U.S. Honey Markets: Recent Changes and Historical Perspective

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1 U.S. Honey Markets: Recent Changes and Historical Perspective by STAN DABERKOW 1, RANDAL RUCKER 2, WALTER THURMAN 3, and MICHAEL BURGETT 4 1 Daberkow and Associates, University Park, MD. 2 Professor, Department of Agricultural Economics and Economics, Montana State University, Bozeman, MT Professor, Department of Agricultural Economics, North Carolina State University, Raleigh, NC Emeritus Professor of Entomology, Department of Horticulture, Oregon State University, Corvallis, OR The authors thank Fritz Baird for valuable research assistance. Introduction The U.S. beekeeping industry depends on two main sources of revenue: honey and crop pollination. The relative importance of the two varies both geographically and over time as a result of such factors as increased honey imports, growth in demand for domestic pollination services, and changes in public policies affecting beekeepers. The present article is the first of two whose objective is to provide data and insights into recent changes in honey and pollination markets, and to put those changes in historical perspective. This first article discusses structural changes in the U.S. beekeeping industry and how they relate to changes in colony numbers, honey yields, production, trade, and prices. The second article will focus on changes in pollination markets. Changes in the Structure of the U.S. Beekeeping Industry Figure 1, discussed in detail below, displays the USDA s count of honey bee colonies over time. It indicates a substantial decline since the peak of nearly six million colonies post World War II, as well as more recent declines in the past two decades. Do the declines have dire implications for commercial honey production and pollination markets? A recent analysis by Daberkow et al. (2009) provides considerable detail on the nature of the changes in beekeeping operations based on information contained in the Agricultural Censuses from Table 1 presents relevant information synthesized from that report. The data in the table are broken down into three size categories for beekeeping operations less than 25 colonies for hobbyists, colonies for part-time beekeepers, and 300+ colonies for full time commercial beekeeping operations. The top four rows of Table 1 indicate that the total number of beekeeping operations in the United States has fallen by almost 70 percent, just since Although the number of operations in each of the three size categories has fallen, by far the largest absolute and proportionate reduction has been in the number of operations with less than 25 colonies (hobbyists). The next four rows provide information on changes in numbers of colonies by each of the three size categories. The total number of colonies has fallen by about 20 percent. Whereas the absolute reductions in colonies are roughly comparable across the three size classes, the proportionate reductions in the number of colonies on hobbyist and part-time operations are much larger than for commercial operations. Perhaps the most important change seen in Table 1 is that the percentage of all colonies in commercial operations has increased from 77.4 percent to 87.7 percent. While the numbers of beekeeping operations and colonies have dropped fairly dramatically over time, an increasing proportion of the remaining colonies are in operations focused on honey production and the provision of pollination services. The biggest reduction has been in the number of hobby beekeepers a change possibly attributable to the advent of two important honey bee mite parasites, Acarapis woodi and Varroa destructor, in the midto late-1980s. Control of these parasites has made beekeeping more costly, both in terms of direct dollar costs and in terms of the time required to understand and successfully manage beehives. The increased time investment required to manage colonies has apparently driven away a high proportion of the small hobbyists. The 2002 structure December

2 Table 1. Changes in the Size Distribution of U.S. Beekeeping Operations: * * Source: The numbers in this table are taken directly, or are calculated from, Daberkow, et al., of the industry is succinctly summarized by observing that, according to data from the Agricultural Census, almost 90 percent of the honey bee colonies in the United States are held by about 1,400 commercial beekeeping operations. U.S. Colony Numbers Annual estimates of national colony inventories can be obtained from surveys of honey producers conducted by the U.S. Department of Agriculture. Figure 1 provides a long-term perspective on these numbers from 1940 to the present. 5 Several features of these data are notable. First, there has 5 Detailed information on the data sources used for figures 1 5 is available from the authors on request. 6 See Burgett, Rucker, and Thurman (2009) for a discussion of these processes and their economic costs. 7 Hoff and Willet (1994) found that the average honey yield per colony used for paid pollination was about 20 lbs. less than the yield received from colonies that were not rented. They attributed the lower honey yields to: 1) heavy concentrations of hives in orchards being pollinated which reduced the amount of nectar per colony; 2) many crops that are pollinated are poor sources of nectar; 3) colonies used for pollination may be exposed to pesticides which can reduce bee numbers and health; and 4) colonies associated with migratory beekeepers are often in transit for many days, which reduces the number of days available for honey production been a long-term decline in the number of colonies, from almost six million colonies in the late 1940s, to 2.3 million colonies in the latest survey for Second, there was a change in 1986 in how the USDA conducted their surveys. From 1982 to 1985, colony inventory data were not collected at all. In 1986, when the surveys were re-instituted, data were collected only from beekeepers who maintained at least five colonies. As can be seen in Figure 1, this resulted in a sharp drop in the estimated number of colonies. Elsewhere (see Muth et al. 2003) we estimate that this resulted in an artificial drop of nearly one million colonies from the series. Third, there have been reports that roughly one-third of the colonies in the United States died in each of the winters and (Burgett et al. 2009, Pernal 2008, van Engelsdorp et al. 2007, and van Engelsdorp et al. 2008). But the annual survey numbers do not indicate corresponding large reductions in colony numbers in fact, the average estimated number for 2007 and 2008 is only 4 percent lower than in 2004 and We attribute these relatively small changes in colony numbers to the ability of beekeepers to replace lost colony populations relatively quickly, albeit at a cost. 6 Per-Colony Honey Yields Whereas colony numbers have declined over time, Figure 2 indicates that per colony honey yields have gradually increased, though with substantial year-to-year variation. The dotted trend line in Figure 2 suggests that, on average since 1940, yields have increased by about 0.5 pounds per colony per year. Yields have varied dramatically from year to year, likely due to variations in weather and nectar yields across seasons and year-to-year variation in pollination rental activity. Notice that yield changes can be interpreted differently if one looks only at more recent data. If, for example, one looks at yield changes since 1993 the conclusion could be drawn that yields are decreasing. One explanation for such reductions is that, in recent years, more intense use of colonies for pollination may account for declining honey yields. 7 An alternative perspective is that it is more appropriate to look at the longer span of data, and that looking at short subsamples can be misleading and lead to concerns about honey production that may not be warranted. Honey yields also vary substantially across states, as illustrated in Figure 3. Among the top honey-producing states, there are clear regional differences in honey yields when averaged over the last 22 years. Northern states, from Michigan to Montana and also South Dakota, which have large acreages of alfalfa and clover, averaged the highest yields. Florida and Texas, which have large year around nectar sources, also have yields above the U.S. average. California and Idaho have 22-year yields below the U.S. average, possibly because many of the colonies in these states are more involved with pollination services than honey production. Domestic Honey Production and Imports Figure 1 indicates that colony numbers have fallen over time, while Figure 2 indicates that yields have risen. Figure 4 shows that since 1940, domestic honey production (the product of annual yield and the number of colonies) has trended downward, falling on average by about 0.7 million pounds per year. Figure 4 also indicates that domestic production has fluctuated substantially from year to year. Visual inspection of Figures 1 and 2 suggests that these fluctuations resulted primarily from variable yields. Between 1940 and 2000, domestic production reached a high of 272 million pounds in 1952 and a low of 150 million pounds in Observers have noted that since 2000, when 220 million pounds of honey were produced, domestic production has fallen dramatically. The 2007 production level of 148 million pounds is the lowest since the start of the data in 1940, and the four-year average from is lower than any other four-year period. Whether the rather sharp declines in production levels over the recent period (which are due to reductions in both colony numbers and honey yields) will continue, or whether production levels will revert back to the longer-term trend remains to be seen. As domestic production has declined, im- American Bee Journal

3 ports have become an increasingly important component of the total supply of honey available to U.S. consumers. Figure 4 shows that from 1950 to 1970, the United States was, in most years, a net exporter of honey. Since the late 1960s, the United States has been a net importer, with imports trending upward at an annual rate of about 4.2 million pounds. In 2002, net honey imports exceeded domestic production for the first time, and this relation has prevailed in all but one year since. 8 On average, over the past four years, imports have been almost 50 percent greater than domestic production. Since 1990, the three countries selling the most honey into the U.S. market have been China, Argentina, and Canada. Until 2000, these three countries combined typically accounted for about 90 percent of imports. More recently, imports from Brazil, Vietnam, and India have increased and become important regular sources of honey for the U.S. market. Imports from Mexico have also been substantial in some years. Given recent limits and tariffs on Chinese and Argentine imports, some suspect that the accuracy of country of origin numbers is compromised by transshipment. 9 While domestic production of honey has declined over most of the 70 years displayed in Figure 3, the sum of domestic honey production and net imports has, on average, increased by about 2.9 million pounds per year. A sense for the impacts of this increase in the availability of honey on U.S. consumers can be gleaned from looking at U.S. per capita honey consumption over time. Since 1966, U.S. per capita consumption of honey has varied between 0.7 and 1.1 pounds per year, with no discernable trend. 10 Thus, the increased availability of honey over time has essentially been offset by increases in U.S. population. Honey Prices While nominal prices received by beekeepers are decidedly higher now than in the mid- 20 th century (over $1.40 per pound in 2009 compared to 20 cents per pound in the mid- 1940s), most of that difference is due to inflation the decline in the purchasing power of the dollar. To render honey prices comparable over time, and to provide a more economically meaningful measure of the value of honey relative to other goods, we calculate and display in Figure 5 real honey prices from 1939 to 2008 in terms of 2008 dollars. 11 In real terms, it can be seen that honey prices have declined over time at a rate of about one cent per year. There is substantial variation in 8 Net imports is the difference between U.S. honey imports and exports. Over the last two decades, U.S. honey exports have never exceeded 12.5 million pounds. 9 See Phipps (2009) for discussion of current issues related to honey imports. 10 See USDA, ERS, Sugar and Sweeteners Yearbook Tables, Table Nominal prices are deflated using the Index of Prices Paid by Farmers for Commodities, Interest, Taxes and Wage Rates obtained from the webpage. December

4 real prices from year to year, and it does not appear that real prices have been more volatile in recent years than in earlier years. It is noteworthy that the 2008 price of $1.41 (which is the highest nominal price on record) is substantially lower in real terms than prices in the mid-1940s and also in the early 1970s. Government Policies Affecting Honey Markets No discussion of honey markets would be complete without a discussion of the U.S. honey support program. The honey price support program was created in 1949 to provide stable market prices for honey and encourage sufficient colonies for pollination (Muth, et al., 2003; Canada and Womack, 2006). The primary policy tool of the program was a nonrecourse loan-based price support system under which producers could place their honey with the Commodity Credit Corporation (CCC) and receive the support price for it in the form of a non-recourse loan. Producers would place their honey with the CCC if the world price was less than the support price. If the world price rose above the support price, they would repay their CCC loan, receive their honey back, and then sell it at the higher world price. If the world price did not rise above the support price, producers simply defaulted on their CCC loans. Until the mid-1980s the support price for honey was rarely above the world price and the honey program cost taxpayers little. In the mid-1980s, the support price exceeded the world price for several years and taxpayer costs became unacceptably high. Among the changes implemented to reduce these costs was the introduction of marketing assistance loans (and later loan deficiency payments), under which producers could receive the support price for their honey, even if the world price was less than the support price. Appropriations for the honey program were denied in 1993 and the honey program was eliminated in the 1996 Farm Bill. In response to pressure from honey producers, programs to protect them from low cost imports were quickly implemented, and in 2000 an ad hoc price support program was put in place. In 2002 the honey program was reborn with a nonrecourse loan rate of $0.60/lb and provisions for marketing assistance loans and loan deficiency payments. In most years since 2002, the world price has been well above the loan rate and the program has had little impact and low treasury costs. The 2008 Farm Bill has extended the honey program through 2012, with the loan rate set at $.60/lb. in 2008 and 2009, but increasing to $.69/lb. in 2010 through Under the program, honey producers can use their honey as collateral for nonrecourse loans from the CCC. Loan revenues are used as a source of operating capital during the year as is evidenced by the fact that from 2002 to 2007, between $3 million and $17 million in CCC loans were made annually to honey producers. Because market prices for honey have exceeded the loan rate in recent years, producers have chosen to pay back their CCC loans, and annual CCC net outlays have averaged less than $1 million since Conclusions In this article we have examined historical information on various dimensions of U.S. honey markets. These data suggest the following: 1. Colony numbers have fallen over time. Changes in USDA survey methodology in the mid-1980s, however, make the decline in colony numbers appear larger than it actually was. Moreover, a substantial portion of the reduction in colonies took place among small beekeepers, rather than among large commercial beekeepers who provide the bulk of honey for consumption. 2. Honey yields have increased over time. Whereas it is possible to select recent subsamples and raise concerns over declining yields, we believe it is most useful to take a longer-term view of the yield data. 3. Domestic honey production has fallen over time. Increased imports, however, have more than offset domestic declines, and the amount of honey available for domestic consumption (the sum of domestic production and imports) has increased over time at a rate sufficient to allow domestic per capita consumption to remain roughly constant over time. 4. Although nominal honey prices have trended upwards over time, real prices (net of inflation) have trended downwards, with both series exhibiting substantial year-toyear variation. Historically high recent nominal prices are considerably lower, in real terms, than historical real prices. References Burgett, M., R. Rucker and W. Thurman (2009). Honey Bee Colony Mortality in the Pacific Northwest (USA), American Bee Journal, Vol. 149, No. 6, June 2009, pp Canada, C. and J. Womack (2006). Farm Commodity Programs: Honey. CRS Report for Congress, Congressional Research Service, The Library of Congress, Wash., DC. Daberkow, Stan, Penni Korb, and Fred Hoff (2009). Structure of the U.S. Beekeeping Industry: , Economic Entomology, Vol. 102, No. 3, June 2009, pp Hoff, F. and L. Willet (1994). The U.S. Beekeeping Industry. AER No. 680, Economic Research Service, U.S. Dept. of Agriculture, Wash. DC. Muth, M., R. Rucker, W. Thurman, and C. Chuang (2003). The Fable of the Bees Revisited: Causes and Consequences of the U.S. Honey Program. Journal of Law and Economics, Vol. XLVI, The University of Chicago. Pernal, S.F. (2008). CAPA statement on honey bee losses in Canada (spring 2008) 12 See United States Department of Agriculture, Farm Service Agency, CCC Net Outlays by Commodity and Function at pb09_tbl35x.xls, accessed June 5, American Bee Journal

5 final revision. Canadian Association of Professional Apiculturists. Phipps, R. (2009). Honey Market Update, American Bee Journal, Vol. 149, No. 5 (May), pp van Engelsdorp, D., R. Underwood, D. Caron, J. Hayes, Jr. (2007). An Estimate of Managed Colony Losses in the Winter of : A Report Commissioned by the Apiary Inspectors of America. American Bee Journal 147: nycollapsedisorderinfo.html#reports Research van Engelsdorp, D., Hayes, J. and J. Pettis (2008). A Survey of Honey Bee Colony Losses in the U.S., Fall 2007 to Spring PLoS ONE. 2008; 3(12): e gov/articlerender.fcgi?artid= U.S. Department of Agriculture, Economic Research Service, Sugar and Sweeteners Yearbook Tables, at usda.gov/briefing/sugar/data.htm, accessed March 10, R N C A L I FO R N IA I TA L I A N Q NORTHE Pendell Apiaries U E E N S Frank & Sheri Pendell P.O. Box 40, Stonyford, CA Selected For: Cordovan Stock Mite Resistance Hygienic Behavior VSH Trait Honey Production Gentleness Isolated Mating Yards Call Fumagilin-B fed All Queens marked for free December 2009 C.F. KOEHNEN & SONS, INC. Quality & Service Since 1907 Queens & Packages: Italians & Carniolans 3131 Hwy 45 Glenn, CA (530) fax (530) bees@koehnen.com Celebrating 100 Years! Tony Homan Apiaries Breeder of Caucasian & I talian B e e s and Q ueens 518 CR 520 Shannon, MS Fax