Agroforestry Market Analysis: Black Elderberry and Ginseng for Oregon’s Willamette Valley

Introduction

The Willamette Valley of Oregon, with its fertile soils, mild climate, and productive diverse forests is an excellent region for perennial crops and agroforestry. However, perhaps because of its historic emphasis on timber based forestry and renown for productive annual crops, proven agroforestry based enterprises are rare. There are a few basic challenges faced by farmers considering adopting agroforestry enterprises. Agroforestry enterprises often produce specialty products for markets about which little is known (Gold et al. 2004) In addition, the unique ecology, culture, and economy of specific regions often requires different production and marketing strategies than regions where certain practices and crops have been proven. Finally, because agroforestry integrates multiple crops, there is an inherent increase in complexity involved in folding in new crops in an agroforestry enterprise. Despite these factors, two crops stand out for their potential in regional markets. One, the elderberry (Sambucus spp.), has a history of cultivation in Oregon and the other, American ginseng (Panax quinquefolius), I have had personal experience with its successful growth in the acidic and conifer dominated soils of the Pacific Northwest.

Available Resources

Land and Soils

This project will occur on “Viriditas Farm,” our 6.5-acre homestead in Oregon’s Southern Willamette Valley. The farm is situated on mountain foothills with the upper section of the property having soils derived from weathered seafloor sandstone and mudstone and the soils near the creek at the bottom being of alluvial origin. The seafloor soils, which are in the Dupee silt loam (45C) and Hazelair silty clay loam (52D) soil series, have high clay content and are moderately fertile. However they are prone to seasonal saturation and need special conservation considerations for erosion prevention in order to permit farming. Their most common use is for forestry and grazing. The traditional use of rangeland and forestry on these soils overlaps well with our projected use of this section of the property which includes establishing grazing paddocks and crop fields divided by multi-species hedgerows on contour. These hedgerows will be designed to function as multipurpose alley crop systems and include elderberries as a major component of the plant assemblage. The alluvial soil type is called Abiqua silty clay loam (1A and 1B). Abiqua soils are deep, well drained and fertile. They are classified as Class 1 soils for agriculture. Two historic floodplain terraces containing this soil type reside on the lowest section of the property. The upper terrace is approximately 2 acres in size and will be included in the elderberry alley crop system. The lower terrace is the highest productivity soil on the site. It is in mixed evergreen and deciduous hardwood dominated riparian forest. This 1-acre section will be designated for ginseng production.

Water

The property has a 12-gallon per minute well. We are in the process of developing a spring water right and an agricultural well water right in addition to the existing well. The expense of obtaining these water rights is not included in the budget for these two crops because our existing well is sufficient to supply our anticipated water needs.

Capital

Existing capital resources include 8-foot tall perimeter fencing surrounding the entire elderberry site, a well, 1-inch irrigation mainline, access roads, and storage facilities. Further investments will need to be made in storage, drying, and processing as well as deer fencing for the ginseng and livestock exclusion for the elderberries. Additional investments in irrigation infrastructure will be necessary for both crops as well. (See variable cash costs in cashflow analysis, Table 2 and Table 4)

Labor

Labor will be derived through the part-time work of our family, residential work traders, and hired temporary employees. In 2016, the Oregon Legislature established a series of annual minimum wage rate increases. The minimum wage will go up 50 cents every year until 2019 and then increase 75 cents every year until the year 2022. Beginning July 1, 2023, the minimum wage rate will be indexed to inflation based on the Consumer Price Index (CPI). In Lane County, The minimum wage in 2022 will be $13.50. For the purposes of this analysis, labor is to be valued at $12.00 per hour, the minimum wage in the year 2020.

Because of our association with a permaculture education center, we have the opportunity to incorporate students into the installation of systems when the work is relevant to the education context. Courses in agroforestry, taught through the center could offset the cost of establishment of both ginseng and elderberry. In addition, NRCS cost share programs for hedgerows, cross-fencing for rotational grazing, and upland buffers could be utilized to offset the cost of at least the elderberry plantings. Cost share programs are considered in the elderberry financial analysis in Table 2.

Management

Our goal is to establish a series of long-term low maintenance crops that allow us to diversify income streams, provide gainful employment to our community, and cover the costs of developing the infrastructure of our farm in such a way that it can lend itself to additional production streams in the years to come. With a background in organic agriculture, permaculture design, and agroforestry, our family has a strong base of management knowledge to assist us in our work. Our primary limitation is time. Our availability for these projects is approximately 20 hours per week combined between myself and my wife. Given this, we anticipate the need to select crops that do not require intensive and routine management. Ideal crops will require management in seasonal pulses that can incorporate the help of our on-site work-traders and temporary hired helpers.

Processing Facilities and Markets

We intend to sell our products locally. The ginseng will be sold to local medicinal distributers and potentially incorporated into iced fruit wines and sold regionally. The elderberry would be made into syrup and sold to local wine makers as fresh berries. The elderberry syrup and a limited amount of fresh berries and ginseng root will be offered through a local Community Supported Agriculture cooperative in our valley and via a buying club run through our local grocery store. Although we may establish a commercial kitchen in time, our current best option for processing the food products is through the rental of a commercial kitchen on our neighbor’s farm or to use the commercial kitchen at the local grange hall. Both options are affordable strategies for startup producers.

Financial Analysis Methods

Agroforestry budgeting involves more complexity than most agricultural enterprises because it often involves multiple crops and long production cycles. This leads to budgets that have long planning horizons with irregular cost and revenue occurrences (Godsey, 2008). The first step in a financial analysis is to develop an enterprise budget. This budget lists all sources of revenue and cost (variable and fixed) and also applies timing to each of these items. Once the enterprise budget is produced, a cashflow plan can be developed. The cashflow plan combines the details from the enterprise budget and adds a time dimension. The enterprise budget provides a framework for reporting and monitoring the profitability of the enterprise and the cashflow plan provides the information necessary to assess and forecast the economic feasibility of the project over time (Godsey, 2008). Both options explored in this paper use enterprise budgets and cashflow plans as budgeting tools. These tables, 2 through 5, can be found in the Appendix section of this paper. There are several common indicators used to analyze agroforestry projects. In this case, the data derived from the cashflow plans was used to determine the net present value, benefit cost ratios, internal rate of return, and the number of years to break even for both practices. These are commonly accepted indicators used to analyze agroforestry products. The conclusion synthesizes the results of both options.

Option 1: Elderberry Alley Cropping

Description

This project will combine the two agroforestry practices of alley cropping and silvopasture. Alley cropping combines trees and shrubs planted in single or multiple rows with agricultural or horticultural crops cultivated in the alleyways between the rows. The practice of silvopasture combines trees and shrubs with pasture and livestock production (Gold et al. 2009). In both cases, livestock and crops raised within the alleys provide a short-term economic return while the tree and shrub component are coming into production. The alley crop will be designed as a single row multi-species buffer on the contour between grazing paddocks and agricultural plots. The species will be selected for on-farm use and local sales. While the on-farm crops (and animals) will be diverse, the primary market crop within the alleys will be elderberry.

There are three species of elderberries known for their commercial viability in Western Oregon. The black elderberry, Sambucus nigra, is common in central and western Europe and grown commercially throughout these regions as well as in North Africa, Scandinavia, and Great Britain. The American elderberry (Sambucus canadensis) is native to eastern and Midwestern North America. According to Finn et al. (2008) Oregon was a major black and American elderberry producer at one time although production has declined substantially. This is likely because of the strong competition from European growers for the dried berries and flowers. The Oregon native blue elderberry, Sambucus nigra ssp. caerulea, is a subspecies of black elderberry. It usually occurs in forest openings and is a dominant understory species in riparian areas within the region. Like the black elderberry, it is known for its high vitamin C content and is highly valued for its medicinal qualities.

Varieties

Research has established that American Elderberry has high yields, the most rapid ripening time of the three species, high sun tolerance, and widespread medicinal recognition (Finn et al. 2008). The European elderberry is often the preferred medicinal elderberry simply because it has the most research associated with it (Finn et al. 2008). However, a study by Thomas et al. (2013) revealed that the American elderberry “Bob Gordon” and “Adams 2” were seen to be good producers in Oregon and were significantly higher in medicinal (total phenolic and total anthocyanin) contents. Although their medicinal content is lower, the varieties “Johns” and “York” are the highest yielding American elderberries in Oregon. (See figure 1) These four varieties stand out as being good selections for producing juices, wines, or health products in Oregon and will be utilized on our farm.

Site Selection

120 elderberry bushes will be planted throughout 1,800 linear feet of alleys across the upland sections of the property and on the upper cleared terrace near the creek. The medicinal grade “Bob Gordon” and “Adams 2” elders will be grown in the lower fertility soils on the slope while the highest yielding syrup and wine elderberries will be grown on the floodplain soil on the terrace. The alleys will be aligned along the contour of the land to serve as nutrient buffers between grazed plots. At this orientation, the perennials within the alleys will absorb any runoff nutrients. The alleys will also serve as summer sun and winter storm shelters for animals. Following harvest, the elderberries as well as other select species can be browsed by our sheep. The vegetation of the elderberries is most palatable to the animals later in the season following berry harvest when the grass dries down.

Cultural Practices

The American Elderberry has more stems and spreads more aggressively by underground rhizomes than the European elderberry. Maintaining American elderberries in alleys surrounded by grazed paddocks may be a good way to minimize the outward spread of the bushes.

The multiple shoots that the bush sends up each year attain full height in one season. Little pruning is required. Most farmers follow an annual selective pruning regime in which all dead, broken, and weak canes as well as canes older than three years are removed at ground level in the winter. As part of this regimen, an equal number of 1, 2, and 3-year-old canes are often also left to bare fruit (Way, 1981). An alternative less management intensive approach is to prune the entire plant to the ground each winter. The following year’s sprouts produce fewer but larger fruiting cymes. The fruit supply is still considered acceptable and because the cymes are larger, this results in efficiency at harvest as well (Way, 1981).

Cultivation around the bushes is discouraged because of the plant’s shallow roots. Deep mulch is often used to suppress weeds and grasses. This mimics the riparian forest understory conditions that the tree is accustomed to. We will utilize a combination of shallow rooted perennial bulb and rhizomatous plants like comfrey, day lily, and camas, mulch, and mob grazed chickens to suppress un-desired vegetation. In addition, in order to maximize space and reduce competing vegetation, plantings will be spaced 6 feet apart on center between bushes 10 feet on-center between trees and shrubs and 14 feet apart between trees.

Elderberries reach bearing age in 2-3 years. The berries are harvested in late August and September when the berries are sufficiently large and have changed to a purplish-black color. Because the fruit does not mature at the same time, several pickings are necessary over a 1 to 2 week period (Way, 1981). The fruit will need to go into frozen storage if it is not processed into wine or syrup immediately.

Elderberry SWOT Analysis

A strengths, weaknesses, opportunities, and threats (SWOT) analysis examines both internal factors of the farm/business enterprise (strengths and weaknesses) and external factors outside of the business/farm that one cannot control but may be able to influence in ways that better impact your business (Gold et al. 2013). The following SWOT analysis is applied to American elderberry at Viriditas Farm.

STRENGTHS

• Availability of processing and storage facilities. There is access to an affordable commercial kitchen less than 2 miles from our farm. Two additional commercial processing facilities include the regional grange hall and a “food hub” processing kitchen.

• Adding elderberry processing to an existing farm operation does not require much extra equipment. Processing and storage needs are redundant with other products from our farm. Thus it makes sense to anticipate investment in some facilities including a freezer and washing station.

• A reliable source of local elderberries is hard to find in Oregon.

• Opportunity to be a demonstration site and create a direct relationship with the customer base.

• Requires only part time work to maintain and harvest the crop.

• Integrates well into existing pasture plan.

• Relatively low start-up cost.

• High internal rate of return and benefit cost ratio (40% and 1.22).

• Fairly rapid payback period (4-5 years).

WEAKNESSES

• No dedicated harvesting equipment for elderberry fruit makes harvesting very labor intensive.

• Supply is perishable requiring immediate processing or finishing.

• Information about growing elderberry is limited.

• Pests and diseases are less known and understood.

• Lack of local processing plants and lack of well articulated processing methods.

• Fruit ripens over multiple weeks, requiring more than one harvest.

• Picking and value adding this product takes quite a bit of work.

• The cost of producing the value added product (syrup) is over half of each year’s budget.

OPPORTUNITIES

• Presence of a burgeoning grower’s cooperative through a local community supported agriculture market.

• Established farm-direct system operating through a local grocery store.

• Low interest farm loans through the Farm Service Agency are available in Oregon to help small-scale growers.

• Cost share money is available in Oregon to implement this practice.

• Most value added producers are reliant on purchasing elderberries from outside suppliers and do not grow their own fruit.

• There is strong demand for fresh fruit and plant parts.

• Because there are so few producers and their volume is relatively small, new entrants to the industry are relatively benign and their presence helps grow the market.

• Because the wine industry is tightly regulated, most elderberry wine is sold within state borders. Since few producers sell in Oregon, this represents a strong market niche.

• Demand for elderberry wine is increasing.

• Interest in elderberry products is driven by consumer’s interest in their health.

• Feedback from wineries producing elderberry wine have a high need for berries.

• Growers indicate very little competition.

• Elderberry has unique properties that put it in a class of its own.

THREATS

• Obtaining financing is a challenge because banks lack detailed financial information concerning the elderberry industry and are therefore reluctant to provide loans.

• Local plant varieties are difficult to source especially in large quantities.

• Lack of quality standards established by buyers.

• FDA regulations limit the market because producers are not allowed to promote the medicinal value of elderberry unless long-term, expensive clinical trials support the claims.

• The wine industry is heavily regulated and limitations exist for the shipment of wine.

• There is prejudice in the wine business toward grapes.

• Large firms can gain access to limited supply of berries for their product lines.

• For medicinal products, there is a lot of competition from leading brands.

• Grape wine and other fruit wines are substitute products.

Elderberry Market Analysis

Observing that up-to-date market information is lacking for elderberries, Cernusca, Gold, and Godsey (2011) carried out a market analysis to shed light on the emerging industry. They utilized the Porter Five Forces Model (PFFM) to explore the competitive forces that coordinate and control the market. This model has been used to describe other specialty crop markets such as shiitake mushrooms and chestnuts. (Gold et al. 2006, 2008) Following a national survey, 74 responses were received from individuals and companies within the industry. Of these respondents, 3 were from Oregon.

According to the analysis, elderberry is a small but growing industry with high growth prospects. The industry has been described as “embryonic”, populated by a few large producers and many entrepreneurs, innovators and other small-scale participants developing their own local markets. Most market participants are involved at multiple levels of the value chain; propagating plants, selling berries, and value adding products. The survey established that because of high demand and few growers, there is room for new producers to enter the market without competition. Many regions had only a single grower. An exception to this is dried berries and flowers, grown for the medicinal industry. Competition from Europe limits the profitability and demand of this supply chain. An inquiry with regional medicinal suppliers revealed that dried flowers and berries are purchased in large quantities (+1000kg lot sizes) from Albania and that the price and volume represents a substantial barrier to entry for local growers. However, the fresh berries and other plant parts do still hold promise for the local market.

Entry into the industry requires some investment, depending on which product a producer intends to make. When new entrants already have existing processing and bottling infrastructure (wine, caning, etc.) from other crops, no new infrastructure investments may be necessary. However, because there is no mechanical harvesting equipment, elderberry must be hand harvested. This adds a level of intensiveness to every operation. In our case, we do have some established and affordable small scale processing facilities at our disposal but none on-farm. This may prove to be a time and financial hurdle.

In order to obtain a reasonable return on investment with elderberries it will likely be necessary to value add. Value adding allows a marketer to obtain an increase in price for the same volume of material. Value can be added to raw products in two general ways: by changing the form of the product through processing (e.g., drying, canning, freezing, fermenting) or by selling further along the marketing chain (i.e., to a retail outlet rather than a wholesaler (Chamberlain et al. 2009). Processing raw materials also allows a producer to sell out of season or over a longer period of time and to ship perishable items to further markets without concern for spoilage. The elderberry is direct marketed through many avenues including fresh elderberries by the pound, de-stemmed elderberries to wineries, dry flowers and dry and fresh fruit to medicinal companies, berries for pie or jam, different elderberry wines from dry to sweet, pure or blended, medicinals, and other value added products like syrup, fudge, sauces, and soda.

Elderberry Financial Analysis

Based on the analysis of Gold and Cernuska, prices for fresh elderberries range from 50 cents (with stems) to $5.00 a pound when sold to wineries for winemaking. In farmers markets or sold direct, prices range from $3.00 to $5.00 per pound. Fresh or frozen berries sell to medicinal companies for $11 per pound (however, there appears to be little demand for this particular product in Oregon). Fresh or frozen elderberries made into value added products and sold locally seem to be the best market advantage for local organic growers given the strong influence of European elderberries on the dried berry market. For instance elderberry wine sells for $10-20 per bottle and elderberry syrup sells for $16.00 dollars per pint. It takes approximately 1.5 pounds of elderberries to make a bottle of wine and about 1 pound of berries to make a pint of syrup. The value of the berries by the pound for these two products is $7-$13 for wine and $16 for syrup. The average yield of the four selected varieties is approximately 11 pounds per plant (Finn et al. 2008). Therefore with approximately 120 elderberries grown, an estimated gross profit from wine is $9,240 and $21,120 (at $16 per pint) from syrup per year. A total of 880 bottles (from 176 gallons of wine) or 1,320 pints of syrup would need to be produced and sold to achieve this gross amount.

Given the cost and permitting involved in wine production, syrup and sales of fresh berries to wineries is where our operation will begin. We will plan for splitting our production between syrup and fresh berry sales. This is based on two informed assumptions: first that it will be hard to sell over 1,000 pints of syrup per year (at least for quite a few years) given the local demand and competition, and second that wine makers have a strong demand for fresh berries. For the sake of this analysis, we will assume a production of half the berry yield for syrup and the other half for fruit sales to wineries for a total yearly profit of approximately $10,000 by year 3 and rising to $13,000 in year four and every year thereafter.

Elderberry Enterprise Budget and Cashflow Plan (See Tables 2 and 3)

At an expected rate of return of 6%, the present value of revenues is $31,853 and the present value of costs is $26,090. The Net Present Value is $5,760. The benefit cost ratio is 1.22. This indicates that with a 6% rate of return, the elderberry project is financially acceptable. The internal rate of return for this practice is about 40%. The breakeven point on the project is at year four if cost share payments for hedgerow establishment are included in the budget and at year five if they are not. Cost share payments of $1.27 per foot for installation of upland buffers and hedgerows are available through the regional NRCS office.

Option 2: Ginseng Forest Farming

Description

American ginseng is one of the world’s most valuable herbs. It occurs naturally throughout Eastern North America in the understory of hardwood forests. Its range is limited to the south by a need for cold periods and to the west by a need for summer moisture. (Taylor, 2006) As horticultural information about ginseng has grown, so too has its cultivated range. For example, Persons et al. (2005) documents large plantings in the arid interior of British Columbia, Canada and significantly, in the Mediterranean climate of Oregon and Washington. I have also been involved with ginseng cultivation below Douglas fir (Pseudotsuga menzesii) and coastal redwood (Sequoia sempervirens) in Northern California.   Ginseng produces a new stem and leaf top every year from a slow growing tuberous root. The semi-mature plant (5-9 years old) has three branches emanating from a single whorl on the main stem. Each branch has a single leaf composed of five leaflets. The species name, quinquefolius, means five leaved. A flower cluster of small greenish white flowers grows from the center of the whorl and produces kidney shaped berries that grow to a crimson color as they ripen (Parsons et al. 2005). The berries can be sold for seed to nurseries and growers. The main crop however is the root. The root, which grows larger each growing season eventually reaches an inch in diameter and four inches in length and often resembles a human form with “arms, legs, and torso”. The name ginseng means “man root” in Chinese (Parsons et al. 2005).

The practice of forest farming involves the intentional cultivation of forestlands for specific products. In contrast to other agroforestry practices that introduce trees into non-forested environments, forest farming introduces or cultivates existing crops within an existing forest (Chamberlain et al. 2009) and attempts to combine the ecological stability of natural forests with the higher productivity of agricultural systems (Sholto et al. 1984). Of the myriad forest farming systems, the intentional cultivation of American ginseng stands out as among the most important in North America. American ginseng has been tended in the forests of America since pre-history. Following “ginseng gold rushes” in the mid-1800s, during which wild populations were severely overharvested for sale to China, field cultivation under artificial shade structures became an alternative growing practice (Parsons et al. 2005). Since World War II, forest farmed ginseng, not just wild-crafted but planted and maintained as a long term crop, has steadily increased again in the United States (Chamberlain et al. 2009). Forest farmed ginseng is typically divided into two categories, “wild simulated” and “woods cultivated.” Woods cultivated ginseng’s main difference is that the ground is cultivated and shaped in order to improve drainage in wet soils and limit competition from other species. Of the two primary growing methods, “wild simulated” ginseng is the most profitable because it requires less management time and produces roots that are often indistinguishable from wild-harvested ginseng (Parsons et al. 2005). By comparison the roots of “woods cultivated” ginseng appear less “gnarly” because they are grown in cultivated soils. However, “woods cultivated” ginseng usually still has a higher gross profit potential per square foot per year than field grown ginseng (Parsons et al. 2005).

Our project would be classified as a woods cultivated system because it will need to rely on cultivation in order to clear the site of brambles and to improve drainage during the winter season. For this reason, and because of the learning curve associated with growing a crop in a different climate, we will follow a conservative budget described by Parsons and Davis in their book “Growing and Marketing Ginseng, Goldenseal and Other Woodland Medicinals”.

Site Selection

The best locations for ginseng are cool, deciduous sites with good air circulation and humus rich soil. When set at the proper spacing and supplied with the soil conditions for optimum growth (barring extreme or overly wet weather) it is believed that ginseng will be free of most disease problems. In particular, site selection and proper cultural practices will be paramount for organic production since it won’t be able to rely on chemical treatments for disease and fungus. The riparian forest on our site stands out as an optimal location, especially with raised beds designed to minimize soil saturation.

Cultural Practices

Given the acidity levels of Western Oregon’s soils, it will be necessary to add gypsum at the rate of 1,000 pounds per half acre. In addition, because the Willamette Valley was not glaciated during the last ice age, it lacks the micronutrients typically available in East Coast and Midwest soils. For this reason it will be necessary to amend with approximately 300 pounds of glacial rock dust. It is typically not necessary to fertilize ginseng as long as there is sufficient decomposed leaf litter in the soil (Parsons et al. 2005). We will be growing in a historic floodplain site, rich in alder, maple, and walnut. It is assumed that soil fertility will be adequate for ginseng cultivation. In order to allow for good drainage, beds will be run up and down slope and shaped into raised berms (crowned at the center) with a bed shaper pulled behind a tractor. Seed is sown at 5 seeds per square foot and mulched with leaf litter (Parsons et al. 2005). Micro-sprayers arrayed to irrigate two 4-foot wide beds at a time should be sufficient to keep the soil moisture up during the dry season.

American Ginseng SWOT Analysis

The following analysis draws from the books “Growing and Marketing Ginseng, Goldenseal and Other Woodland Medicinals” by W. Scott Parsons and Jeanine M. Davis and “Ginseng: the Divine Root” by David A. Taylor.

STRENGTHS

• Irrigation will be fairly simple on the site.

• Much of the fencing work is already complete. A small investment will be required to extend the fencing into the ginseng plot.

• The well drained, gently sloped, and fertile soils combined with the hardwood canopy create a good growing site.

• Few infrastructure investments are required for this project. The only major costs will be improving rather than starting from scratch with fencing, irrigation, and drying facilities.

• I have had experience working in a successful ginseng operation in similar climate and soils to my own site.

• Growing a high value understory crop like ginseng in the riparian zone represent a way to obtain income from an otherwise under used section of the property. It also allows us to maintain the riparian buffer function of the forest within this streamside zone while obtaining a financial yield from the system.

• Fairly low amount of invested energy for a high return on investment (15%).

• Cost benefit ratio is greater than 1 (1.53).

WEAKNESSES

• There is a high risk of predation from birds, squirrels, and other wildlife.

• Long time span between planting and harvest increases risk.

• Pests and diseases are less known and understood compared to its native range.

• Compared to wild simulated plantings, woods cultivated ginseng faces higher risks from poaching because it is often outside of an easily guarded area.

• Because it is sharing woodland habitat with trees and other understory vegetation, woods cultivated ginseng requires more initial site preparation.

• Ongoing vegetation management will also be necessary given the competition from surrounding vegetation for water and nutrients.

• In woods cultivated ginseng, the feeder roots of the surrounding shade trees permeate the soil a few years after bed preparation. This is un-preventable and one of the reasons why woods cultivated ginseng takes longer than field grown to reach marketable size.

• The Mediterranean climate of Western Oregon combined with competition for water requires that the ginseng be irrigated throughout the summer season. Within its native range, supplemental irrigation is usually unnecessary given the wet summers and humid climate. This will require more active management and infrastructure costs in our region. It also carries with it an increased risk of disease from too much moisture.

• High soil acidity and a lack of historic glaciation processes require careful consideration of the soil chemistry. Limestone and glacial rock dust will need to be added to the plots.

• Shade requirements for American ginseng range from 70% to 90% (Anderson et al. 1993). This percent canopy cover will need to be carefully maintained throughout the growing area.

• High cost outlay and long payback period (7 years).

OPPORTUNITIES

• Regional associations (Small Woodlot Association, local permaculture guilds, Cascadia Permaculture Institute, Oregon Woodland Cooperative) would be good resources for promoting the product.

• Potential research partnerships with district Natural Resource Conservation Service office, Aprovecho, and the Western division of Sustainable Agriculture Research and Education.

• Existing wine industry with strong market circulation and recognition.

• Unique iced wine product would be a market niche in a strong local wine industry.

• No one makes a living poaching ginseng in Oregon.

• No regional competition.

• Strong Chinese medicinal export industry established in the Pacific Northwest.

THREATS

• Consumers in the Northwest are less familiar with the health benefits of ginseng and potentially less prone to purchasing it than individuals on the East Coast or in the Midwest much less Asia.

• There is not a lot of information on growing ginseng in general and no information on growing ginseng in Western Oregon. This will increase the learning curve and chance of failure.

• There is a very limited supply of regionally adapted seeds.

• Climatic factors and soil conditions may be challenging for the crop.

• Obtaining financing is a challenge because banks lack detailed financial information concerning the ginseng industry and are therefore reluctant to provide loans.

Ginseng Market Analysis

            There are two routes for ginseng sales: selling wholesale to exporters and direct marketing. Major ginseng exporters have buyers within the ginseng growing areas of the United States. These buyers will quote prices for sale primarily to the Pacific Rim countries and Hong Kong. The export market to this region is still good for ginseng and has been for 275 years except during times of war and trade embargoes (Davis et al. 2005). Buyers are usually eager to purchase roots and can pay cash upon delivery. There is a link between per capita income and ginseng consumption. For instance, in Taiwan, the average individual consumes over 9 grams of ginseng per year while in China the average individual consumes 2 grams. In affluent Hong Kong, consumption is 74.6 grams per person per year (Parsons and Davis, 2005). As China continues to grow its economy, the consumption of ginseng should also continue to grow. There are also growing markets in Europe and North America, as people learn about the health effects of the root. Parsons and Davis (2005) suggest that a grower with more than 10 pounds of ginseng to sell find an experienced buyer with a well-established market. This will result in a higher price per pound for the roots. Getting multiple bids is also an important practice.

Because each link in the export chain has a mark-up and each transaction has a commission, consumers pay much more for ginseng than the wholesaler’s price. For this reason, there is incentive for the seller to market their ginseng directly to the retailer or consumer. Although identifying and entering these markets can be a challenge, marketing direct to local holistic health practitioners, Chinese herbalists, and Asian groceries could potentially bring twice the profit to the seller than utilizing wholesale markets. Concern for the impacts on wild populations and chemical residues found in non-organic roots would improve buyer’s interest in locally grown organic roots. Another outlet is direct sale worldwide through the internet. Parsons and Davis point out that the complexities of grading your own roots, working with regulations and permits, and finding buyers in an already well established and steady export market makes the internet less promising than at first glance.

The supply of ginseng out of the Pacific Northwest is very small. In 2000, a survey was conducted of United States growers (Davis et al. 2005). One individual was growing woods cultivated ginseng on one acre in Oregon and six individuals were growing wild simulated ginseng on two acres in Washington. This compared to 300 acres of woods cultivated and wild simulated ginseng in Tennessee, shows a limited supply in the Northwest; a region with a very well established export market to Asia. It appears that, as long as plant establishment and growth is successful, the supply and demand for ginseng in the Northwest are optimal for growers.

Ginseng Financial Analysis

Ginseng growers usually dig roots as soon as the plant produces a sizeable berry cluster. This is a sign that the plant is reaching reproductive maturity and that the growth of the root is slowing down (Parsons et al. 2005). For woods cultivated ginseng, growers generally harvest between six to eight years. According to Parsons and Davis (2005) a root yield of 300 pounds per half acre in seven years is a reasonable expectation from a woods cultivated planting. For the sake of this analysis, we will set our price at $100 per pound. This price represents the lowest rate one can obtain quality woods cultivated roots.

American Ginseng Financial Analysis and Cashflow Plan (See Table 4 and 5)

The minimum acceptable rate of return is 6% and the cashflow plan covers a seven-year period. At these rates, the present value of revenues is $18,666 and the present value of costs is $12,181. The Net Present Value is a $6,485; indicating that with a 6% rate of return, the ginseng project is financially acceptable. The internal rate of return for this practice is about 15% and the cost benefit ratio is 1.53. The breakeven point on the project is at year seven.

Conclusion

The elderberry and ginseng projects are not mutually exclusive on this site. Therefore, given their financial acceptability both options could be pursued. However, if one were to choose one project over the other, it should be elderberries. First of all, this system integrates well with a series of other management regimes (pasture, hedgerows, buffer strips) and crops (sheep, chickens, nursery stock, and specialty fruit). Some of these crops have market value while others simply serve our household. Secondly, elderberry has a history of production in our region and a diversity of value added products which are relatively simple to produce without significant investment. Ginseng, on the other hand, has a reputation for being hard to grow outside of its native range. This factor in particular makes ginseng a higher risk investment. The elderberry project has a higher net present value than ginseng when its cashflow budget is extended to ginseng’s seven-year time scales. At the end of year seven, the net present value of elderberries is $12,206 compared to $6,485 for ginseng. Elderberry’s internal rate of return is 40% compared to ginseng’s 15%. When considering the additional risk of ginseng, the elderberry crop appears again to be the best choice. However it is important to note that the financial indicators are favourable for both crops. In addition both crops have low competition and high market demand.

For ginseng in particular, further research could be conducted in order to reduce risk. For instance, in order to reduce the risk of the ginseng planting, small and scalable test plots could be planted out in various locations in order to determine the viability of the investment. If growth is favourable, one could scale up with berries selected on site from the most productive plants. Also, at an economy of scale, if we were to acquire more forest land, ginseng grown at a larger scale and marketed at a higher cost per pound could potentially be more profitable than a scaled up elderberry crop. Marketing the ginseng to local buyers at an organic price premium as well as producing ginseng infused beverages could dramatically increase the profitability of the crop. Although the root is the most commonly sold component of the plant, some growers also sell seed. This can be done by designating a specific plot for seed and transplanting established roots. Within three years, the profit from seed will pay for the cost of planting the roots (Parsons et al. 2005). The seed can also be used to increase the ginseng patch size and to improve local genetics. Another benefit of this approach is that one can plant out test plots of roots in different sites and under both woods cultivated and wild simulated conditions in order to gauge the success throughout a woodlot. Acquiring funding through Sustainable Agriculture Research and Education could be one way to pay for the research and seed grow-out period of a ginseng enterprise. The research process could include planting roots and berries in multiple sites and soil conditions under varying cultivation practices in order to gauge the best cultural strategies in Western Oregon.

In terms of elderberries, by taking time to make personal connections with a series of wineries that are interested in purchasing direct, growing the regional recognition of our product, and marketing as organic certified, less risk and potentially higher profits would be achieved. In addition, as the years progress, two things could be done to improve the viability of this option: on-site production of honey would reduce our input costs and increasing syrup sales would emphasize the most profitable market chain of our business.

This financial and market analysis demonstrates that both American elderberry and American ginseng show promise as small-farm agroforestry crops in Western Oregon. As is often the case with agroforestry practices and specialty crops, actual production and marketing trials will be necessary to establish predictable economic outcomes for these crops. There are opportunities for the hard won successes and failures at the farm scale to be supported by research and development dollars at the regional scale. This support would further the introduction of these crops to this region while limiting the risk to the farmers who are pioneering these two practices.

References

Anderson, Roger C., et al. “The ecology and biology of Panax quinquefolium L.(Araliaceae) in Illinois.” American Midland Naturalist (1993): 357-372.

Cernusca, Mihaela M., Michael A. Gold, and Larry D. Godsey. “Using the Porter model to analyze the US elderberry industry.” Agroforestry systems 86.3 (2012): 365-377.

Chamberlain, J. L., et al. “Forest farming practices.” North American Agroforestry: An Integrated Science and Practice. American Society of Agronomy Inc., Madison, WI, USA (2009): 283-320.

Finn, Chad E., et al. “Evaluation of American (Sambucus canadensis) and European (S. nigra) elderberry genotypes grown in diverse environments and implications for cultivar development.” HortScience 43.5 (2008): 1385-1391.

Godsey, Larry D. Economic budgeting for agroforestry practices. University of Missouri Center for Agroforestry, 2008.

Gold, M. A., L. D. Godsey, and S. J. Josiah. “Markets and marketing strategies for agroforestry specialty products in North America.” Agroforestry Systems 61.1-3 (2004): 371-384.

Gold, M., M. Cernusca, and M. Hall. “Training manual for applied agroforestry practice.” Center for Agroforestry, University of Missouri 245 (2013).

Gold, Michael A., and Harold E. Garrett. “Agroforestry nomenclature, concepts, and practices.” North American Agroforestry: An Integrated Science and Practice 2nd edition northamericanag (2009): 45-56.

Gold, Michael A., Mihaela M. Cernusca, and Larry D. Godsey. “A competitive market analysis of the United States shiitake mushroom marketplace.” HortTechnology 18.3 (2008): 489-499.

Gold, Michael A., Mihaela M. Cernusca, and Larry D. Godsey. “Competitive market analysis: chestnut producers.” HortTechnology 16.2 (2006): 360-369.

Douglas, James Sholto, and RA de J. Hart. Forest farming. Towards a solution to problems of world hunger and conservation. No. Ed. 2. Intermediate Technology Publications, 1984.

Taylor, David A. Ginseng, the Divine Root: The Curious History of the Plant that Captivated the World. Algonquin Books, 2006.

Thomas, Andrew L., et al. “A comparison of fruit characteristics among diverse elderberry genotypes grown in Missouri and Oregon.” Journal of berry research 3.3 (2013): 159-168.

Thomas, Andrew L., Patrick L. Byers, and Mark R. Ellersieck. “Productivity and characteristics of American elderberry in response to various pruning methods.” HortScience 44.3 (2009): 671-677.

Way, R.D. “Elderberry culture in New York State.” NY State Agric. Exp. Sta., Geneva NY, Food Life Sci. Bull. No. 91. (1981).

Tables

Table 1.          Mean value of elderberry cultivars from two species (S. canadensis and

                         S. nigra) grown in Corvallis, OR, in 2004 and 2005 (Finn et al. 2008)

Table 2:         Viriditas Farm Elderberry Enterprise Budget

AMOUNT TIME INTERVAL AMOUNT TIME INTERVAL REVENUES VARIABLE CASH COSTS Cost Share Payments EQUIP Practice 422) $3,438 Year 0 1. Establishment Scionwood / Cuttings Sold – a. Site preparation (Tilling and bed shaping) $300 Year 0 Berries (syrup/winery sales) 11,000 Year 3 on b. Amendments Animal forage – Fertilizer $200 Year 0 Tours – Lime $200 Year 0 Rock Dust $200 Year 0 FIXED CASH COSTS c. Planting Property Tax $200 Year 1 on Seedlings (120 gallon plants) $382.00 Year 0 Insurance $200 Year 1 on Labor $360 Year 0 Interest Payments – Equipment – Leases – d. Irrigation infrastructure $1,000 Year 0 Management – f. Protection (livestock cross fencing) $800 Year 0 FIXED NON-CASH COSTS 2. Maintenance Depreciation – a. Fertilization $100 Year 1 on Land – b. Mowing – Year 1 on c. Weeding – Year 1 on VARIABLE NON-CASH COSTS d. Watering $300 Year 1 on Family Labor – e. Pruning – Year 1 on f. Labor (30 hours at $12/Hr) $360 Year 2 on 3. Harvesting a. Berries labor (40 Hours at $12/Hr) $480 Year 3 on 4. Processing a. Berries labor (80 Hours at $12/Hr) $960 Year 3 on b. Equipment (Freezer and Washing Station) $2,900 Year 0 c. Syrup ingredients $3,000 Year 3 on 5. Marketing a. Advertising $500 Year 3 on b. Packaging $1,800 Year 3 on c. Transportation $400 Year 3 on

Table 3:         Elderberry Cashflow Plan

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Revenues $10,000 $13,000 $13,000 Cost share Payments $3,438 Variable Costs -$4,200 -400 -$1,160 -$7,900 -$7,900 -$7,900 Fixed Costs -400 -$400 -$400 -$400 -$400 Net Income/loss -$762 -$800 -$1,560 $1,700 $4,700 $4,700 Payback period with Cost Share Payments -$762 -$1,562 -$3,122 -$544 $4,156 Payback period without Cost Share Payments -$4,200 -$5,000 -$6,560 -$4,860 -$160 $4,540

Table 4:         American Ginseng Enterprise Budget

AMOUNT INTERVAL AMOUNT INTERVAL REVENUES VARIABLE CASH COSTS Berries – 1. Establishment Roots $28,000 Year 7 a. Site preparation (120 hours at $12/Hr) $1,440 Year 0 Tours – b. Amendments Fertilizer – FIXED CASH COSTS Lime $200 Year 0-7 Property Tax $100 Year 1-7 Rock Dust $200 Year 0 Insurance $100 Year 1-7 c. Planting Interest Payments – Seed (24 pounds at $65/lb) $1,560.00 Year 0 Leases – Labor (20 Hours at $12/Hr) $240 Year 0 Management – Equipment – FIXED NON-CASH COSTS d. Irrigation infrastructure $500 Year 0 Depreciation – f. Protection (Deer fencing) $1,000 Year 0 Land – 2. Maintenance c. Weeding – Year 1-7 VARIABLE NON-CASH COSTS d. Watering $200 Year 1-7 Family Labor – f. Labor (30 hours at $12/Hr) $360 Year 2 on 3. Harvesting a. Berries labor – b. Roots labor (120 Hours at $12/Hr) $1,440 Year 7 4. Processing a. Roots labor (30 Hours at $12/Hr) $360 Year 7 b. Equipment (Drying racks) $600 Year 0 5. Marketing a. Advertising and Sales –

Table 5:         American Ginseng Cashflow Plan

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Revenues $28,000 Variable Costs -$5,760 -$400 -$760 -$760 -$760 -$760 -$760 -$2,560 Fixed Costs -$200 -$200 -$200 -$200 -$200 -$200 -$200 -$200 Net Income/loss -$5,960 -$600 -$960 -$960 -$960 -$960 -$960 $25,240 Payback period -$5,960 -$6,560 -$7,520 -$8,480 -$9,440 -$10,400 -$11,360 13,880