Mushroom prices slicing pizzerias' profits

Oct. 2, 2006
Hard times for mushroom growers are tightening supplies and driving up prices for the U.S. restaurant industry.
Long-term supply excesses have depressed prices, and that's forced some mushroom growers out of business. With those crops out of circulation, the normally plentiful fungus is becoming harder to find, said Jim Fox, founder and owner of Fox's Pizza Den.
"They're telling us that, if you can even get them, expect a $9-a-case increase on domestics and $5.50 a case on imports," said Fox, whose company is in Pittsburgh. Ironically, Pennsylvania produces more mushrooms than all other U.S. states combined. "(In the last week of September), we ordered nine pallets, but they only sent us four."
On Oct. 3, one

What's Important

Excess mushroom supplies in 2005-2006 crushed growers' profits. Harsh weather and high energy costs also forced many growers out of business.

Now mushroom supplies are tightening worldwide and prices are rising sharply.

Some pizza operators are considering charging more for mushrooms until prices go down again.

Fox's franchisee reported a 17 percent increase in his mushroom bill.
According to a June survey conducted by the National Agricultural Statistics Service (NASS), the 2005-2006 U.S. mushroom crop was a mere 1 percent smaller than the 2004-2005 crop. But in the same month this year's report was published, Franklin Farms, one of the country's largest growers, closed its doors, and that removed 25 million pounds of mushrooms (about 3 percent of the total crop) from the market. Laura Phelps, president of the American Mushroom Institute in Washington D.C., said many smaller growers have left the business this year, too.
"Some growers are deciding they can't afford to be in business any longer," Phelps said. "Outside of supply issues, the energy costs tied to growing mushrooms is astronomical. This is a tough time for growers."
Mike Basciani knows that all too well. As the 45-year-old owner of Basciani Mushrooms, he's seen many ups and downs in his fifth-generation, family-owned business. But these are the darkest days yet, he said.
"In the 1970s, a cannery-grade mushroom brought 70 cents a pound. Now it's 40 cents," said Basciani, whose company is in Avondale, Pa. "When all your other costs are going through the roof, you can't hardly afford to do this. I'm spending 100 hours a week working and trying to make a living."
Pizza perspective
Several pizza operators contacted said they weren't aware of the cost increase or supply shortage; one even said they he doesn't sell enough mushrooms to notice if his price was up. But Fox said mushrooms are his chain's second-most popular topping at its 280 stores and that short supplies and high prices will lead him to raise prices system-wide.
"We'll do what we did when the cheese market went nuts," Fox said, referring to 2004, when cheese prices hit all-time highs. "We'll put a note on top of our pizza boxes explaining that due to concerns beyond our control, it's going to be an extra dollar over the normal cost until the shortage is over."
Since Basciani's large pizza chain clients already contracted prices for the year, they won't bear the burden of this year's struggles. But could operators without contracts find themselves short handed? Phelps doesn't think so, but she's confident they'll pay higher prices for what they get.
"I can't say this is a true shortage until we have more evidence. What we know right now is mostly anecdotal," she said. "When growers got (the NASS) report and they realized that Franklin had shut down, they realized they can't keep selling mushrooms for the same price they have for the past five years. They've got to do something to offset their costs."
Tight all over
Gary Caligiuri owns mushroom canner Sunny Dell Foods in Oxford, Pa. He said mushroom supplies aren't tight just in the United States. "It's pretty much industry wide. Canada's having problems, we just heard that Holland has the same problems and that Poland is going to be short on mushrooms."
The crop in China, the world's largest producer of canned mushrooms, is down between 25 percent and 30 percent, and much of its supply is destined for Russia.
Though mushrooms are grown indoors, weather has

start quote"Imagine coming home and your wife has the air conditioning running full blast and the baseboard heat on. But that's what we have to do to grow mushrooms. You have to heat and cool in the summer and the winter.end quote

Mike Basciani, Basciani Mushrooms

played a large role in tightening supplies and putting growers out of business. Caligiuri said great mushroom crops are grown in great compost. But when products that make up compost suffer from harsh weather, compost quality suffers, too.
"Here in the U.S., we had a dry summer, which affects the hay, and that's a key component of the compost," he said. "That started the production problems because you don't get as good a yield if your compost isn't good."
U.S. mushroom growers also have battled green mold, which kills mushrooms and reduces crop yields. Worse, growers then are forced to shut down their operations to remove the mold from mushroom houses. Less production turns into less product and ultimately into losses.
But what's truly killing mushroom growers' profits is the soaring cost of energy. Growing mushrooms is highly energy intensive because the climate in mushroom houses is fully manmade.
"Imagine coming home and your wife has the air conditioning running full blast and the baseboard heat on. You'd kill her," Basciani said. "But that's what we have to do to grow mushrooms. You have to heat and cool in the summer and the winter. This is a product that can't be dried by the sun. It has to be dried by heat. A mushroom house is like an oven and a refrigerator" because compost has to be sterilized at 160 F, while spawning takes place at 45 F.
Growers have done all they can to conserve energy, Basicani said, but their best efforts aren't providing a return on investment.
"We said some time ago that we'd conserve energy by sealing everything up, but you do that and air can't circulate. If air doesn't circulate, mushrooms don't grow," he said. "To get mushrooms to grow, you've got to have fresh, clean air. To make that is very expensive, and the costs are killing us."

Topics: Fox's Pizza Den , Operations Management

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