Reductions in tobacco allotments have slashed production and income for Wisconsin tobacco farmers, and many are looking for alternative crops to replace tobacco. Echinacea (commonly known as the coneflower) has become a popular herbal supplement, and reports of high profits have some tobacco growers thinking about switching to Echinacea production. That could be a very risky switch, according to University of Wisconsin-Madison researchers.
Don Schuster, an outreach specialist at UW-Madison”s Center for Integrated Agricultural Systems and Rick Klemme, an agricultural economist and director of CIAS, analyzed the economics of Echinacea for a typical southern Wisconsin tobacco farm. Their conclusions: switching from tobacco to Echinacea could yield big profits for some growers. But there are also big risks and uncertainties, some of which growers won”t know until they harvest their first crop three years down the road.
Potential problems include fieldwork/harvest differences, marketing, and large price swings for Echinacea roots.
Growers will have no income for three years, until the Echinacea roots reach marketable size, but they”ll have plenty of field work. A 2-row tobacco planter, planting Echinacea plugs, will require four people on the planter, one person walking behind to check sets, and one person handling the plug trays. Echinacea for the herbal-supplement market must be grown organically. The researchers estimated 160 hours of hand-hoeing per acre over the three years. Washing and drying the roots will add 35 hours of labor per acre, and growers must build LP-heated drying boxes.
Considering equipment, labor, energy, interest, maintenance and marketing costs, Klemme and Schuster calculated break-even points for the three most popular Echinacea varieties: $6.57/lb. for E. purpurea, which yields about 1,000 pounds of dried roots per acre; $5.84/lb. for E. Angustifolia, 1,125 pounds per acre; and $3.65/lb. for E. pallida, 1,800 pounds per acre.
High prices for Echinacea root have grabbed growers” attention, but Echinacea lacks the supports that reduce price risk in tobacco, and you can expect sizable price swings. As one buyer noted to Schuster, “Angustifolia Echinacea is worth $17 a pound today but may only be worth $2 a pound tomorrow.” E. purpurea roots were worth about $2 a pound in early 1999, down from $10 just a year earlier. If you sold it at $2 a pound, you”d lose more than $4,500 per acre over the three-year cycle, according to the researchers” calculations. The market is still developing for E. pallida, a high-yielding variety that”s better suited for Wisconsin growing conditions, Schuster notes.
“I suspect that we”re talking about a market where relatively small changes in quantities supplied could lead to major changes in price,” Klemme says. According to James Quinn of The Thomas Jefferson Institute, “Two big tobacco growers in Wisconsin could cause the price of Echinacea to drop dramatically.”
Finding buyers could be another problem. “Between searching the internet and the Echinacea conference, I could find only six buyers in the whole United States,” Schuster adds. “There could be more but as a grower you have to find them and that could be difficult.”
Schuster suggests checking out markets six months before harvest, which may seem late since you”ve already put 2.5 years into the crop. “This is the earliest that a buyer is going to even start to talk to you. This market is very different than any other market that I have worked on.
“One big hurdle is the fact that a new grower has no history with the buyers,” he says. “Buyers want a sample of your product before they are willing to buy, so if your product is still in the ground it is going to be hard to give them the sample. Six months was a number that one of the buyers at the Echinacea seminar suggested to the group as a starting point for trying to sell your product. I feel that because of the above information, this would be the earliest that growers could get buyers for their produce.”
For a copy of the complete report or copies of Echinacea composite budgets, contact Don Schuster at CIAS, (608) 262-7879.