A newly published study from the Business and Economic Research Center at MTSU examines the growing international agribusiness sector of ginseng in Tennessee.
Murat Arik, Ph.D., director of the BERC, led the development of a pilot study to explore global supply chain dynamics for American ginseng. International demand is on the rise for wild simulated American ginseng — especially in China and South Korea — as climate conditions in parts of the United States allow for the cultivation of a suitable alternative to the endangered wild American ginseng.
“The U.S. does not have well-established quality sorting processes, which is where the majority of value is found. For this reason, Hong Kong and other countries exporting U.S.-harvested American ginseng absorb large proportions of the value-creating activities,” stated Arik.
Asian markets have set the price as high as $8,090 per pound for wild American ginseng, with American wholesalers receiving only $1,633 per pound.
The study further examines existing issues to help provide U.S. growers with methods to capture more market share. Research findings indicate Tennessee’s economy has the opportunity to achieve market share by supporting investments in the cultivations and exportation of American ginseng. As of now, Tennessee does not partake in large agricultural ginseng operations.
“The price of ginseng is on the rise because less volume is being circulated while the demand is increasing on the global stage,” Arik said.
The supply path in 2015 for wild American ginseng went from the U.S. to Hong Kong for distribution in the Chinese market. The price points for these stages were: $270 per pound for American farmers; $1,633 per pound for wholesalers in Hong Kong; and $5,376 per pound for retailers/consumers in Asia. The price points found in the research reveal market inefficiencies that short domestic suppliers.
The study established three price scenarios Tennessee growers could potentially face in the market for American ginseng: the average export price, wholesale price, and direct access price. Each of these price points are associated with greater levels of investment into market processes, such as grading and sorting.
The BERC study found that, even without exploiting current market inefficiencies, simply encouraging local cultivation could generate $32.5 million in net annual income. The total economic impact could reach $87.3 million. Supporting the development of quality sorting and establishing connections in the Asian consumer market (the wholesale and direct access price scenarios) could bring in a respective net annual contribution to local economies of $301.3 million and $1.4 billion with a total economic impact to business revenues of $528 million and $1.74 billion.
The study by Arik, “Implications of Changing Supply Chain Dynamics of Global Ginseng Trade: A Pilot Study,” is co-authored by Iris Gao, Ph.D., director of the International Ginseng Institute at MTSU and Bronwyn Graves, a BERC graduate research assistant and Ph.D. candidate at MTSU. The article is published in The Journal of Strategic Innovation and Sustainability.
For more information about MTSU’s Business and Economic Research Center, visit www.mtsu.edu/berc.
— Brian Delaney (Brian.Delaney@mtsu.edu)