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Almond Grower Newsletter – July 1, 2005

SCIENTIFIC AG CO.
P.O. Box 2144
Bakersfield, CA

Office located at:
1734 D Street, Suite #2
Bakersfield, CA 93303
24 hr. phone (661) 327-2631

2006 ALMOND POLLINATION PRICES

The unprecedented high bee rental prices for almonds in 2005 will be carried over to 2006. The reason for the phenomenal increase in bee rental prices is, of course, supply-demand-a limited supply of bees and increased demand as new almond acreage comes on line. Poor nutrition of bees (due to drought conditions in most bee states) + losses to the varroa mite took a heavy toll on the 2005 bee supply for almonds. Beekeepers across the U.S. heard of 2005 almond-bee problems and are increasing colony numbers in anticipation of a 2006 “gold rush”. There is no guarantee, however, that these “new” colonies will not succumb to the same problems that caused the 2005 bee shortage. No beekeeper can tell an almond grower what his bees will look like in February until January.

Almond growers that are shocked at proposed 2006 bee prices can take some solace in the fact that they have been getting bees at bargain rates for 50 years because the bee industry is fragmented and growers have been in a position to play one bee supplier off against another and get bees at rates lower than the cost of providing such bees.

Almond growers should take a look at Canola pollination in Canada to see how pollination fees are set in a manner that is equitable to both the beekeeper and the grower. Canola blooms in June, a time when bee rentals for summer crops such as alfalfa seed and melons in California are around $40/colony. There are about 30,000 acres of Canola in Alberta (requiring 2+ colonies of bees per acre) and 250,000 bee colonies in Alberta (more if adjacent provinces are included), a ratio of bee colonies to acres of 10:1-far in excess of the bee:almond ratio and one that should result in bargain-basement bee rental prices. Yet bee rental prices for Canola seed are $125/colony!

The reason why Canola bee rentals are at prices that would seem exorbitant to almond growers (and stratospheric to melon and seed growers) is that the Canola seed companies know that strong bee colonies are required to get the seed yields that will meet market demand.

Canola is hard on bees and, without supervision, Canadian beekeepers will select their very best colonies for honey locations and put their weakest colonies on Canola. In order to resolve this problem, Canola seed representatives sat down with representatives of the Alberta bee industry and asked what it would take to provide strong colonies; the economics of beekeeping was a major part of the discussion. The end result of these frank talks was a pollination price that was fair to both beekeepers and Canola seed producers. The Canola seed companies also hired their own bee people to inspect colonies for strength (Trust but Verify).

The “Canadian Solution” will never apply to almond pollination because almond buyers have little control over almond growers, esp. about what kind of bees the grower gets and at what price. Beekeepers, in order to survive, must reduce the inputs necessary to get a strong colony in February. Getting a strong bee colony (defined as 8 frames of bees or more) in the middle of winter requires considerable extra expense on the part of beekeepers. Most beekeepers would much rather rent weaker colonies at a significantly lower price than invest the resources necessary to come up with strong colonies.

Many beekeepers rented “field-run” bees in 2005 and many more will be rented in 2006, many by upstanding, first-class beekeepers. “Field-run” is an innocuous sounding term, but it means that beekeepers will make every effort to supply the best possible colonies but there will be no sorting or culling of weaker colonies. In some years, field-run bees might be a good deal for the almond grower, other years they would not since bee colony strength for an individual beekeeper can vary greatly from year to year. Almond growers would love to sell “field-run” almonds at a fixed price ($2/lb?)-no penalties for dirt, trash, insect damage, mold, salmonella. Field-run bees are analogous to field-run almonds. Many beekeepers have rented field-run bees for years and many growers have been happy with these bees.

Beekeepers are a savvy bunch and are aware that enforcement of colony-strength standards in almonds is often lax or absent, especially now that most counties have gotten out of the bee inspection business. Beekeepers know that if they can stall inspections until after bloom is over (rather than pre-bloom) their colonies will look a lot better.

Most almond growers read of the 20 to 80% losses (dead colonies) experienced by beekeepers during the winter of 2004-2005. With that many dead colonies, there was also a huge number of very weak colonies (less than 4 frames of bees). Most or all of these sub-standard colonies were rented to almond growers, many at premium prices.

Not too many years ago, almond growers were in the same position as beekeepers. Nut buyers played one grower off against another and pushed almond prices below the cost of production. Some growers were forced out of business. The situation looked bleak, with no sign things would change. But things did change.

The situation changed because growers started demanding a fair price for their crop. Some credit Doug Younghahl (CEO of Blue Diamond) as a driving force behind the rise in almond prices. Mr. Youngdahl talked to growers up and down the state asking them to hold out for higher prices. When a grower stood up at a meeting and said he could produce almonds for 65 cents/lb he was roundly chastised by Mr. Youngdahl.

The bee industry in not nearly as monolithic as the almond industry because beekeepers are scattered all over the U.S. rather than concentrated in a central valley. Organizing beekeepers (to raise pollination prices) is like herding cats. The bee industry is too fragmented to stand up to price-bullying by almond growers. The only option many beekeepers have-the only way they can make almond pollination pay-is to reduce the inputs that are necessary to obtain strong colonies in February and keep their fingers crossed that their bees will pass muster with growers. There are some enlightened growers (and their numbers are increasing) that are aware that “you get what you pay for” and are more than happy to pay a premium price for a quality product: strong bee colonies.

What is a fair bee rental price for almonds? Ask your banker. First, ask your banker for a loan to purchase and operate a 1,000 colony bee outfit. After he stops laughing, ask him what would be a fair bee rental price for almonds. The banker would likely tell you that $150 per colony would be the minimum rental price needed for almonds.

Say you secured a loan for 1,000 colonies, then told your banker in January that the strength of the colonies didn’t meet the 8-frame standard required by the contract with the almond grower-the colonies looked great in October but crashed during the winter. The banker might well say, “rent them anyway”. Many beekeepers, acting as their own bankers “rent them anyway”, some in order to continue feeding their families. WWYD?*

Some beekeepers that offer bees at below costs can do so because their outfit is paid for-Return on investment is not considered. The almond grower that said he could produce almonds at 65 cents/lb. likely didn’t consider ROI.

The almond-bee crunch won’t hit in 2006, but in 2010, when new acreage comes on line. Unless the almond industry can pay pollination prices that will encourage more people to get in the bee business, there will be a real bee-almond crisis down the road. Almond growers that bargain for the lowest possible prices in 2006 could well be shooting themselves in the foot. The pain from the shot won’t be felt for a few years, but the pain will be intense when it does arrive.

Joe Traynor, Mgr.

* what would you do?