. Lohr collaborated on a 3-year ARS study of his farm, aimed at keeping brown stomach worms from nibbling into dairy producers' profits. Under the ARS-developed regimen, Lohr will deworm his cows twice-once in spring and once in fall-instead of five to six times as in previous years. Lohr is one of a growing group of diary producers trying to increase their bottom line by letting cows graze when possible, rather than cutting, drying and storing the feed and serving it up later. The practice lowers feed costs. But milk production often "roller coasters" throughout the season. The study was funded by a grant from USDA's SARE. The ARS researchers observed that Lohr's 19-day grazing rotation perfectly fit the brown stomach worm's life cycle. Lohr followed the researcher's advice to let the cows "vacuum up" infectious larvae while they graze each paddock at the start of the season. The spring worm treatment killed these ingested larvae before they could mature and deposit eggs in the feces-which would reinfest the pasture. Contact Immunology and Disease Resistance Lab, Louis Gasbarre, 301-504-8509, lgasbarr@ggpl.arsusda.gov (Quarterly Report, Jan-March 1998) Research from Iowa State University on the potential of surface water problems from winter spreading of manure shows a greater risk of runoff than manure that is applied in either the fall or spring. The researchers found that the risk of snowmelt in winter was so high that manure application during that time period should be avoided. They recommend that if manure is applied during the winter it should be done as early in the season as possible or after all snowmelt has occurred. (Center for Rural Affairs Newsletter, May 1998) Herbs are a fast growing segment of the specialty crop market, according to the Dec 1997 issue of Central Coast Family Farm Report. The top 10 herbs in terms of sales in 1996 included (in order of sales) echinacea, garlic, ginseng, ginkgo, goldenseal, ma huang, psyllium, Siberian ginseng, saw palmetto and cascara sagrada. Herbs projected for future growth include cat's claw, ginkgo, kava kava, bilberry, elderberry, and grape seed. One third of the nation's adults spend an average of $54 per year on herbal remedies to treat common health conditions. The leading uses of herbs for health problems include colds (59%), burns (45%), headaches (22%), allergies (21%), rashes (18%), and insomnia (18%). (Small Farm News, Spring 1998) Aquaculture now contributes more to per capita consumption than veal, mutton and lamb combined. In 1997, US production of processed catfish products was close to 1 pound per capita, imports of farm-raised shrimp were likely over 1 pound per capita, and the combination of farm-raised salmon, trout, tilapia, crawfish, and other aquaculture products added another pound. (Agricultural Outlook, May 1998) For a seventh year in a row, US organic industry sales grew more than 20 percent, according to a recent Natural Foods Merchandiser news release. Sales reached $3.5 billion in 1996, topping the 1995 sales earnings of $2.8 billion. Rapid growth in the natural foods industry has not gone unnoticed by Wall Street investors. In the past 15 months, eight natural products companies have gone public, raising more than $618 million by selling stocks. Investment analysis expect that this trend is only just beginning. (Small Farm News, Spring 1998) According to the Organic Trade Association's July 1997 newsletter, more than 5,000 US farmers were using organic methods by 1995, with the majority of these growers producing fruits and vegetables. (Small Farm News, Spring 1998) In Print *The 1996-1997 Pesticide Directory: A Guide to Producers and Products, Regulators, Researchers and Associations in the United States* Lori Thomson and W.T. Thomson. Gives names and addresses of pesticide manufacturers and formulators in the US. Lists which pesticides each company produces or formulates. Includes directory of university research programs and state and federal government agencies involved with pesticides, pest control and agriculture. 154 pp. $49.95. Thomson Publications, PO Box 9335, Fresno, CA 93791, 209-435-2163. *Temperate Agroforestry Systems* edited by Andrew M. Gordon and Steven M. Newman, 1997. CAB International, 198 Madison Ave, New York, NY 10016-4314, 212-726-6490. *The Green Food Shopper: An Activist's Guide to Changing the Food System* Shows how people can support transition to a sustainable food system. Gives information about benefits of organic agriculture and health effects of pesticides; tips for convincing local supermarkets to provide better food choices; and suggestions for convincing consumers to support sustainable agriculture. $18.00. Mothers and Others, 40 W 20th St, New York, NY 10011-4211, 212-242-0010, mothers@mothers.org *The Community Farm* $20.00. Designed for the CSA movement, small farms and sustainable agriculture. The Community Farm, 3480 Potter Rd, Bear Lake MI 49614, fsfarm@mufn.org. *Solviva: How to Grow $500,000 on One Acre and Peace on Earth* by Anna Edey, 1998. $38.00. Available from Growing for Market, PO Box 3747, Lawrence, KS 66046. *Advancing Sustainable Agriculture through Small Group Discussions: A Guide for Group Leaders and Members* 1998. $25. 175-page handbook contains guidelines for setting up study circles, tips on forming productive questions, stories from existing study circles, and lists of reference materials from around the world. Make checks payable to the Univ of IL and send to Deborah Cavanaugh-Grant at PO Box 410, Greenview, IL 62642, cavanaughd@ces.aces.uiuc.edu. Missouri On-Farm Tours June 6-Medicinal Herbs Farm Walk and Workshops, Rutledge, MO. Call 660-883-5637 June 18-Seasonal Dairy, Sheep, Goats and Peacocks, Winigan, MO. Call 660-857-4474. June 25-Produce for Direct Marketing, Unionville, MO. Call 660-457-3469. July 12-Value Added Processing, Rutledge, MO. Call 660-883-5543. July 12-Greenhouse Operation, Medicinal Herbs and Organic Herbs, Elkland, MO. July 16-Stockers, Kirksville, MO. Call 660-665-0861. Aug 16-Pastured Poultry and Vegetables, Cabool, MO. Call 417-962-4183. Aug-Sheep for Alternative Weed Control in Christmas Trees. Call 816-593-2857. Aug 20-Organic Dairy and Creamery, Purdin, MO. Call 660-244-5858. Sept 12-Tomato Production on Ryegrass/Hairy Vetch Mulch, Call 417-865-4186. Sept 13-Watermelon Social and Tasting, Nixa, MO. Sept 17-Grass Finishing Cow/Calf Operation, Laclede, MO. Call 660-963-2685. Calendar of Events June 6-Sheep & Farm Day, Buffalo, MO. Contact Marilyn Powell, 417-345-7358. June 22-24-Integrated Forage Beef Systems Workshop, Middle Tennessee Experiment Station, Spring Hill, TN. Contact Ron Morrow, 800-346-9140. June 24-MU Refresher Grazing School, Brookfield, MO. Call Joetta Roberts, 573-499-0886. July 6-8-Greenhouse Management Short Course, Columbia, MO. Call 573-882-9631. July 8-10-MU Grazing School, Brookfield, MO. Call Joetta Roberts, 573-499-0886. July 11-Polyface Farm Field Day, Swoope, VA. Contact ACRES USA, 800-355-5313. Aug 3-Weaving Workshop, Jackson, MO. Contact Pat Weber, 573-238-4623. Aug 13-23-MO State Fair, Sedalia, MO. Aug 16-18-MO/KS Landscape & Nursery Assn Summer Meeting & Trade Show, Kansas City, MO. Call Sara Woody Bibens, 816-369-3115. Sept 14-16-Artificial Insemination Workshop for Sheep and Goats, Jefferson City, MO. Call Helen Swartz, 573-681-5551. Sept 3-4-Fiber Art Expo, Bethel, MO. Contact Virginia Neal, 573-681-5551. Sept 5-7-World Sheep, Fiber Art and Flower Festival, Bethel, MO. Contact Helen Swartz, 573-681-5551. Sept 25-MO Landscape & Nursery Assn Summer Field Day, New Franklin, MO. Call Sara Woody Bibens, 816-369-3115. Oct 4-7-Farming the Agroforesty for Specialty Products, Minneapolis, MN. Call Scott Josiah, 612-624-7418. Oct 4-8-BioEnergy '98, Madison, WI. Call Fred Kuzel, 312-407-0177. Oct 7-9-MU Grazing School, Brookfield, MO. Call Joetta Roberts, 573-499-0886. Nov 6-7-National Small Farm Today Conference and Trade Show, Columbia, MO. Call 800-633-2535. Nov 8-11-New Crops & New Uses: Biodiversity & Agricultural Sustainability, Phoenix, AZ. Contact Dave Dierig, 602-379-4356. Jan 8-9-Great Plains Vegetable Conference, St Joseph, MO. Contact Keith Hawxby, 816-279-1691. Jan 17-19-Midwest Regional Grape & Wine Conference, Tan-Tar-A. Jan 21-22-North American Farmers Direct Marketing Conference, Grand Rapids, MI. March-Value Added Agriculture Conference, Columbia, MO. March-Sustainable Agriculture Conference, Columbia, MO. Oct-National Small Farm Conference, St. Louis, MO. "University Outreach and Extension does not discriminate on the basis of race, color, national origin, sex, religion, age, disability or status as a Vietnam-era veteran in employment or programs."