Bee Culture - September, 2009

by Joe Traynor

2006 was a watershed year for almond growers. The price of almonds hit a record $3/lb, yields were good and almond consumption was increasing at double-digit rates (over 10% annually).

Things slowed down in 2007-2008 as almond prices dropped to $2/lb - still profitable and well above the $1.25/lb that most almond growers figure as their break-even point. Current almond prices are around $1.45/lb and holding, but the $1.45 figure is for the premium Nonpareil variety (about 40% of California's acreage). Prices for hardshell varieties (about 20% of state acreage) have dropped to $0.90/lb, well below the cost of production.

At $3/lb, almond growers pulled out all stops to increase yields. Many upped their bee supply by 1/2 colony/acre, looking at the extra bees as good insurance against poor weather during bloom.

Bee colony use went from two colonies/acre to as high as three/acre for some growers. Not all growers increased their bee numbers, but enough did to create a strong demand for bees from 2006-2008.

An increase in almond acreage from 600,000 acres in 2006 to 700,000 acres in 2009 also contributed to the robust demand for bees.

The increased demand for bees, coupled with the well publicized problems in the bee industry caused growers to bid up the price of bees during 2006 to 2009. Average bee rental prices for almonds jumped from $80/colony in 2005 to $150/colony in 2008 with prices for super-strong colonies approaching $200. The U.S. bee industry responded to the increased demand for bees by increasing colony numbers. Instead of focusing on honey production, beekeepers devoted their efforts towards increasing colony numbers for almonds. Honey production was sacrificed during the Spring and Summer months in order to divide honey-producing hives to fill the demand for almond bees the following February. Many honey-producing beekeepers discovered that they liked the switch - almond pollination was a sure, fixed source of income while honey production was hostage to the weather and the whims of market prices for honey. Honey production for individual beekeepers dropped as their colony numbers increased.

The 2009 almond pollination season will be remembered as "the year everything changed." 2009 was the first time in recent years when the supply of almond bees exceeded the demand. All this in the wake of widespread publicity on CCD, which peaked during the Winter of 2007 -2008. Lower incidences of CCD in 2008-2009 were likely due to a combination of a virus running its course and beekeepers being able to afford better care of their bees (via almond income). Along with increased colony numbers and less CCD came a third unanticipated factor: reduced demand by almond growers. Growers decided to remove some older orchards that were not profitable at the lower prices. Water shortages throughout the state caused some growers to go into a maintenance mode: sacrificing yields for the current year by reducing irrigation in order to keep the trees alive until the water (and almond) situation improved. Nursery orders for 2009 almond plantings were cancelled. Almond growers, squeezed by low commodity prices and higher input costs took a hard look at their operating costs with many deciding that reducing bee rental costs was the best way to reduce total production costs and that maybe they could cut their bee requirements by half a colony/acre.

Many Midwestern beekeepers bring their bees to California in October-November every year without an almond pollination commitment because they have always been able to rent them in the past, sometimes at a premium price. This year, the anticipated demand for almond bees didn't happen and beekeepers were forced to negotiate price with growers that held the upper hand. Significant numbers of these beekeepers wound up losing money on almond pollination, some were lucky enough to break even and some were totally shut out of almond pollination and lacked sufficient funds to return their bees home.

Determining Rental Prices

What is a fair rental price for almonds? A fair price is determined by first getting a firm grip on operating costs and then adjusting pollination fees accordingly. Dr. Michael Burgett (Oregon State University) has published the Pacific Northwest Honey Bee Pollination Economics Survey every year for the past 23 years. This survey performs a tremendous service for all beekeepers as it gives them a handle on pollination prices and operating costs. The current Survey (see Summer 2009 Speedy Bee) gives an average annual hive maintenance cost of $178/colony with a range of $132 to $225/colony. Burgett politely suggests that "beekeepers should try to be more precise in calculating their operating costs. If you can't answer the question of your operating cost on a per colony basis, you need to adjust your operational accounting."

Burgett makes a trenchant point: How can you set pollination fees without knowing what your operating costs are? I know of no beekeeper that can give me a precise figure on his operating costs. My guess is that most beekeepers set pollination fees (for almonds, or for any crop) that are below their operating costs for that particular crop. In contrast, I know of no almond grower that does not have a firm handle on their operating costs - I have seen their accounting sheets that neatly categorize every operating input. These sheets include a column for ROI (return on investment). There are probably some out there, but I don't know of any beekeeper that has ROI down on paper or in his head; some have never heard of the term.

Beekeepers can, perhaps, be excused from their lack of knowledge on operating costs as these costs can vary widely from one year to the next - unlike almond growers, there is no typical year for beekeepers. With the recent nosema ceranae scare, beekeepers that had never invested in fumagillin are winding up with a significant fumagillin bill (and, as others have pointed out, it is not clear that this money is well spent). With almond growers demanding stronger colonies, beekeepers' supplemental feeding bills have skyrocketed in recent years. Honey production costs can vary widely from year to year as can queen replacement costs. In determining operating costs, a three-year average will produce a more reliable figure than costs in any given year. A beekeeper that makes 150 lbs of honey/hive and gets a 90% take on his queens one year, but only 20 lbs and a 20% take the following year would be best off averaging the two years when setting pollination fees.

The 2010 Almond Season

Pollination prices for 2010 almonds are currently $10/colony below 2009 prices (2009 prices ranged from $145 to $195/colony). They could go up if beekeepers that got shut out of almonds in 2009 decide to stay home in 2010 - they could go down further if they don't. Based on the 2009 season, the best advice for beekeepers is: don't bring bees to California unless you have a firm, written almond contract.

Almond growers are becoming increasingly aware that bee colonies can vary greatly in strength - most are willing to pay a premium price for colonies of 8-frame strength or better. Some pay a bonus of $10/frame on colonies exceeding 8 frames. If you want to get top dollar for almond bees you will have to invest in a supplemental feeding program. If you don't have a good September-October bee location (e.g., rabbit brush or blue curl) you will have to provide supplemental feed in Sept-Oct in order to get strong almond colonies. And yes, before investing money in fall feeding, make sure you have a firm almond contract in hand.

The Future of Almond Pollination

Long range, almond prices will bounce back up, and almond pollination fees are likely to follow. In spite of record crops and current global economic woes, almond consumption has increased by 7%. Consumption will go back to double-digit figures when the current economic crisis is over (in late 2010?). Almond acreage has leveled off at 700,000 acres and will holdat that figure for the foresee able future (it may decrease if the water-short west side pulls out significant almond acreage). Once almond prices return to profitable levels, almond acreage should increase, but this won't happen for a few years.

With current strong honey prices, many beekeepers that have brought bees to almonds will return their focus to honey production, especially if almond pollination feescontinue to decline. It may be a few years for the supply-demand equation for almonds to settle out but when it does, almond pollination should continue to be a major source of income for U.S. beekeepers.

Water Woes

California farmers are calling our current drought a "Regulatory Drought". Millions of gallons of water are flushed into San Francisco bay each year in order to preserve the habitat of the delta smelt, an endangered species. This is water that could be going (via a permanent aqueduct) to San Joaquin Valley farmers, including many almond growers. The science behind the water dumping has been challenged (it has not been demonstrated that sending more water to farmers would be detrimental to the delta smelt). It is federal regulators that are calling the shots - the state has no say. If you bring bees to almonds from other states, contact your congressman to get behind providing more water to California farmers.

Joe Traynor is a pollination broker in Bakersfield, CA.