Market Economics of Ginseng
Since the similarities between American ginseng and Asian ginseng were discovered, the market for American ginseng has flourished. For almost 300 years, rural Americans have been selling ginseng roots. Rural communities in the United States have enjoyed tremendous economic benefits, as have Asian economies.
Each year, The U.S. Fish and Wildlife Service (USFWS) makes a declaration of what states can export wild and cultivated ginseng (USDA Foreign Agriculture Service 2001). In 2001, the USFWS found that 19 states could export wild ginseng without detriment to the survival of the species. Twenty-five states were approved for the export of cultivated ginseng. Most of the 25 states aproved to export wild ginseng are in the Appalachian region, but several northern states received also were approved. Based on data from the USFWS of wild ginseng harvested from 1978 through 1998, seven states account for approximately 82 percent of total harvest. Of those, West Virginia, Kentucky and Tennessee report the largest volumes, approximately 18, 16 and 14 percent, respectively. The others (i.e., Indiana, North Carolina, Ohio and Virginia) account for approximately 33 percent of the total reported harvest.
Although 62 countries have imported American ginseng since 1967, seven have accounted for 98.4 percent of the total. Southeast and East Asian countries have historically imported about 96 percent of all exports. Canada has imported 3 percent. Of the portion that has been exported to Southeast and East Asia, approximately 96 percent has gone to Hong Kong, mainland China, and Taiwan.
Of all American ginseng exported from the United States over the last 33 years, Hong Kong has been the major recipient, importing more than 82 percent. In general, the United States has experienced a steady upward trend in ginseng exports since the USDA Foreign Agriculture Service began tracking this commodity in the mid 1960s. The figure to the left illustrates the changes in total ginseng exports from 1967 through 2000. During the first 15 years of this period, total ginseng exports increased at an average annual rate of approximately 9 percent. Then, in 1983, exports began to increase dramatically, and through 1994 they increased at an average annual rate of more than 25 percent. Since 1994, however, exports have declined at an average annual rate of approximately 10 percent, ending the 20th century at a level below that recorded in 1987.
The volume of ginseng root exported in 1967 was below that recorded for 1900. Not until 1970 did total ginseng exports exceed the amount that was exported at the turn of the 20th century. From 1967 to 1982, total ginseng exports increased, from 146,000 pounds to 381,000 pounds. During the next 12 years, exports increased to approximately 2,372,700 pounds in 1994. From this boom year, exports have declined almost 50 percent to approximately 1,216,220 pounds of dry root.
Starting in 1983, ginseng export records were divided into two categories. The figure at right (Total volume of Cultivated and Wild Ginseng Exports) shows the trend in exports of cultivated and wild-harvest ginseng from 1983 through 2000. Although the trend has been progressively positive, annual changes have been large. During the period from 1983 through 1987, total ginseng exports increased more than 210 percent. Cultivated ginseng exports increased approximately 390 percent, while wild ginseng exports decreased almost 40 percent. Total exports dropped more than 22 percent in 1988, and although exports of cultivated root declined in that year, wild root exports increased by 38 percent. In 1989, total exports spiked almost 160 percent, but then declined 44 percent over the next 2 years. Starting in 1991, total ginseng exports increased approximately 40 percent over next 3 years. Since 1994, total ginseng exports have declined approximately 36 percent; exports of cultivated declined approximately 58 percent, while exports of wild ginseng increased approximately 33 percent. Relative to cultivated ginseng, exports of wild-harvested have been fairly steady over the last 17 years.
Although exports of wild ginseng appear fairly steady compared to cultivated ginseng, closer examination reveals volatility in wild exports as well. The figure above, Total Wild Ginseng Exports, illustrates the trend in wild ginseng exports from 1983 through 2000. Over the last 17 years, exports have grown more than 90 percent, but not without a great deal of annual variation. After realizing an 80 percent increase in 1984, exports declined more than 60 percent over the next 3 years. In 1987, exports of wild ginseng hit a low that would not be experienced for the rest of the century. The following year, exports rebounded approximately 100 percent, only to drop 35 percent through 1991. Exports of wild ginseng spiked in 1992, growing 68 percent from the previous year. Then, in 1993, they were below the volume recorded in 1983, and down 31 percent from the previous year. From 1993 through 1996, the export market for wild ginseng surged, growing more than 175 percent in three years. Unfortunately, the boom was short lived and exports declined more than 40 percent through 1998. The following 2 years, through 2000, showed a 30 percent growth in exports. Although exports of wild ginseng have been erratic over the last 17 years, in general they have increased at an average annual rate of approximately 10 percent. The final decade of the 20th century was a period of growth for wild ginseng exports, and if the trend persists ginseng exports will continue to increase.
American ginseng has been called "green gold" because of the incredible prices that people have been willing to pay for this valuable forest product. The average wholesale price for wild ginseng has experienced remarkable growth and volatility over the last 50 years. According to industry experts, prices averaged approximately $65 per pound of dry root through the 1950s. The following decade they increased more than 40 percent to approximately $93 per pound. Then in the 1970s, the average wholesale prices jumped drastically to approximately $210 per pound. The price remained fairly steady through the 1980s, averaging approximately $220 per pound during that decade. Wholesale prices for wild ginseng started the last decade of the 20th century around $260 per pound and climbed to approximately $300 per pound in 1994. The following year, average wholesale price increased more than 50 percent to approximately $455 per pound. Prices slowly decreased over the next 3 years to approximately $350 per pound in 1998. They climbed approximately 25 percent the following year, and have been in decline ever since. In 2001, the average wholesale price of wild ginseng lingered around $225 per pound, approximately what it was at the beginning of the last decade of the 20th century.
Although ginseng exports have been volatile over the last 33 years and declining over the last 6 years, they continue to provide significant economic benefits to rural America. From 1983 through 2000, the total amount of wild ginseng exported from the United States was approximately 3,992,870 pounds. Based on average wholesale prices for this period, the value of these exports to rural communities exceeded $1.29 billion. The average annual export of wild ginseng during this time was approximately 221,000 pounds, the sale of which generated an average of $71.7 million each year to rural communities. The indirect economic benefits to these communities far exceed this amount.
Closer examination of the value of total exports reveals significant changes in the markets for cultivated and wild ginseng. The total value of cultivated and wild ginseng for the 12 years beginning in 1989 exceeded $800 million. The export of cultivated ginseng comprised approximately 67 percent of the total value. During the first 3 years (1989-1992) of this period, total exports increase 42 percent. The total value of ginseng exports peaked in 1992 at approximately $104 million, and has been decreasing ever since. The average value of total ginseng exports during this period decreased approximately 3 percent annually. From 1992 through 1998, the value of total ginseng exports declined 67 percent to approximately $34.8 million. Since then, it has rebounded approximately 19 percent due to an increase in the value of wild ginseng.
The major reason behind the decline in value of total ginseng exports was a drastic reduction in the value of cultivated ginseng. Since 1992, the average value of cultivated ginseng exports has decline approximately 8 percent annually. When the market for ginseng began to decrease in 1992, the value of cultivated ginseng was approximately $80 million. By 2000, the value had dropped almost 80 percent to approximately $17 million. According to industry experts the average price of cultivated ginseng was approximately $45 per pound in 1992, but in 2000 it lingered around $10 per pound.
Conversely, the value of wild ginseng exports continued to increase until 1996, when it began a short-lived decline. During the period 1992-1996, when the value of cultivated ginseng was decreasing, the value of wild ginseng increased more than 30 percent. In 1996, the value of wild ginseng surpassed that of cultivated roots. Although it did not remain greater than cultivated ginseng the next 2 years, the value of wild ginseng surpassed cultivated in 1999 and remained greater in 2000. In 1998, the value of wild ginseng dropped to a level not realized since 1991, but it has rebounded, and over the last two year has increased approximately 77 percent. This increase in value is due, in part, to an increase in export volume.
Although the ginseng market is the largest for a medicinal NTFP, it is only one of literally hundreds of such products. Ginseng illustrates the volatility and overall growth trend for NTFP markets. Further, ginseng demonstrates the tremendous economic value of NTFPs. Data for other products and segments is severely lacking so further research is needed to define and determine the scope and scale of all NTFP market segments.
Encyclopedia ID: p1882
