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Honey Price Support Program

By HARRY A. SULLIVAN
Agricultural economist, Price Support and Loan Division, Agricultural Stabilization and Conservation Service.

BEEKEEPING IN THE UNITED STATES
AGRICULTURE HANDBOOK NUMBER 335
Revised October 1980
Pages 182 – 184

Price support programs for agricultural commodities were undertaken as a result of the depression of the 1930′s. For some years, price support operations were restricted to what were called the “basic” commodities (corn, cotton, peanuts, rice, tobacco, and wheat), but gradually other commodities were added.

Factors Leading to Honey Price Support Program

Sugar rationing during World War II and the requests by the Government to increase the production of honey led to a large increase in colony numbers and a proportionate increase in honey production. With the end of sugar rationing, prices for honey dropped close to prewar levels. Due to the depressed economic situation facing them, representatives of the beekeeping industry requested assistance from Congress. In taking note of the industry’s request, the House Committee on Agriculture had this to say:

Since the close of the war, the price of honey has dropped to the point where beekeepers are finding it impossible to obtain their costs of production. It appears obvious to the committee that, if these vitally important insects are to be maintained in sufficient numbers to pollinate our crops, the beekeeping industry must have immediate assistance. Until the time comes when beekeepers can receive an adequate return from pollination services, the committee believes that a price support program for honey, as provided in this bill, is the only answer to this problem.

Honey Price Support Legislation

The Agricultural Act of 1949 requires that honey, along with several other commodities under the heading “Designated Nonbasic Agricultural Commodities,” be supported at a level between 60 and 90 percent of parity. In determining the actual level of support within the prescribed limits, the Secretary of Agriculture is directed to consider the following factors:

(1) Supply in relation to demand.
(2) Price levels at which other commodities are being supported.
(3) Availability of funds.
(4) Perishability of honey.
(5) Importance of honey to agriculture and the national economy.
(6) Ability to dispose of stocks acquired through price support operations.
(7) The need for offsetting temporary losses of export markets.
(8) The ability and willingness of producers to keep supply in line with demand.

Parity prices are a measure of the price levels needed to give agricultural commodities a purchasing power with respect to articles that farmers buy equivalent to the purchasing power of those agricultural commodities in a base period. The formula used to determine parity prices for agricultural commodities has been outlined by Congress. The parity price calculations and determinations are made by the U.S. Department of Agriculture.

Operating Features of Price Support Program

The price of honey presently is supported through warehouse- or farm-storage loans or through purchases, or both. Loans at the applicable price support rate on warehouse- and farm-stored honey are made available to beekeepers during the crop year on any or all of the honey produced during that year. By obtaining immediate cash for his crop, the beekeeper can hold his honey and market it when he thinks the price level is satisfactory to him. However, if the market price fails to rise above the support price, he may cancel his loan by delivering honey, of a value equal to the loan value, at the end of the year unless arrangements for earlier delivery have been made.

If the beekeeper has not made use of the loan feature of the program for a part of all of his production, he can then use the purchase option. The Commodity Credit Corporation (CCC) stands ready to buy at the applicable support price any of his production he wishes to sell and which is not already obligated to CCC as loan collateral.

The beekeeper obtains loans, or payment from a CCC purchase of his honey, at his Agricultural Stabilization and Conservation Service county office. The U.S. Department of Agriculture carries out price support operations through the field offices in most of the more than 3,000 counties in the country. The offices also issue delivery instructions as to time and location for honey deliveries being made to CCC.

Other Provisions of Loan and Purchase Program

Quality and Quantity Determination

For loan purposes, the beekeeper’s statement is accepted as to the quality of the honey offered as collateral. He then receives 90 percent of the value (price support rate times quantity) of the collateral. When honey is actually acquired by CCC through purchase or loan default, quantity is determined by the actual weight of honey delivered. Quality is then determined by the Agricultural Marketing Service, in accordance with U.S. standards for grades of extracted honey based on samples drawn by ASCS representatives supervising delivery. CCC bears the cost of this quality and color determination.

Color and Class Differential Structure

Honey is supported on the basis of color and class. Color and class differentials for the 1977 crop are as follows:

Class and color:
Table honey:  Cents per pound
White and lighter 33.5
Extra light amber 32.5
Light amber 31. 5
Other table honey 29. 5
Nontable honey 29.5

For the 1977 crop, the national average support rate on a 60-pound and larger container basis was 32.7 cents per pound.

Fees and charges

A producer pays a nonrefundable fee for each loan disbursed. The farm-stored loan fee is $10 per loan plus $1 for each lot of honey covered by the loan. The warehouse-stored loan fee is $6 plus $1 for each warehouse receipt. A delivery charge of one cent per hundredweight is assessed on the quantity of honey delivered to CCC. The producer also pays all charges relative to insurance premiums, storage, and handling.

Early Support Program

The Department first decided that mandatory honey price support could be most widely and effectively assured by working through existing marketing machinery. Under the 1950 program, packers of honey signed contracts with the Department, under which they agreed to pay beekeepers 9 cents per pound delivered to their packing plants for all the honey acquired from them that met the requirements of the program. These requirements were especially concerned with the cleanliness of the honey, its moisture content, and flavor.

The Department, in turn, agreed to accept from the contracting packer all the honey the packer offered and to pay the support price, plus established charges for handling, storage, and any processing requested by the Department.

In the 1951 season, a similar program was operated, except that a price support differential related to the degree of acceptability of honey for table use was introduced. The differential was 1.1 cents per pound between honeys of “general national acceptability” and “limited acceptability” for table use, reflecting to a degree the difference in market value for variations in this regard.

The type of price support program in operation during those first 2 years did not give universal satisfaction. The 1952 season saw the producer (i.e., beekeeper) loan and purchase agreement type of program develop, which is now in use for honey and for most of the other agricultural commodities.

Summary of Price Support Activity

As indicated in table 1, activity under the price support program was rather modest until 1964, with small quantities placed under loan and even smaller (or none) acquired by CCC. With the dropping of the official inspection requirement as a prerequisite for obtaining a loan, activity increased rapidly. A peak of 45.7 million pounds of honey placed under loan was reached in 1969. Loan activity declined subsequent to 1969, due to declining domestic production and rising honey prices. Reduced program activity led to the discontinuation of the loan provision of the program for the 1975 and 1976 crop years. However, after repeated requests by the honey industry, the loan provision was reinstated in 1977.