The bankruptcy of a Pennsylvania mushroom grower signals how devastating Chinese shiitake log imports have been to U.S. growers over the past two years.
After growing and packing specialty mushrooms since 1985, Oakshire Mushroom Farm LLC, Kennett Square, Pa., is starting 2019 with a chapter 11 bankruptcy.
In 2017, the growing, shipping and wholesale business had annual sales of $37 million and 65 employees, CEO Gary Schroeder said. But by early this year, the business had filed for bankruptcy and 49 people lost their jobs.
In 2018, many Oakshire customers — retailers and other U.S. mushroom growers who didn’t grow shiitake themselves — stopped buying from him because the influx of much cheaper Chinese shiitake substrate logs meant they could save money by harvesting those shiitakes themselves, he said.
“There are so many layers of this that are just wrong, it’s astonishing,” Schroeder said. “Here we have a product made in China, inoculated in China, predominately grown in China and mislabeled.
“And everybody is happily buying it because of the reduced cost and it’s legal, and I think that’s a problem in our industry,” he said.
“It’s all about price. That’s our world.”
Oakshire packs oak sawdust and other ingredients into a polypropylene bag, sterilizes it and inoculates it with spawn, placing it into an environmentally controlled room. They produce shiitakes in seven weeks. The total process, from spawning to harvesting, takes about four months.
Frozen Chinese logs arriving U.S. need only eight to 10 days before mushrooms can be harvested, Shroeder said.
The issue isn’t about really about Chinese competition; it’s the “Product of the USA” labels that mislead consumers, said Robin Gillette, president and owner of Top Hat Mushrooms Inc., Stayton, Ore., a third-generation company that grows only organic shiitakes.
Top Hat was selling 20,000 to 22,000 pounds of shiitakes a week, but that dropped in half when customers switched to Chinese log imports, Gillette said.
In July, Top Hat partnered with Oakshire and two other growers that the Gillettes did not name to seek ways to address the issue.
“It’s a unique industry and growing process that’s not understood by the right government officials,” Gillette said.
“They believe the product is spawn. And we are trying to tell them it’s not spawn, and so it needs more health inspection certificates.”
Spawn is like the mushroom equivalent of a seed, and seeds can be imported and the resulting plant is a U.S. product.
But Gillette, Schroeder, and others say with shiitake, the spawn has spread mycelium throughout the living, moist substrate log in a growing process that’s almost complete by the time it arrives in the U.S.
Also, there are different sanitation certificates required for soil, wood, spawn and plants, and by labeling it spawn, the log doesn’t need a separate certification.
Two years ago, Phillips Mushroom Farms, Kennett Square, Pa., produced 50,000 shiitake logs a week, but sales dropped steadily, cutting those numbers in half until December 2017, when the company shut down that part of the business, said Peter Gray, Phillips’ exotics grower.
Chinese logs sell for $1.50, which is several dollars cheaper than domestic logs, Gray said.
Shiitake had comprised about 5% of the 8-10% organic sales at Phillips, Gray said.
“We did try to fight this when it first happened, but really there is nothing we can do,” Gray said.
The company still produces shiitake mushrooms but now uses Chinese logs.
Elizabeth Gillette, Top Hat’s marketing manager, said the company spoke with the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service about importing plants and wood, and the Oregon and national offices of the USDA, and the North American Plant Protection Organization.
Gillette said she has researched Chinese log growing processes and questions sanitary practices.
“But we’re still trying to get this in front of the right person,” Elizabeth Gillette said.
Laura Phelps, former American Mushroom Institute president, wrote about Chinese imports in the August 2018 issue of the institute’s Mushroom News.
COOL regulations allow shiitakes harvested from the imported logs to be marketed as from the U.S. because they are harvested in the U.S. Phelps now specializes in farm program policies and agricultural issues at Watkinson Miller in Washington, D.C., a law firm providing legal and government relations services.
Domestic shiitake growers say they will keep fighting the classification.
Despite the bankruptcy, Oakshire plans to continue making spawn products for oyster, maitake and white mushrooms, and just a bit of shiitake, Schroeder said. He also wants to press politicians to include the Chinese logs in the retaliatory tariffs on Chinese fresh mushroom imports.
Robin Gillette wants more retail buyers to ask the question: Did these shiitake mushrooms come off Chinese logs or logs from the U.S.?
“I just look at it as a problem of transparency. If the consumer wants to buy the product and knows it’s from China, then that’s fine,” he said.
“But they don’t, and the U.S. government is allowing it, and you have your domestic growers going broke and not because they’ve done something wrong.”