Welcome to part 3 of the three-part series and thank you for your interest.
In today’s article, I will compare both cultivation methods on the economic level because at the end of the day you as a mushroom farmer want to live from what you are doing. To do so you must know is something worth doing it or not.
Before I do that let’s have a quick look at the different cultivation methods (Table 1). With the help of table 1, we can identify four main differences.
- Indoor vs. outdoor
- Bag vs. no bag
- Growing cycle
Table 1: Commonly used shiitake cultivation processes
According to table 1, the spawn is introduced in the log cultivation at local points were as in bag cultivation you can choose if you only want to spawn locally or mix it. While mixing the spawn after the inoculation helps to speed up the growing cycle it also means another step to do and hence means more time is needed which in the end means losing your money.
The more obvious difference is where the fruiting is happening. While for log cultivation the fruiting is happening in nature most of the bag cultivation is happening indoors. This difference alone affects the production a lot. This is due to the fact that with almost no structure around your logs you have almost no control over the environment in which your logs are in. Your production, therefore, is practically 100% dependent on nature.
If you cultivate your mushrooms instead inside. Then you have 100% control over the environment your bags are in which gives you the ability to adjust according to the needs of your mushrooms.
The third difference again has an influence on your production because without a cover around your substrate you have little control over it be it contamination or humidity.
The last aspect is a big one. The time to harvest since inoculation affects directly the number of harvests you will have during one season. While for log cultivation it is typically three to four times with bag cultivation you can harvest if set up properly almost every day.
Now let’s crunch some numbers. I found an interesting article in which they put together all the costs and income for log cultivation (Table 2). The only difference between the table in this article and mine is that I added an additional line at the end of the calculation. Which for me makes the difference more obvious. But that is for later.
Table 2: Scenario of a Large Commercial Production
To compare both cultivation methods we have to somehow standardize the yield. To do so I made the following assumptions.
Average yield per log: 0.44 pound
Average yield per bag: 1.00 pound
Average selling price: $10/pound
Labor cost: $10/h
If I take these assumptions and put them into a spreadsheet, I end up with the results shown in table 3. Let’s compare these results with table 2.
Table 3: Scenario of a Small Commercial Production
The first thing that stands out is that the number of logs needed to run the farm translate only to about 410 lb per month in yield. While the number of logs needed to achieve this amount of yield is considered already a large mushroom farm for bag cultivation it is more of a small size mushroom farm.
The next thing which is different is the time of the first harvest. While with log cultivation we have to wait until the second year we can harvest using the bag cultivation method right away in our first year of production.
More importantly, the maximum yield per log is reached only after 5 years while with bags we get the maximum yield in each and every year.
If we move to the expenses, we see that starting log cultivation is way cheaper than bag cultivation. In this example, we need a total of $3,043 to start our log cultivation and $7,982 for our bag cultivation.
Next up are our labor costs. Here we spend $2,564 per year with log cultivation and $1,917 per year with bag cultivation. But these are only the labor costs for the start-up.
The labor costs to run the farms are $16,130 with log cultivation and $7,124 with bag cultivation.
The last section I want to compare is the sales part. As clearly seen in table 2 the sales for log cultivation increases every year. Especially in the fourth year through the introduction of value-added products like for example dried mushrooms.
Because I didn’t know what they used to calculate the sales for their value-added numbers I didn’t put it into the bag cultivation farm. But still, without this additional income, we got $24,573 with our farm in comparison to $25,516 which is not bad at all.
And here starts the interesting part. As already mentioned, the main problems with log cultivation are 1) lower productivity and 2) higher labor costs.
These two points alone are leading to almost the same result when log cultivation and bag cultivation is compared.
But, big BUT actually, if we compare the profit and loss statement of our two farms, we see that with a log cultivation farm we get a positive income only in the fourth year while for the bag cultivation farm we reach this point already during the year (Figure 1).
Figure 1: Profitability of Log Cultivation and Bag Cultivation
But that is not all. The main difference with both cultivations is the fact that if we use log cultivation, we don’t reach the break-even point (BEP) within the first six years (Figure 2). For the bag cultivation the BEP is reached after five years.
Figure 2: Profitability of Log Cultivation and Bag Cultivation (cumulated)
If we think these numbers through, we will conclude that log cultivation is not the best option for a mushroom farmer. Especially, because log cultivation isn’t that scalable while we still have room with our bag cultivation.
To make this point more visible I adjusted our bag cultivation farm accordingly to the labor cost of the log cultivation farm instead of the yield. To so I calculated the time for each step and then calculated the number of bags produced in that time.
I then entered this number into my spreadsheet and get the following results (Table 4). If my assumptions are correct than the bag cultivation has the potential to bring in sales of around $63,833 per year with the same amount of time spend on the farm at a profit of $3,944 in the first year and $2,491 in average.
Table 4: Scenario of a Medium Commercial Production
In addition to that potential of bag cultivation, bag cultivation has another advantage over log cultivation. Due to the higher-margin bag cultivators can lower their price and still be profitable. At this low price point, log cultivators cannot sustain very long.
Here helps the only thing your marketing and sales strategy as a log cultivator. You must position yourself as part of the sustainable forest management strategy. On the other hand, bag cultivators can position themselves as someone who uses agricultural waste and turn it into products.
When it comes to position yourself there is no right or wrong just something which works for your business or not. And you can position yourself how ever you want but at the end of the day your farm must be profitable. Because if it doesn’t the burden will be on you and your family.
If this was your first article you read from the three-part series and if you want to learn more about how the two cultivation methods differ in their processes than I recommend that you read my other two articles. Both articles will explain in detail each step starting with the substrate and ending with harvesting.
 BE 100%
 Bag cultivation
 Own table in based on table 1
 Own table in based on table 1