Montana State University

Herbal crop market study points to pitfalls and potential

May 10, 2002 -- Carol Flaherty

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BOZEMAN -- A recent Montana study of herbal crops makes clear that there are significant hurdles for anyone who wants to profit by growing them.

Opportunities exist for alternative crops, say several economists under contract to the Montana Department of Agriculture. However, they say that many of the markets would be flooded if growers tried to plant more than a few acres. In addition, both the researchers and growers say that marketing herbal crops can take more time than producing the crop, even though production often includes hand labor.

"It is a small, unstable market with frustratingly little solid economic data," says Gary Brester, a Montana State University economist who worked on the project with Watts and Associates economists Tim Watts and Kole Swanser of Billings, the economists with whom the state contracted.

(see graph at: http://www.montana.edu/wwwpb/ag/estaltcrops.pdf)

Still, some Montana herb growers succeed. Steve Simonson's Big Sky Teas are sold in 50 stores and on the web. Originally a wheat farm, the family converted to mint about 15 years ago and transformed again after mint prices fell four years ago.

"Growing herbs won't replace commodity agriculture, but we hope to develop ways to diversify and strengthen farms," says Steve Simonson, whose Spearmint Springs farm is near Thompson Falls. "You have to add value, or you can't withstand the pressure here in western Montana to subdivide. You can add value by cleaning the chaff from your wheat to growing or marketing herbs, but we need to keep our children employed in well-paying jobs by adding value to what we grow."

"When the price of mint fell, we focused on value adding and alternative crops," says Simonson. "We've got 35 acres in herbs, and it typically takes five of us all summer. Most of the mint we mechanically harvest. Some of the flowering crops like chamomile and echinacea are hand-picked." Simonson says the field work is a whole family effort that includes himself, his wife Maureen, sons Erik and Marcus and father-in-law Herb Stobie.

Simonson said he recently hired help with marketing and also hopes to develop a co-operative of herb growers. So far, about 30 growers have said they are interested. Though most are in western Montana, some are also in the eastern part of the state, said Simonson, who grew up in Glendive. A co-operative and brand recognition might help support a tea processing plant that Simonson hopes to build within two to three years.

Even if good profits continue for herbal crops, the number of acres produced may remain small compared to Montana's traditional grain acreage.

The report by Brester, Watts and Swanser estimated that mint grew on only 40,000 acres in North America in 1998-99. Contrast that to 5-6 million acres of wheat commonly harvested each year in Montana. The economists estimated that total North American production of cultivated and wild echinacea was about 30,000 acres in 1998-99. Genseng and anise acreage totaled roughly 20,000 acres in North. Acreage of coriander, dill, and valerian together total about 26,000 acres. Omega-oil flax and valerian had about 30,000 acres. These acreages are rough estimates, say the researchers, since no official reporting of these crops occurs.

Nancy Callan, MSU researcher at the Western Agricultural Research Center, has been investigating methods of growing herbal crops for several years and shares her production information on her web site at: http://ag.montana.edu/warc/Specialty_crops.htm

"A potential grower should start small with trial plantings of several crops that they think might fit into their farming system and expand as they find markets for the crops," says Callan. "Many specialty crops are used in small quantities and do not require large acreages to supply the present market. Most herbs and spices are high value, so that does not necessarily make them a sideline, but it will depend on the market the grower is able to enter or develop." Much of the information Callan has developed has been due to grants such as those she has from the Montana Department of Agriculture - Growth Through Agriculture program and the Montana Department of Commerce - Research and Commercialization Technology Program.

Since hand-labor is involved in the production, it is difficult for Americans to compete with the low labor costs of China, India, Egypt and Korea, traditional sources for some of these herbs, says Brester.

"If we compete, it must be in markets where quality matters, which means the dietary and medicinal markets," says Brester. Even in markets with prices based on quality, Brester estimates that it might require four times as much effort spent on marketing as on producing the crop. For that reason, he expects grower co-operatives to become important.

Even when producing for quality markets, production efficiency will be important.

"The goal of MSU specialty crop research both at the Western and Northwestern Agricultural Research Centers is to lead to more efficient production strategies, reduced input costs, and higher quality. This should help Montana producer become more competitive," says Callan.

"This could be a market that explodes, but right now it is thin in terms of volume. When prices move higher and more growers rush in, there could be wild swings in prices that add risks for producers," says Brester.

In fact, a large segment of some herb markets is filled by "wildcrafters," people who harvest wild plants. In 1996, there were 10,000 acres of planted echinacea, while twice that amount was harvested from naturally occurring stands. Such wildcrafting is covered by state laws. (People can check on some of the requirements by looking at the Montana Code on the web at: http://data.opi.state.mt.us/bills/mca/76/10/76-10-103.htm

Though herbal prices are volatile, the initial challenge is to invest in the labor required to grow herbal crops.

"The labor is 10 times more than grain. There are no herbicides labeled for these crops, so all the fields are hand-weeded. The key is to start with a clean field," says Simonson.

In short, don't start spending your future herb income until you have it in hand.

"We don't think a person is going to be able to make a living planting just one of these crops," says Brester. "There's too much volatility. It's difficult to share production and price risks, and there isn't a lot of contracting. I see this fitting on a few acres where someone does it for extra income and grows several crops to better manage risk."

A graph showing estimated 1998 North American production of nine herbs is available in Acrobat PDF format at:
http://www.montana.edu/wwwpb/ag/estaltcrops.pdf

Estimated* North
American Herb Acreage
*No official reporting agency tracks the acreage of these crops.
Acreage
Anise, 22000
Coriander, 12000
Dill, 10000
Echinacea Cultivated, 10000
Echinacea Wildcrafted, 20000
Ginseng, 18000
Mint, 40000
Omega Flax, 30000
Valerian, 4000

Gary Brester (406) 994-7883, Nancy Callan (406) 961-3025