Farmmi, Inc. (FAMI): PESTLE Analysis [Nov-2025 Updated]

You're tracking Farmmi, Inc. (FAMI) and, honestly, the investment thesis right now hinges on a razor's edge: can the surging global demand for functional foods-think medicinal mushrooms-outrun the intense geopolitical and regulatory headwinds? The company is caught between a projected Chinese GDP growth of around 5.2% in 2025 and the constant threat of new tariffs and stricter NASDAQ scrutiny under the Holding Foreign Companies Accountable Act (HFCAA). It's less about their fungi products and more about navigating Washington and Beijing, so let's cut straight to the PESTLE analysis that maps these near-term risks to clear opportunities.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Political factors

You're operating a Chinese agricultural business, Farmmi, Inc., listed on a major U.S. exchange, which puts you squarely in the crosshairs of the two most volatile political forces in global finance: the U.S.-China trade war and the escalating regulatory crackdown on Chinese foreign listings. The political environment isn't just a backdrop; it's a direct, material risk to your revenue and your NASDAQ listing.

The near-term outlook is a fluid mix of temporary truces and permanent structural tension. You need to focus on mitigating trade tariff exposure and preparing for heightened U.S. regulatory compliance, defintely.

US-China trade relationship remains volatile, risking new tariffs on agricultural exports.

The U.S.-China trade relationship is still a tangled mess of overlapping duties and policy whipsaws, even with the recent trade truce in November 2025. While China agreed to suspend retaliatory tariffs on a 'vast swath' of U.S. agricultural products, the core U.S. tariffs on Chinese goods remain a significant cost burden for exporters like Farmmi, Inc.

Your products, as Chinese exports, are still subject to the U.S. Section 301 tariffs, which are at a rate of 7.5% or higher, plus the recently lowered 'fentanyl' tariff, which was reduced from 20% to 10% in late October 2025. This means your products face a cumulative tariff floor of at least 17.5% when entering the U.S. market. The risk here is that a minor diplomatic spat could instantly re-trigger the higher rates, or China could reinstate its own retaliatory tariffs, squeezing your export margins overnight.

• Monitor the 10% U.S. 'fentanyl' tariff for reinstatement to 20%.
• Diversify export revenue beyond the U.S. to mitigate trade war exposure.
• Maintain a strong cash reserve to absorb sudden tariff cost increases.

Chinese government prioritizes food security, potentially shifting domestic supply mandates.

China's government has elevated food security to a national security priority, a move that fundamentally shifts the focus of domestic agricultural policy. The 2025 'No. 1 Central Document' emphasizes boosting the domestic supply of staple crops-wheat, rice, corn, and soybeans-to ensure self-sufficiency. This is a massive policy push.

Here's the quick math: China's current Five-Year Agricultural Plan targets annual grain production exceeding 770 million tons and aims to increase domestic soybean production to 23 million tons by 2025. This intense focus on staple crops can indirectly disadvantage specialty agricultural companies like Farmmi, Inc. by diverting resources, subsidies, and prime farmland toward grain production. This could mean less government support for your edible fungi business, or increased competition for labor and logistics resources.

Export subsidies and tax rebates for specialty agricultural products are subject to change.

The central government is actively adjusting its export tax rebate policies, signaling a strategic pivot away from encouraging all forms of exports toward promoting higher-value, less polluting goods. While the policy changes in late 2024 and 2025 primarily targeted metals and energy-intensive products-eliminating rebates for aluminum and copper, and cutting the rate from 13% to 9% for 209 other products-the trend is clear. What this estimate hides is the political appetite to reduce all export support not deemed strategically crucial.

For Farmmi, Inc., which relies on competitive export pricing, this means the current export tax rebate status for your specialty agricultural products is under constant review. A reduction in your rebate rate, even by a few percentage points, would immediately erode your gross margin, which was already a thin $2.5 million on a revenue of $43.8 million for the trailing 12 months ending March 31, 2025. You need to model the impact of a potential 3-4 percentage point reduction in your current rebate rate.

Stricter scrutiny on NASDAQ-listed Chinese companies, increasing delisting risk.

The regulatory environment for Chinese companies listed on U.S. exchanges is the most hostile it has been in decades. Nasdaq proposed significant new listing rules in September 2025, raising the bar for Chinese issuers due to concerns over financial transparency and trading anomalies. This scrutiny is a direct threat to Farmmi, Inc.'s listing.

The primary risk remains the Holding Foreign Companies Accountable Act (HFCAA), which mandates delisting if the Public Company Accounting Oversight Board (PCAOB) cannot inspect the audit firm for two consecutive years. Furthermore, Nasdaq is specifically targeting smaller, less transparent issuers. Consider this: Chinese companies make up less than 10% of Nasdaq listings, but account for nearly 70% of referrals to the SEC and FINRA for trading issues. With a market capitalization of roughly $8 million and a trailing 12-month net loss of -$5.3 million as of March 31, 2025, Farmmi, Inc. is a micro-cap company that fits the profile of heightened regulatory concern.

Your action is clear: ensure your audit firm is fully compliant with PCAOB inspection requirements and prepare for the new, tougher disclosure standards, or seriously evaluate the cost-benefit of maintaining the U.S. listing.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Economic factors

China's Projected GDP Growth Supports Domestic Demand

You need to know how China's economy is actually performing, because that drives domestic demand for premium products like Farmmi's fungi. The good news is the economy showed resilience in the first half of 2025. In the second quarter of 2025, China's Gross Domestic Product (GDP) grew by a notable 5.2% year-on-year, slightly exceeding market expectations. This performance helps underpin the government's full-year growth target of around 5.0%.

This growth is crucial because it translates into stronger consumer spending, especially for non-essential, higher-value food items. Final consumption expenditure contributed 52% to GDP growth in the first half of 2025, making it the main driver. That's a clear signal: wealthier consumers are buying more, and Farmmi is positioned to capture that demand for its specialty agricultural products. Still, some major institutions like UBS and Morgan Stanley have revised their full-year 2025 forecasts to a more cautious 4.7% to 4.8%, which suggests a weaker second half is defintely possible.

Global Inflation Drives Up Input Costs for Cultivation and Logistics

The global inflationary environment is hitting your cost structure hard, even as commodity prices for some raw materials soften. For an agricultural company, the costs of farming and processing inputs remain stubbornly high. Total production expenses for the U.S. agricultural sector-a proxy for global pressure-are projected to hit a record $467 billion in 2025, an increase of nearly $12 billion from 2024.

Here's the quick math on key cost pressures you're facing in late 2025:

• Fertilizer: Prices are projected to rise by over 7% in 2025, according to World Bank forecasts, directly impacting cultivation costs.
• Interest: Elevated interest rates mean financing costs are up. Interest payments are forecast to reach $33.1 billion in 2025 for the U.S. farm sector, a 17.7% increase from 2023.
• Logistics: While energy prices are projected to decline by 17% in 2025, geopolitical tensions could quickly reverse this, keeping transportation and logistics costs volatile.

Currency Volatility (Yuan vs. US Dollar) Impacts Margins

Currency volatility is a double-edged sword for Farmmi, which reports in US Dollars but has significant operating costs in Chinese Yuan (CNY). As of May 23, 2025, the USD/CNY exchange rate was approximately 7.2886. The consensus among analysts is that the Yuan will continue to face depreciation pressure against a strong US Dollar through the end of 2025.

A weaker Yuan generally makes your exports cheaper and more competitive internationally, boosting reported US Dollar revenue. But, and this is the critical risk, it simultaneously raises the cost of any imported raw materials, equipment, or energy you rely on, squeezing profit margins. You need to be hedging this risk now. Some institutions, like UBS, anticipate the USD/CNY rate could reach 7.50 by June 2025, or even higher, depending on trade tensions and US policy.

Labor Market and Wage Pressure on Operations

While China's overall labor market shows signs of softness, with a reported wage growth slowdown to 3.9% year-on-year in Q2 2025, the pressure on the specific, non-glamorous labor required for farming and processing is still rising. This is a structural issue. Labor shortages are emerging in physically demanding industries like manufacturing, construction, and logistics, which means competition for your farm and processing workers is intensifying.

The government's push for social stability and higher living standards is reflected in minimum wage hikes. For example, Shanghai's monthly minimum wage rose to RMB 2,690 (approximately $370) as of February 2025. Even if Farmmi operates in lower-cost regions, this sets a rising floor for wages. Your labor expenses, which have surged by nearly 50% since 2020 in the broader agricultural sector, will continue to climb, forcing you to invest in automation or accept lower margins.

Next Step: Finance: Draft a 13-week cash view by Friday, stress-testing your profit margins against a USD/CNY rate of 7.50 and a 10% rise in fertilizer costs, to quantify your currency and inflation exposure.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Social factors

Strong global consumer trend toward functional foods, boosting demand for medicinal and edible mushrooms

You are operating in a market with a defintely powerful tailwind: the massive global shift toward functional foods. These are foods offering health benefits beyond basic nutrition, and edible fungi fit this trend perfectly. The global functional mushroom market is projected to reach $38.88 billion in 2025, growing at a Compound Annual Growth Rate (CAGR) of 8.80% through 2033. That's a huge addressable market for Farmmi, Inc.'s core products, which include varieties like Shiitake and Mu Er (Black Fungus).

The demand is driven by consumers seeking natural solutions for immunity, cognitive function, and stress reduction. For context, the entire global mushroom market, edible and medicinal, was valued at $68.03 billion in 2024 and is expected to grow at an 8.00% CAGR. Asia-Pacific is the largest regional market, accounting for a substantial share, which is a core advantage for a China-based company like Farmmi, Inc. The market is not just growing; it's accelerating.

• Demand for medicinal varieties like Reishi and Cordyceps is highest.
• Consumers want natural, plant-based options for health.
• Immunity and cognitive health are key purchase drivers.

Increased consumer focus on product traceability and 'clean label' sourcing from China

The sourcing origin for Farmmi, Inc.-China-presents both a massive opportunity and a critical social risk. Consumers globally, especially in key Western export markets, are demanding radical transparency, often referred to as 'clean label' sourcing. A global consumer trends survey in 2025 showed that 64% of Gen Z consumers actively look for clean-label claims like 'natural' and 'organic.' This generation is now surpassing 40% of global consumer spending in 2025, so their preferences are non-negotiable for future growth.

For a Chinese supplier, this means moving past a low-cost focus to a value-driven procurement strategy that emphasizes quality assurance and ethical practices. If Farmmi, Inc. can credibly prove the traceability of its fungi from cultivation to packaging, it can command a premium. This is no longer a niche preference; it's a strategic necessity to avoid being relegated to the low-margin bulk commodity segment. Quality control and inspections are expected at every step when sourcing from China in 2025.

Westernization of diets in China creates new domestic market opportunities for processed fungi snacks

The rapid Westernization of diets in China, fueled by urbanization and rising disposable incomes, is fundamentally changing domestic food consumption. This shift is characterized by a move away from traditional staples and a significant rise in demand for convenient, ready-to-eat products. The China snacks food market is a prime beneficiary of this trend, projected to be valued at US$ 131.10 Billion in 2024 and is on track to reach a staggering US$ 206.20 Billion by 2033, reflecting a CAGR of 5.16% from 2025.

This creates a clear opportunity for Farmmi, Inc. to diversify its product line beyond dried fungi into processed, convenient, and healthy fungi-based snacks. Younger urban consumers are increasingly seeking out international and novel snack varieties. By leveraging the natural health halo of mushrooms-high protein, low-calorie-and packaging them as convenient snacks, the company can tap into this high-growth domestic segment.

Aging populations in key markets increase demand for health-promoting, natural ingredients

The demographic reality of an aging global population is a powerful, long-term driver for Farmmi, Inc.'s products. The World Health Organization projects that 17% of the world's population will be 60 years of age or older by 2030. This cohort is actively seeking natural ingredients to support healthy aging and prevent age-related diseases.

The market for specialized products is already significant. The global market for Health Products for the Elderly is projected to reach an estimated $17,240 million by 2025. Furthermore, the global longevity ingredients market is expected to rise from $988.81 million in 2025. Edible and medicinal mushrooms, with their proven immunomodulatory and anti-inflammatory properties, are perfectly positioned to capture this demand in the form of supplements, extracts, and functional foods. The Asia Pacific region, where Farmmi, Inc. operates, is anticipated to witness the fastest growth in the anti-aging supplements industry.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Technological factors

Adoption of smart farming (Internet of Things) for fungi cultivation to boost yield and consistency

The fungi cultivation business is defintely moving toward precision agriculture, and Farmmi, Inc. must keep pace. The global market for Smart Mushroom Farming Solutions, which integrates Internet of Things (IoT) sensors and Artificial Intelligence (AI) for real-time climate control, is projected to be valued at approximately $1.5 billion in 2025. This market is growing fast, at a Compound Annual Growth Rate (CAGR) of 17.70% through 2032. This isn't just a trend; it's a direct path to better margins.

Studies show that using IoT-based cultivation systems provides a substantial increase in output. For example, one system demonstrated an average yield of 5.306 kg compared to 4.118 kg in traditional methods, a significant difference that impacts the bottom line. Farmmi, Inc.'s stated strategy of making strategic investments in agricultural technology is critical here, as smart systems can reduce the traditional 50-day mushroom production cycle to as little as 25 days by optimizing substrate and air circulation. The key action is to move beyond manual environmental control to AI-driven systems that ensure consistent quality for high-value products like shiitake and Mu Er mushrooms.

E-commerce and direct-to-consumer (DTC) platforms are crucial for expanding market reach beyond traditional distribution

Your ability to reach consumers directly through e-commerce and Direct-to-Consumer (DTC) channels is now a core technological competency, not just a sales channel. This is where Farmmi, Inc.'s recent logistics investments become a powerful technology enabler. The company's expansion of its U.S. warehousing footprint to a total of 640,000 square feet as of August 2025, including a new 183,000 square foot facility in New Jersey, directly supports this digital sales strategy.

This massive logistics build-out is essential for shortening delivery times and controlling costs, which is the only way to compete effectively in the US e-commerce market where mobile shopping optimization is a major consumer trend. Plus, the strategic cooperation agreement with Mazon Technology for warehousing and logistics services has the potential to generate $10 million in annual orders for Farmmi USA, which shows the real-world revenue opportunity in digitizing the supply chain. Simply put, the physical warehouse network is the engine for the digital storefront.

Advanced food processing and packaging technologies extend product shelf life and reduce waste

In the dried agricultural products sector, processing and packaging technology directly translates into reduced food loss and expanded market access. For a company focused on edible mushrooms, which are highly perishable, advanced drying and packaging are non-negotiable. The industry is seeing a major shift toward sustainable, eco-friendly, and recyclable packaging solutions, which also appeal to the growing consumer preference for organic products.

Here's the quick math on the opportunity:

Continuous investment in these areas is what protects your product quality through the expanded 640,000 square foot distribution network in the U.S.

Blockchain implementation could enhance supply chain transparency for international buyers

Supply chain transparency is no longer a nice-to-have; it's a requirement for major international buyers and increasingly conscious consumers. Blockchain technology provides a decentralized, immutable ledger that tracks a product from the farm to the fork. The global blockchain in agriculture and food market is a clear area of opportunity, valued at approximately $0.6 billion in 2025 and projected to grow at a staggering CAGR of 36.0%.

For Farmmi, Inc., which operates globally, distributing to North America, Japan, Europe, and the Middle East, this technology is a competitive advantage, especially for proving the provenance of specialty mushrooms. The focus is on product traceability, tracking, and visibility, which accounts for the largest market share by application. The benefits are clear:

• Builds Trust: Verifies origin and processing standards for international buyers.
• Reduces Risk: Enables rapid isolation of affected batches in case of a contamination incident.
• Streamlines Logistics: Integrates with IoT data to monitor storage and transportation conditions in real-time.

The Asia-Pacific region is experiencing the fastest growth in this market, which is a strong signal for a China-based company to lead the way in adoption. Finance: draft a proposal for a blockchain pilot project for high-value shiitake exports by the end of Q1 2026.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Legal factors

China's State Administration for Market Regulation (SAMR) enforces defintely stringent food safety standards.

You must recognize that compliance with China's domestic food safety regime is a moving target, especially for an agricultural products supplier like Farmmi, Inc. (FAMI). The State Administration for Market Regulation (SAMR) and the National Health Commission (NHC) are continually raising the bar, impacting everything from raw material sourcing to final product labeling.

A major development in the 2025 fiscal year is the release of several key revised National Food Safety Standards (GB standards). For instance, the revised National Food Safety Standard on Maximum Levels of Contaminants in Foods (GB 2762-2025) was jointly released on September 25, 2025, though its full enforcement is set for September 2, 2026. This new standard tightens the limits on contaminants generated during farming and processing, which is a direct operational risk for Farmmi, Inc.'s (FAMI) dried agricultural products.

Also, the revised labeling standards, including the General Standard for the Labeling of Prepackaged Foods (GB 7718-2025) and General Standard for the Nutrition Labeling of Prepackaged Foods (GB 28050-2025), were published on March 27, 2025. These mandate expanded nutrient declaration requirements, now including sugar and saturated fat as core items for mandatory disclosure. Farmmi, Inc. (FAMI) has a two-year transition period until March 16, 2027, but documentation updates must start now to avoid future stock write-offs.

US Food and Drug Administration (FDA) maintains high import inspection rates for Chinese food products.

Exporting to the US market carries a persistent and heightened regulatory risk due to the US Food and Drug Administration's (FDA) intense scrutiny of Chinese imports. The FDA does not inspect every shipment, but it uses a risk-based approach that results in a high refusal rate for products from China, including dried agricultural goods.

In March 2025 alone, the FDA refused multiple batches of Chinese food imports for reasons like 'filthy, decomposed, or otherwise unfit-for-consumption substances' and 'suspected pesticide residue.' This indicates that even minor lapses in quality control or documentation can lead to a costly import refusal. The financial impact is amplified by the FDA's fee structure for re-inspections: the fiscal year 2025 fee for foreign food facility re-inspections is assessed at $373 per hour if foreign travel is required.

The regulatory environment is becoming more adversarial, too. The FDA has indicated an intent to treat foreign firms, including those in China, more like domestic firms by conducting unannounced foreign inspections, a shift from the historical practice of announced visits. This means Farmmi, Inc.'s (FAMI) facilities must be audit-ready at all times. It's a simple cost-of-doing-business calculation: invest in continuous compliance or face significant seizure losses.

Compliance with the Holding Foreign Companies Accountable Act (HFCAA) remains an ongoing audit risk.

For Farmmi, Inc. (FAMI), as a US-listed Chinese company, the Holding Foreign Companies Accountable Act (HFCAA) is a critical, existential legal factor. While the Public Company Accounting Oversight Board (PCAOB) and Chinese regulators reached an agreement in August 2022 allowing for inspections, the risk of non-compliance and eventual delisting has not been eliminated, only deferred.

The core of the HFCAA is that if the PCAOB is unable to inspect or investigate the company's registered accounting firm completely for two consecutive years, the US Securities and Exchange Commission (SEC) is required to prohibit trading in the company's securities. The PCAOB successfully conducted inspections in 2022 and 2023, covering firms that audited 99% of the total market capitalization of US-listed Chinese companies by the end of 2023. The PCAOB continues to demand complete access and has explicitly stated that should Chinese authorities obstruct access 'in any way and at any point,' the Board will immediately consider issuing a new determination. This means the delisting risk, while currently low, can spike instantly based on geopolitical shifts or a negative PCAOB determination.

Here's the quick math: Delisting from the NASDAQ would effectively reduce Farmmi, Inc.'s (FAMI) access to global capital markets to zero, a major threat to its business continuity.

New international labeling and allergen declaration requirements demand constant product documentation updates.

The global trend toward consumer transparency and allergen safety is forcing a continuous, high-cost cycle of product documentation and label redesign. This isn't just a US or China issue; it's international.

Key 2025 requirements for a company like Farmmi, Inc. (FAMI) include:

• US Allergen Specificity: The FDA requires specific labeling for all major allergens. For example, rather than just listing 'tree nuts,' the label must specify the exact type (e.g., almonds, cashews).
• GCC Digital Menus: In the Gulf Cooperation Council (GCC) region, new regulations effective January 2025 require dining establishments to display allergen and calorie information on digital menus, impacting how Farmmi, Inc.'s (FAMI) products are presented in that supply chain.
• Global Warning Labels: Over 30 countries are set to implement or propose front-of-package warning labels for products high in sugar, fat, or sodium by 2025. While dried mushrooms are generally healthy, any processed or flavored products must be re-evaluated against these new nutritional thresholds.

The cost of non-compliance is high: a single labeling error can trigger an FDA import refusal (as seen in March 2025) or a costly product recall in a foreign market. You must budget for continuous regulatory monitoring and quality assurance staff to manage these defintely complex, ever-changing documentation requirements.

Farmmi, Inc. (FAMI) - PESTLE Analysis: Environmental factors

China's national push for sustainable agriculture and reduced chemical use in farming.

You need to recognize the Chinese government's aggressive shift toward green agriculture, which directly impacts Farmmi, Inc.'s sourcing and production costs. China has successfully moved past its initial goal, achieving a policy of zero growth in chemical pesticide use ahead of its 2020 target. The current focus, as outlined in the 14th Five-Year Plan (2021-2025), is on a plan to actively reduce and replace chemical fertilizers and pesticides.

This is not just a suggestion; it is a regulatory mandate. For crops like fungi, which are often grouped with vegetables and fruits in terms of sensitivity, the Ministry of Agriculture and Rural Affairs (MARA) has strengthened its framework. This includes mandating detailed pesticide usage records and prohibiting highly toxic chemicals. For instance, bans on pesticides like omethoate and carbofuran took effect in mid-2024, with a broader list of hazardous chemicals scheduled for elimination by 2026. This regulatory environment creates a clear opportunity for Farmmi, Inc. to brand its products as premium, low-chemical alternatives, but it also forces a rapid transition in sourcing practices.

The government is backing this transition, having approved five new biopesticides in October 2025 alone, demonstrating a commitment to providing greener alternatives. This is a defintely a tailwind for companies already focused on natural products.

Climate change variability (e.g., extreme weather) poses direct risks to fungi harvest yields and quality.

The core risk to any agricultural business like Farmmi, Inc. is the increasing volatility of the climate. Fungi cultivation is extremely sensitive to micro-environmental factors like temperature and moisture. Extreme weather events-heavy rainfall, prolonged droughts, and heat waves-are becoming more frequent and directly disrupt the delicate growth cycles of edible fungi.

For common cultivated species, such as the button mushroom (Agaricus bisporus), the optimal growth temperature is a narrow range, typically between 12°C and 18°C. A heatwave pushing temperatures above this threshold can lead to crop failure or significantly reduced yields and quality, forcing producers to invest heavily in climate-controlled environments. Furthermore, the shifts in temperature and humidity can create ideal conditions for pathotrophic (disease-causing) fungi, threatening the health of the crop. Climate models also indicate that for some valuable wild fungi species, habitat reduction is predicted by 2050, with precipitation and temperature being the most important influencing factors.

The unpredictability complicates production planning and increases the capital expenditure required for cooling and humidity control systems. This is a non-negotiable cost of doing business in 2025.

Increased pressure to reduce the carbon footprint of the international logistics supply chain.

The pressure to decarbonize the global supply chain is intensifying, driven by China's national climate goals. President Xi Jinping confirmed that China's updated 2025 Nationally Determined Contributions (NDCs) will encompass all economic sectors and greenhouse gases, not just carbon dioxide. This means the scrutiny on logistics emissions is high.

In November 2025, China's Ministry of Transport unveiled the 'International Green Logistics Corridors Cooperation Initiative,' focused on developing low-carbon transport solutions and near-zero carbon port infrastructure, such as the new Qingdao-Hamburg corridor. For a company exporting dried agricultural products, this translates into higher costs for compliant, green shipping options, but also a competitive edge for those who adopt them early.

Crucially, by the end of 2025, China plans to complete the first phase of its national Product Carbon Footprint (PCF) management system, which will include a carbon labeling certification. This will require detailed, verifiable data from Farmmi, Inc. on its entire value chain, from cultivation to final shipment. Here's the quick math on the logistics side:

Water usage and waste management in fungi processing plants face tighter local regulations.

Regulations governing water use and waste are becoming significantly stricter, impacting the operational expenditures of Farmmi, Inc.'s processing facilities. The national 'Regulations on Water Conservation,' which took effect on May 1, 2024, is the first national-level framework of its kind. This legislation sets water use quotas for industrial products and restricts water-intensive projects in water-stressed regions.

For industrial enterprises, a key target is to raise the recycling rate of water used by companies 'above a certain size' to 94% by 2025, an increase from the 92.5% rate recorded in 2020. The government is also pushing for a 16% reduction in industrial water use per 10,000 yuan of industry value added from the 2020 level. The food processing sector is specifically included in the push to achieve these new water efficiency standards.

This means that simply meeting wastewater discharge limits is no longer enough; the focus is now on water circularity and efficiency. The waste management aspect is also tightening, with a renewed focus on plastic regulations and hazardous waste controls. For Farmmi, Inc., this translates into a clear action item:

• Upgrade water recycling technology to meet the 94% industrial recycling rate target.
• Implement new processes to reduce water consumption per unit of processed fungi.
• Review packaging materials to comply with strengthening plastic regulations.

Finance: Budget for water efficiency technology upgrades by the end of Q1 2026.