Mushroom farms struggle through see-saw markets

Issue Date: August 12, 2020
By Ching Lee
Mushrooms at South Valley Mushroom Farm in Morgan Hill and other mushroom farms are typically harvested three times. With restaurant closures and limited food service, some farms that rely on selling to those markets have resorted to not harvesting their third picks.
Photo/Lori Eanes
The owners of South Valley Mushroom Farm in Morgan Hill say demand has begun to rebound, but crop prices remain low.
Photo/Lori Eanes

Record demand for mushrooms has placed the year-round indoor crop in the company of other top-performing staples such as tomatoes, carrots and onions, but COVID-19 shutdowns and disruptions have created topsy-turvy marketing conditions for California mushroom farmers.

Growers who rely on selling to restaurants and other food-service customers have been particularly rattled. Sales plummeted early in the pandemic when those businesses were forced to close; then restaurants slowly reopened, but in recent weeks pulled back again as the state tries to quell spikes in coronavirus cases.

"It's been pretty wild," said Santa Clara County farmer Tim Chiala, whose family operates Global Mushrooms in Gilroy, which produces white button, crimini and portabella mushrooms.

Christi Becerra, Chiala's sister and company executive manager, said mushroom orders in March "came to a quick halt" as many food-service customers—including restaurants, schools, casinos, cruise lines and corporate cafeterias for high-tech firms—stopped serving. Some of their mushrooms were diverted to processing "at a significantly discounted price," she said, adding that there was a time the company couldn't even give mushrooms away, because food banks were already inundated.

Even though business picked up as the state allowed restaurants to resume limited dine-in service in May, it was short-lived, with orders from food-service customers slowing again during the current second closure.

Becerra said the farm is now "treading water," having reduced production from about 150,000 pounds a week to 120,000 to 135,000 pounds, "just trying to cover costs and see if we can make it through this."

"I feel confident we can," she said. "It may not ever come back the way it was, but I think it will come back."

Mushrooms were on track to be one of the top food trends of the year, with some reports declaring the produce item "the new grocery aisle celebrity," according to the Mushroom Council.

Monthly shipping reports revealed a run of record highs in late 2019, driven in part by high demand in food service, Council President Bart Minor said. U.S. mushroom volume last December exceeded 90 million pounds, the first time that had occurred, he added.

"Prior to the crisis reaching the U.S., our industry was riding tremendous momentum," Minor said.

Christine and Arthur Kubogamell, owners of South Valley Mushroom Farm in Morgan Hill, said they are starting to notice demand slowly rebound. Prices for their crop, however, have not improved and remain lower than before shelter-in-place orders, they noted.

One saving grace, they said, has been their pizza-restaurant customers, who "never skipped a beat," Christine Kubogamell said, and whose demand for sliced white mushrooms remained consistent because those restaurants were already set up for take-out and delivery.

She said the farm also sold more mushrooms to retail early in the shutdown, when supply-chain disruptions shorted supplies of some vegetables, encouraging stores to fill their shelves with more mushrooms, which provide a new crop every week, year-round.

Despite the market disruptions in March and April—when a lot of their crop ended up in food banks and they had to cut costs by reducing the amount of compost they bought to grow mushrooms—the Kubogamells said they've returned to their regular production since the end of April.

Though growing mushrooms is about a 21-day process, Becerra said, compost production adds another seven weeks. To slow production requires slowing compost production by storing the straw, she said.

But Chiala said that ties up a lot of the farm's cash, because that straw has already been bought and "you're not turning that inventory into cash."

With five weeks' worth of compost and four crops in progress, Don Hordness of Countryside Mushrooms in Gilroy said he hasn't been able to slow production despite a lack of demand from food service, which accounts for about half his business.

"It's not like we can just turn it on and turn it off," he said. "Our business just doesn't lend itself to that. If I don't continue the process, I'm going to lose everything that I've done."

During the first round of shutdowns, Hordness said he lost about half a million dollars of mushrooms thrown away because of restaurant closures. With so much uncertainty at the time and "the idea that this was going to be a short-term deal," he said, he continued composting and planting. Business was "almost back to normal" in June, he noted, until the state rolled back reopenings, and now "we're all the way back to throwing stuff away."

At this point, the only thing he's changed, he said, is to stop picking his third break—what mushroom farmers call harvest—effectively reducing his weekly production by about 30%.

As a new mushroom farm that opened three months before the pandemic hit, Funguy's Mushrooms in Stockton, which sells organic and specialty mushrooms, has been struggling to acquire new customers, owner John Barta said. He planned to sell initially to restaurants and farmers markets, then to smaller grocery chains as his business grew. But so far, he said, he hasn't been able to make money to afford the "very sizable investment in equipment" to allow him to produce at a lower cost and compete in the wholesale market.

"We have to pay our dues, and that's what we're doing right now. Unfortunately, we're paying our dues in a coronavirus environment," Barta said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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