Supply Chain Update - July 2024
Return to China: A Reflection on Change and Progress
It has been five long years since our last annual trip to China, where we visit our Hebei Meiwei herb factory, various suppliers, and friends. In June, we were finally able to go again, and it was a pleasure to see the considerable progress in factory upgrades and new workshops. Most importantly, we were grateful to find that all the familiar faces were still there, and no one was greatly affected by COVID.
The cities we visited have changed dramatically over the past five years. When we first invested in Hebei Meiwei in Anguo in 1993, the town had unpaved roads, just one stoplight and no streetlights. Over the years, we saw gradual improvements, but now Anguo has transformed into a bustling city with high-rise apartments, shopping malls, and tourist destinations.
Gone are the days of two-lane roads shared with donkey carts and tractors. Anguo now boasts a four-lane freeway connector that reduces the drive to Beijing from four-plus hours to just under three. Additionally, there is already a high-speed train to the nearby city of Baoding, which takes only 42 minutes to reach central Beijing. Excitingly, a new stop in Anguo will be added next year, making the journey to Beijing just about an hour long.
With all this progress however, at its heart Anguo is still a city that is all about herbs. Even the weeds on the side of the road are Ma Chi Xian/ Portulaca oleracea herb 馬齒莧! During our trip, we observed profound transformations in the herb industry, notably driven by an influx of non-traditional speculator-investors. I have mentioned this unfortunate trend in previous newsletters, but to reiterate: these speculators are not knowledgeable about herbs or previously part of our industry, but are speculators who purchase herbs with the aim of holding them for future sales at higher prices, altering traditional market dynamics previously centered around harvest seasons.
The surge in huge cold storage facilities in Anguo, largely supported by these investors, are physical manifestations of this significant shift. Properly stored in these facilities, most herbs can maintain their quality for at least a year or two, although concerns remain about how this storage method impacts the eventual quality since some have held on to herbs since before the pandemic, resulting in nuanced quality and energetics of the herbs themselves. For instance, Fang Feng / Saposhnikovia divaricata root 防風 tends to darken and degrade under prolonged cold conditions, often requiring sulfur treatment to maintain appearance. How much the degradation and then aesthetic cover up affects treatment efficacy is anyone’s guess. Legitimate herb companies like us continue to buy fresh herbs during harvest season but have been pushed to consider also using cold storage to enable bulk purchasing in order to stabilize prices amidst weather-related crop yield fluctuations. Check out our previous newsletters and podcasts to learn more about how climate change affects herb availability and prices.
Our visits to herb markets in Anguo also revealed a notable increase in herb grading complexity. Where there were once 2-3 grades, we now encounter five grades of Yuan Zhi/ Polygala tenuifolia root 遠志 and ten grades of Dan Shen/ Salvia miltiorrhiza root 丹參. This grading system reflects broader trends of price sensitivity in the marketplace, and more significantly, the mixing of Chinese Pharmacopoeia-compliant herbs with lower-grade alternatives. Although this is strictly prohibited, the difficulty of inspecting tens of thousands of small vendors across the country has resulted in a dearth of non-medicinal grade herbs being sold domestically and in international markets.
Market Trends—Some facts and figures
As of July 9, 2024, the Comprehensive Chinese Medicinal Materials 200 Index* closed at 3564 points. It peaked at 3604 points on August 8, 2023, showing a 35% increase from the previous year. Its lowest point was 2832 points on January 1, 2023, marking a significant swing of 27%.
Data from the Zhongkang Yunling Chinese Medicine Big Data Center indicates that in 2023, select herb varieties saw remarkable price surges: 5 varieties experienced increases exceeding 200%, while 73 varieties recorded increases surpassing 100%, underscoring volatility within the market.
Daily fluctuations continue to challenge herb pricing predictability. Suan Zao Ren/ Ziziphus jujube seed 酸棗仁 prices exemplify this volatility.
Significant Price Increases: 2023 to 2024
| Bai zhu/ Atractylodes macrocephala root 白朮 | 454% |
| Pang Da Hai/ Sterculia lychnophora seed 胖大海 | 160% |
| Yuan zhi/ Polygala tenuifolia root 遠志 | 133% |
| Mai men dong/ Ophiopogon japonicus tuber 麥門冬 | 133% |
| Huang qin/ Scutellaria baicalensis root 黃芩 | 123% |
Di Dao Herbs and Quality Concerns
Changes in sourcing and growing practices impact the quality of Di Dao herbs, driven by cost considerations. We have noticed that each edition of the Chinese Pharmacopoeia has expanded the growing range of many herbs, and there is really no alternative to this trend, since there is just too much demand. There are also instances where new species for a particular herb have also been adopted. While herbs meeting Chinese Pharmacopoeia (CP) standards are deemed legal, questions persist regarding whether meeting these standards alone guarantees medicinal efficacy. Some illegal practices, like substituting orange or lemon peel for Chen Pi/ Citrus reticulata peel 陳皮, meet CP active ingredient testing requirements but raise doubts about therapeutic value without further scientific scrutiny. Amidst these uncertainties, sourcing from trusted suppliers remains paramount.
The TCM herb industry faces additional challenges, including adapting to evolving US pesticide regulations. Differences in allowable pesticide use between the two countries have primarily led to supply disruptions, resulting in stock shortages.
As the industry continues to navigate these changes, strategic investments in herb farms by larger manufacturers aim to stabilize prices and quality, potentially mitigating future supply chain disruptions. Most large TCM manufacturers in China now either administer their own herb plantations or have cooperative agreements with local authorities to conduct GAP growing sites. It is especially important for those factories with medicines covered by national health insurance and prescribed in hospitals to ensure that their drugs are available; they risk losing their covered medicine status as well as being fined.
This evolving landscape underscores the importance of transparency and reliability in herb sourcing practices, ensuring continued quality and efficacy in traditional Chinese medicine. Mayway turns 55 this year, and our deep commitment to quality ensures that we select only the highest-grade Chinese Pharmacopoeia species, unsulfured herbs for our Plum Flower line. You can trust that our commitment to quality is more than just a concept or promise; it's an ideal shared by everyone involved in creating our products. This dedication is backed by rigorous testing and meticulous, sometimes unique, processing methods.
* The Comprehensive Chinese Medicinal Materials 200 Index (CCMM 200 Index) is a financial index that tracks the performance of 200 key Chinese medicinal materials. These materials include various herbs and ingredients used in traditional Chinese medicine (TCM). The index provides a benchmark for assessing the overall market trends and price movements within the Chinese herbal industry. It is used by stakeholders such as investors, traders, and industry analysts to monitor the health and fluctuations of the market for Chinese herbal medicine materials.
Source: zyctd.com
