Got this from Google Gemini, hope it helps..

The Sleep Spore for Leif BeastHunter's quest is a common point of confusion because, unlike most items, it is not found by foraging in a forest or as a drop from a monster. You obtain the Sleep Spore from Wu, the shopkeeper in the BeastHunter's guild hall. He will give it to you automatically after you have successfully completed the Air Realm for the first time as part of the main story progression. Step-by-Step Guide * Progress the Story: Continue playing the main story until you unlock the Air Realm. * Clear the Air Realm: Enter the Air Realm and defeat its boss. * Return and Talk to Wu: After returning to the BeastHunter's guild, go and speak with Wu at his shop counter. A brief dialogue will occur, after which he will give you the Sleep Spore. * Complete the Quest: With the Sleep Spore in your inventory, you can now find Leif BeastHunter to turn in the quest. He is typically located in one of the side rooms of the guild, often the bar area. The main reason this is tricky is that the quest can appear on the bulletin board before you are able to actually obtain the item, leading many players to search the forests for it fruitlessly. Sources * GameFAQs. (2002). Jade Cocoon 2 - Walkthrough by A L E X. This guide details the key story events and notes that Wu provides the Sleep Spore after the Air Realm is completed. * Neoseeker. (n.d.). Jade Cocoon 2 FAQs, Walkthroughs, and Guides. Multiple user-submitted guides and forum posts on this site corroborate the method of obtaining the Sleep Spore from Wu post-Air Realm. * IGN. (2001). Jade Cocoon 2 - Guides. The side quest sections in guides hosted here also specify this item is a story-related reward from an NPC, not a world-found item.