China Consumer

The world’s costliest herb?

Demand for Tibetan herb drives price above gold

The world’s costliest herb?

Health is the greatest possession” wrote Lao Tzu, founding philosopher of Taoism and author of Tao Te Ching (‘The Book of the Way’) and a belief in herbal remedies has always been prominent in Chinese philosophies of the body and mind.

One such remedy – cordyceps – also has a long history of pharmacological importance and is believed by many Chinese to be one of the most potent herbs available.

But lately it has been Chinese investors who have shown greatest appetite for cordyceps in an effort to reinvigorate their investment returns.

Derived from a genus of mushroom found in the mountains of Tibet, the herb is the result of a parasitic relationship between the fungus and the larvae of the ghost moth. Discovered by herdsmen who observed that livestock seemed to become more energetic after grazing on the plant, cordyceps consumption is said to strengthen bone marrow and the immune system, counter lung disease and help with sexual dysfunction.

Largely unknown in the West, Chinese consumers value the traditional remedy as a premium health product (see WiC39).

But its reputation as a medicinal and culinary status symbol is forcing prices to new heights. The market price for cordyceps (known in Chinese as dongchong xiacao) now exceeds that paid for gold, reports China Youth Daily.

In 2005 the cordyceps fungus was being sold in shops for prices equivalent to Rmb60,000 per kilogram. This year the same amount could cost you Rmb600,000, which equates to $2,963 per troy ounce (gold is currently selling for $1,757 a troy ounce). Demand from China’s new super-rich partly explains the price increases.

However, there’s also an element of speculation. With property investment steadily losing its status as a sure thing, investors have been forced to be more creative with their money. Alternative assets such as Chinese art, liquor and traditional medicine have also come in for new attention.

Of course, WiC has also written previously about sudden price surges in foodstuffs and how speculators often seem to be involved. Big profits have been made in garlic (WiC89), cotton (WiC84) and even cabbage (WiC105).

Many of these speculative booms have proved to be shortlived, and soon subside when supply and demand dynamics adjust. Last year, the cordycep crop fell slightly in volume terms, with supply from Qinghai province taking time to recover from disruption resulting from the Yushu earthquake in 2010.

But longer term, environmental campaigners warn that the cordyceps harvest isn’t a sustainable one. Collectors need to dig out a small square to gather each specimen of plant. Many haven’t been bothering to refill their holes, leaving little chance for the grassland to restore itself naturally. The concern is that the natural habitat for the plant is being eroded.

If the market for cordyceps collapses, the consequences are likely to be felt outside investor circles. Over the years, larger swathes of rural Tibet have become more dependent on harvesting the herbal remedy as a source of income. Daniel Winkler, an expert in Tibetan ecology, estimates that 60% of rural Tibetans participate in the fungal quest, and that the cordyceps crop can generate as much as 40% of their cash incomes, increasing to 70-90% in prime production areas.

In 2010 sales represented 8.5% of Tibetan GDP.

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