Ginseng Producers Eyeing Tariff Pinch Ahead of Harvest

Sep 7, 2018  | 6 min  | Ep4403

Before the current trade war with China, some sectors of agriculture were already suffering tariff fatigue from the Asian giant. This includes U.S. pork exports which are operating under a 62 percent duty. According to the U.S. Meat Export Federation, exports have declined 22 percent so far this year.

Another niche market with strong roots in China was among those laboring under existing trade tariffs.

Josh Buettner has more in our Cover Story. @mtmjosh

Will Hsu/Hsu’s Ginseng – Wausau, Wisconsin: “History has shown times where trade to China has been shut down…this industry was dead.  The demand, as income levels rise in Asia, is really coming from there. So to help farmers in Central Wisconsin, the best thing we can have is access to those export markets.”

Will Hsu is a second generation ginseng producer near Wausau, Wisconsin.  According to USDA, over ninety-five percent of the plant’s domestic cultivated origin is sprinkled across the Badger State – with Marathon County as the hub.  Wisconsin officials estimate one million raw pounds are produced there annually – with a yearly output valued at over $50 million. 

But 15 percent retaliatory tariffs from President Trump’s trade war with China have been tacked onto pre-existing duties and value-added taxes ahead of this year’s harvest. The move could leave growers feeling a pinch on an export-dependent, multi-year premium crop.

Will Hsu/Hsu’s Ginseng – Wausau, Wisconsin: “Very similar to France and Italy, which are known as the old world regions for growing wine…the taste and flavor of Wisconsin ginseng has been ingrained in people for the last 100 years.”

Overharvested in China after use as a pancea for millennia, a cousin root was unearthed in North America three centuries ago.

Will Hsu/Hsu’s Ginseng – Wausau, Wisconsin: “You don’t always find four prongs.”

Around the dawn of the 20th century, the wild root moved from forest to farm in Wisconsin, cementing trade partnerships in Asia and earning a gold standard reputation.

Paul Hsu/Founder - Hsu’s Ginseng – Wausau, Wisconsin: “Well, I’m the farmer.  He’s the brains, so works out as a team very good….Each notch is one year old.”

Originally from Taiwan, Will’s father - Paul Hsu - founded the core of the family business over 40 years ago after discovering unmet demand for the niche product in Asian-American communities. 

Enduring production challenges – including five years from seed to harvest and the need to secure new land for each crop because the root can never be grown twice in the same location - the Hsu’s bought into the supply chain. Their enterprise now includes several hundred acres under production and nearly 1,000 employees across the globe.

Paul Hsu/Founder - Hsu’s Ginseng – Wausau, Wisconsin: “Chinese…real warm.  It’s hot – yang, and American ginseng – yin.  So there’s two different functions.  Two species…”

Traditionally used in Asian cooking and medicine, American ginseng has even drawn accolades from the Mayo Clinic where a 2012 study revealed high doses can curb fatigue among cancer patients in chemotherapy.  And while farmed root has averaged $30-55 per pound, wild ginseng commands a much higher price. 

Paul Hsu/Founder - Hsu’s Ginseng – Wausau, Wisconsin: “Depending on what location, how good they are – 500, 600, 700 dollars a pound.”

The older the root, the more ginsenosides – active compounds within the plant that impart its elixir-like prestige – the higher the price. By state law, the original wild, woods-grown ginseng must be at least 10-years old before being extracted for sale. 

Private landowners like the Hsu’s recognize the importance of conservation and have developed their own ‘wild simulated’ strain, as part of the state’s multi-pronged approach to viability.

Will Hsu/Hsu’s Ginseng – Wausau, Wisconsin: “So this is kind of that in-between space, not quite wild, not quite farm-raised, that you see a lot of agriculture moving into.  So you can take any patch of woods, if you take care of it and do a good job of it, and turn it into this.  And in the wild, some of the best roots are 15-30 years old.”

Paul Hsu says he’s been paying diggers top dollar for over three decades to break the soil at certain times and only for certain root sizes.

Paul Hsu/Founder - Hsu’s Ginseng – Wausau, Wisconsin: “Very seldom do you have 60 year old roots, maybe on in 100 to 1,000.”

Over the years, the Hsus have worked to vertically integrate and navigate volatile market waters.  But for smaller producers laboring with razor-thin margins, staring down the barrel of a trade war can trigger a battle with anxiety.

Bob Kaldunsky/President - Ginseng Board of Wisconsin: “Eighty-five percent of our market is China. So yeah, it’s tied in. It’s hard-wired.”

Bob Kaldunsky heads up the state’s ginseng board, a quasi-governmental promotion group of active producers, funded through shade assessment – a tax on the farm structures that help mimic woods-like conditions for the fickle herb.

Despite strong demand, Kaldunsky says the number of ginseng growers in Wisconsin has declined over the past 20 years from over 1,000 to nearly 180.

Bob Kaldunsky/President - Ginseng Board of Wisconsin: “There’s 5 producers that produce 75 percent of the crop. And the balance, then, that’s about 175, produce the other 25 percent.”

As Ginseng growers weigh whether or not to plant, harvest, or rent, some fear ongoing trade tensions could lead buyers to cheaper sources in Asia and Canada.

President Donald Trump: “It’s going to be very hard for them to that.  We’re putting a lot of safeguards in.”

Trump’s announced $12 billion aid program for farmers affected by tariffs doesn’t sit well with producers like Will Hsu…

Will Hsu/Hsu’s Ginseng – Wausau, Wisconsin: “Especially for something so valuable.”

…who say for the long term, free trade is the right model.  Value-added products, infusing ginseng into all kinds of food and drink combinations – which are taxed and treated differently - could be one future path for the industry.

There are no forward contracts or futures markets for ginseng, and Hsu says within the last year returns have neared the cost of production. 

President Donald Trump: “Family farmers are the backbone of America.”

So as he and other growers adapt to new rules brought on by the White House, all must assess how long farmers who export 90 percent of their crop to China can weather the political storm.

For Market to Market, I’m Josh Buettner.

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