Mushrooms are a relatively small US agricultural crop, with total production of about $1.2 billion in the 2017-2018 growing year. But they do illustrate some economic lessons, including how a local area that develops a specialization in a certain product can be hard to dislodge, and how the rise of China is reshaping global production in so many ways.
US mushroom production has for a long time been very geographically concentrated. The town of Kennett Square in southeastern Pennsylvania bills itself as the Mushroom Capital of the World, because about half of all US mushroom production happens in the surrounding area of Chester County.
The story here goes back to 1885, and to a florist named William Swayne who lived in Kennett Square. Swayne grew a lot of carnations, which required raised beds. He pondered whether it might be possible to grow a cash crop in the space under those raised beds. Mushrooms had been domesticated in France and England in the middle of the 19th century. Swayne sent away to England for mushroom spores and began growing them. The demand was high enough that he built a “mushroom house,” an enclosed building designed to grow only mushrooms. Other local farmers took note, and the Mushroom Capital of the World became established.
From an economic point of view, an obvious question is why mushroom production remains so concentrated in Chester County more than 120 years later. After all, the basic materials for growing mushrooms like compost from vegetative material (like straw and hay), along with animal manure, are not hard to find. The climate of southeastern Pennsylvania provides a usefully cool ground temperature in fall, winter, and spring, but there are many other locations with similar temperatures.
Although I do not know of a systematic study of mushroom technology, there are some obvious hypotheses as to why mushroom growing has stayed so geographically concentrated. Many types of production look fairly easy from the outside. But when it comes to large-scale commercial production that covers costs and makes a profit, it seems likely that growing mushrooms commercially requires detailed skill and knowledge that spreads among the workers and producers in a geographically close community–in much the same way that software developers flourish in the area around Silicon Valley. In addition to a local labor force with crop-specific skills, local producers build up a chain of processors, wholesalers, national distribution networks, and retailers that is not quickly duplicated. The producers around Kennett Square have shown an ability to dramatically increase production over time: for example, back in 1967 the total US production of mushrooms was 157 million pounds, with 57% coming from Pennsylvania mushroom farmers; total production of about $1.2 billion in the 2017-2018 growing year. Finally, the relatively small size of the mushroom market can limit the incentives for new competitors to make substantial investments in trying to take over this market.
