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Scaling up can be the right decision
Challenges facing exotic mushroom farming
Quality local production of mushrooms is critical to the fresh market. Safe, high quality, and affordable local production is very important to further popularizing a lot of what Western markets call “exotic mushrooms.” One key part of that is that sales have to go beyond what Americans call “farmer’s markets” or catering and restaurant operators. For example, only 12% of Americans regularly shop at farmer’s markets, and direct sales, online shops, and fresh markets only reach a minority of any given consumer market.

Without consistency and scaled-up production, selling to supermarket chains that require large orders at more competitive prices is impossible. And without relatively affordable mushrooms in the produce aisles of standard supermarket chains, a huge portion of the population will continue to never be exposed to exotic mushrooms. This stifles the growth of the market and makes it harder to continue introducing new consumers to mushrooms. I maintain that the issue of availability and price even impacts gourmet mushroom growers: cheap mass market exotic mushrooms at common supermarkets means more people develop a taste and interest in those mushrooms which in turn trickles down into more consumers that turn to gourmet growers for higher standards and freshness.
Is it that expensive to automate and scale up?

A new tractor of standard size and settings for large-scale traditional farms, in the U.S. at least, cost at least 500,000 USD. I’ve seen used beet harvesters running for over 200,000 USD. Just glancing at Ag Business journals, I can see that the total line of farm equipment needed to run any kind of modern farm producing at scale starts at 1 million USD for small farms. A fully automated, mid-sized bag cultivation mushroom farm runs less than half that cost even using the most premium Japanese equipment and using partly stainless-steel settings. Bottle cultivation farms are more heavily automated, and with automation comes more machinery and fewer labor costs, which translates into high initial investment in return for lower operating costs.

I haven’t even addressed operating costs. For modern agriculture, farmers have to pay for seed, fertilizer, pesticides, irrigation systems, the water itself, and running the machines requires substantial fuel and maintenance costs. On a mushroom farm the biggest cost by far is the energy required to sterilize substrate in the autoclave, followed by climate control systems. But those same climate control systems allow year-round production with enormous stability and consistency, whereas farmers are still to a great extent at the mercy of macro-climate.

What I’m getting at is that there are reasons to be cautious about expanding, but exotic mushroom farming being inordinately expensive is not one of them. In fact, even comparing a premium top-of-the-line, fully-automated Japanese bottle cultivation plant to a comparable state-of-the-art button mushroom farm (or any other Agaricus bisporus variety), and the Japanese bottle plant is cheaper. At least given the current currency exchange rate for the yen, around 145 yen to 1 USD.
Land costs and construction costs vary, but I recommend that exotic mushroom farmers not repeat the mistakes made by vertical farming businesses. An exotic mushroom farm just needs to be in a central, not too remote area, with reasonable land prices. Mushroom farms don’t need especially complex or labor-intensive structures either. Even the big farms I have toured in Japan use a mixture of inexpensive pre-fabricated steel warehouses with insulation form, and vinyl greenhouses.

Altogether_emdash_setting aside land costs simply because those are too variable to account for_emdash_construction and the equipment needed to set up an exotic mushroom farm with a production range of 250~300 tons a year will cost around three million USD in initial investment for a bag cultivation system. For a more mid-sized farm aiming for 100~150 tons of production a year, between 1~2 million would be more than sufficient (calculated using a warehouse that costs 40 USD per square foot/430 USD per square meter, and 5 USD per square foot/50 USD per square meter for greenhouse space, multiplied by a general estimate of the baseline space needed at those scales). Both of these figures are comparable or cheaper than starting up a new commercial farm (traditional agriculture) or a button mushroom farm.
I have to be clear too, that these yield figures are based on shiitake, which given shiitake’s long incubation and lower bioefficiency (600~700 grams on the first flush), is less productive for the same amount of space and machinery than are oyster mushrooms (very fast turnover), and other common exotic mushroom species. A majority of the cost of setting up an exotic mushroom farm also lies in construction and climate control facilities, with the actual equipment less than a third of the investment cost.

Japanese equipment for exotic mushroom farming is durable as well. Compared to the expected operational life and maintenance costs of large pieces of machinery on a traditional farm, bag cultivation equipment requires only basic maintenance and cleaning. Autoclaves, while expensive, have a typical life span of 20 years on Japanese farms, with 30-year-old autoclaves not at all a rare sight. Meanwhile, bagging and inoculation machines can produce up to 25 million bags of substrate and between 17 and 18 million kilograms of mushrooms over the life of the equipment line, if not more.

The math speaks for itself, at least when comparing very productive and durable equipment. For those who want to expand, who don’t mind being more involved in the business side and less with mushrooms, and, most importantly, have potential customers and clients, expansion and automation make perfect sense. Rather, without building up facilities and installing the most state of the art equipment, an exotic mushroom farm will forever be highly limited in scope.

Demand for mushrooms is already growing in Western markets, and is set to continue growing for the immediate future. One of the biggest barriers to growth at this point is the lack of widely available, inexpensive options for more exotic varieties and wider penetration into fast food and restaurant chains as a staple ingredient. The average American consumption of fresh mushrooms is roughly 4.3 grams per day, whereas Japan’s is 16 grams a day. Within Japan even, mushroom consumption in Nagano Prefecture, a leading mushroom producer, is roughly 22 grams per day. In China, the average figures are more than 25 grams per day per person, figures which underwrite and enable China’s domination of the global mushroom industry.

With the explosion of flexitarian, vegetarian and vegan diets_emdash_which polling indicates are now the goal of a majority of younger consumers who will be aging into the consumer market over the next decade_emdash_mushrooms are primed to find a niche as a protein and nutrient rich superfood and meat replacement. In Europe and the Americas, the total consumption of mushrooms and edible fungi is primed to increase by at least 300% just to reach current levels in Japan. Japan as well, despite a post-COVID slump, has still seen overall production inching up from a decade ago despite a shrinking and aging population (meaning per person consumption is marginally increasing year to year).

Expansion should be a carefully calculated and considered decision, but the market is ripe for new businesses. With proper equipment and automation, well-codified best practices, and the steady development of key infrastructure for the industry, local producers and companies can establish themselves and secure their market share. The idea that in the U.S. mushroom consumption will remain roughly 1.5 kg per year person and in Europe will range between 2.5~4 kg per year per person forever and that any new entrants to the market will just be driving prices down and competing with other growers for the same narrow market share is, I think, a flawed perspective.

The well of the market is deep, and there is enough water for many more entrants into the market to draw from. In fact, the development of more farms, more growers and more competition will benefit all in the industry by providing more resources, infrastructure and sub-suppliers, as well as established consultants, to make growing more efficient and more stable. This is a positive change from the status quo, where exotic mushroom farmers often feel like Matt Damon abandoned on Mars to fend for himself. Expansion is a way for exotic mushroom farms to plan their growth with the industry, and the next few years will be a key period for farms to establish themselves in this new sector.

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Scaling up can be the right decision

Challenges facing exotic mushroom farming