Dan Shen (Salvia miltiorrhiza) is one of the commonly used traditional Chinese medicinal herbs in China. In the winter of 2022, as the new harvest season began, prices continued to rise. Entering the spring of 2023, the demand remains high, with the price of semi-fine quality Dan Shen from Linyi, Shandong reaching around 20 yuan, and fine quality reaching up to 23 yuan, an increase of 3-4 yuan compared to before the new harvest. Recently, suppliers have maintained firm pricing. As a short growth cycle herb, typically sown in spring and harvested in winter or the following spring, with the new harvest now concluded and supply clearer, what will be the future market trend for Dan Shen?
1. Recent Price Increases of Dan Shen: Multiple Influencing Factors
From the market performance in recent years, the current round of price increases for Dan Shen began with the new harvest in 2020. By the new harvest in 2021, the price of common quality reached around 10 yuan, and market prices for common quality rose to 11-12 yuan. Entering the new harvest in 2022, prices increased again, with common quality reaching around 16 yuan and semi-fine quality reaching around 18 yuan. This marked a near doubling of prices over two consecutive years, primarily due to reduced planting areas, decreased production, and weather conditions of “drought followed by flooding” affecting yields.
In March 2023, as the new harvest concluded and dry products entered the market, the purchasing season combined with continuous financial support saw the price of semi-fine quality rise to 20-22 yuan, while fine quality prices rose to between 23-25 yuan, setting a new historical high. Additionally, the quality varies significantly by region, with fine quality Dan Shen being particularly scarce.
2. Survey of Dan Shen New Harvest Conditions in Winter 2022 and Spring 2023
Due to factors such as planting area, crop rotation, and weather changes, the yield of Dan Shen can be highly uncertain. To further understand the new harvest conditions of Dan Shen in Shandong during the winter of 2022 and spring of 2023, I contacted several local farmers and merchants in the region, which consistently ranks first in national production. Below are the findings from my field investigations and feedback:
Dan Shen is grown from seedlings in one year and transplanted, with the new harvest occurring at the end of the same year after transplanting. However, the new products are not concentrated before the New Year, and peak market entry occurs after the New Year. Due to the low cost of cultivation and short growth cycle, one would expect an increase in planting enthusiasm among farmers given the continuous price rise of Dan Shen. However, this is not the case. Farmers report that the production cost of Dan Shen is around 10-12 yuan per kilogram. Based on an average yield of 300-350 kilograms of dry product per mu (approximately 0.067 hectares), the current price of common quality at 17-18 yuan yields a gross income of 5100-6300 yuan per mu. After deducting production costs, the net income is about 2000-2000+ yuan. In contrast, due to high prices of other crops and the continuously rising grain prices, income from wheat and corn alone can yield nearly 2500 yuan per mu. This clear economic benefit comparison has led to less enthusiasm for planting Dan Shen, and the impact of crop rotation on yield and quality is significant.
Moreover, without an increase in planting area in 2022, and with multiple regions experiencing “drought followed by flooding” weather conditions again last year, it is an undeniable fact that both single yield and total new product output have decreased.
Image: Dan Shen seedlings for sale in Juxian, Shandong in 2023.
3. Current Supply Situation of New and Old Dan Shen
The demand for Dan Shen is enormous, as it is one of the forty commonly used medicinal herbs. It is reported that the annual demand has reached as high as 20,000 tons. From the recent years’ supply-demand relationship, the total output after the new harvest in 2020 has been declining. In 2021-2022, the prices of grains and other economic crops, along with the impact of pandemic lockdowns and climate conditions in 2022, have significantly affected Dan Shen seedling production, planting, and yield. The largest production area in Shandong has seen a continuous decline in output for three years. The total new product output in Henan, Hebei, Shanxi, Shaanxi, Anhui, and Gansu has also continued to decrease, and inventory has indeed been greatly reduced in recent years. It is reported that most of the stock held by local farmers is sold as it is harvested, and merchants have little new stock left, with most remaining inventory being old stock from two to three years ago.
4. Current Market Conditions
Due to high prices and the traditional off-season for medicinal herbs, the purchasing intensity among merchants has weakened. Compared to the peak demand period, the external sales of stock have indeed decreased. It is considered that mainly medicinal units and long-term operators are purchasing based on need due to high prices, and some pharmaceutical companies have already completed part of their procurement, leading to a slowdown in stock movement and stabilizing the current market. Currently, the wholesale prices in the production area are approximately 18 yuan for common quality, 20 yuan for semi-fine quality, and 23 yuan for fine quality, while prices in Juxian are slightly lower. The market wholesale prices are between 20-22 yuan for semi-fine quality and 23-25 yuan for fine quality.
Image: Dan Shen produced in Juxian, Shandong.
5. Future Market Analysis
In summary, based on the production, storage, and sales situation, the negative factors from previous years have turned into positive ones in the past two years. The rigid market demand and cost factors will strongly support the price of Dan Shen. According to the analysis of various conditions from the production area and market, although the new harvest volume of Dan Shen in winter 2022 and spring 2023 continues to decrease, there will not be significant contradictions in supply and demand. The market has already experienced a rising phase, and it is expected that the price will have limited further increases in the short term. The future changes in the Dan Shen market will depend not only on demand but also on the actual market digestion.
Furthermore, the planting for Dan Shen in 2023 is basically concluded. The high prices have stimulated farmers’ enthusiasm for planting, and local merchants report that the planting area has generally increased compared to last year. By around July, the seedling period for Dan Shen will begin. The current prices will undoubtedly stimulate the desire for seedling cultivation among the public. The volume of goods available by the end of 2023 and in the spring of 2024, as well as the planting scale for next year, will directly impact the market trend for Dan Shen. Merchants should learn from history and pay attention to market rhythms.