KENNETT SQUARE, Pa. — That “locally grown” produce for sale in your neighborhood grocery store?

It may have started its life up to 6,000 miles away.

And that irks Gary Schroeder, who has been growing and packing specialty mushrooms for nearly 40 years in the so-called Mushroom Capital of the World, Kennett Square. Schroeder’s Oakshire Mushroom Farms had annual sales of $37 million in 2017 and employed 65 people last year.

In early January, Schroeder’s farm was forced to slash the workforce to 16, and file for bankruptcy.

“We’ve got ourselves in crisis mode,” said Schroeder, who founded Oakshire in the mid-1980s and is now laboring under more than $10 million in debt, according to documents filed in court. “I’m fighting a battle to save this company every day.”

Schroeder, and several other mushroom producers in southeastern Pennsylvania, say they have been clobbered by imports from Canada and China.

To add insult to injury, the farmers say, mushrooms that originated in China are allowed to be labeled “Product of the USA” due to a regulatory quirk.

Schroeder’s business last year was dealt a couple of near-fatal blows. First, he lost his biggest customer, Costco. The warehouse market chain, he said, switched to packaged mushrooms from Canada because the stronger U.S. dollar made it cheaper.

But Schroeder and other producers said it’s shiitake mushrooms that start their journey in China that hurt them the most.

Shiitake mushrooms are grown on logs made from compressed sawdust and grain. Each log produces about 2.5 pounds of shiitakes.

Shiitakes are a specialty mushroom, and for years they have fetched a premium at food markets, retailing for about $10 a pound. They’re chewier and more flavorful than standard white button, brown crimini and portabello mushrooms.

Last year, there were about $45 million in wholesale shiitake sales industrywide.

Shroeder’s Oakshire Farm is also one of a handful of American companies that produce the logs on which shiitakes are grown.

The logs, made from compressed sawdust and grain, are inoculated with shiitake mushroom spawn – the fungi equivalent of seed. The spawn sends out the threadlike mycelium, which spreads through the logs and becomes the bulk of the mushroom organism. When the shiitake mycelium is shocked – when it senses it’s going to die – it sends out fruiting bodies that we recognize as mushrooms. Each log produces about 2.5 pounds of shiitakes.

Until mid-2018, Schroeder was manufacturing 1.5 million of them a year. No longer.

In the course of nine months last year, Schroeder said, Chinese log manufacturers swept in, deeply undercut the prices, and wiped out 85 percent of his log sales. “There was just no chance to adjust,” Schroeder said. “We didn’t see it coming.”

Logs in China are made of Chinese sawdust and grain, inoculated with Chinese spawn, and loaded onto container vessels for a six- to eight-week trans-Pacific voyage. When the logs arrive in the U.S., they’re distributed across the country. Many of them end up in Kennett Square mushroom grow houses.

“In a week to 10 days, the mushrooms are picked and the logs get thrown away,” said Caputo, who called the mushrooms grown on Chinese logs “inferior.”

Because these mushrooms are harvested in the United States, they meet the USDA’s country-of-origin labeling requirement.

“They’re clearly not U.S. grown,” said Daniel J. Royse, professor emeritus at Penn State who specializes in mushrooms

“We believe the Chinese are skirting the law,” Schroeder said. “But the USDA and the U.S. Customs folks say it doesn’t rise to a level deserving their attention.”

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