The beekeeping industry matters more to economists than those who are not buzzing around the fields of economics may suspect. In the 1950s and 1960s, it was common for economists to use bees as a theoretical example of a situation where markets would not work well. The underlying argument was that it would be hard for beekeepers and growers to agree on how to price pollination services. This argument bit the dust, hard, when a practically minded economist pointed out in the 1970s that in fact, such agreements between beekeepers and growers had been commonplace for decades. I offered a quick overview of this this intellectual history in \”Do Markets Work for Bees?\” (July 10, 2014)
More recently, colony collapse disorder offered a new challenge for thinking about bees and markets. But it turns out that beekeepers have tried-and-true techniques for creating more hives: for example, by splitting an existing hive. There\’s a market for buying a starter-kit \”package\” of bees: about 12,000 worker bees, plus a queen, totals about three pounds and sells for $90. I describe how the number of bees has not diminished, despite higher die-offs from colony collapse disorder, in \”Fighting Colony Collapse Disorder: How Beekeepers Make More Bees\” (August 5, 2017)
For those looking for a more recent update and overview of the beekeeping industry, Peyton M. Ferrier, Randal R. Rucker, Walter N. Thurman, and Michael Burgett of the US Department of Agriculture are at your service with \”Economic Effects and Responses to Changes in Honey Bee Health\” (Economic Research Report Number 246, March 2018).
I\’d say there are two particular challenges to the market for bees in recent years. One is the ongoing presence of colony collapse disorder, so that beekeepers have had to invest more in replacing hives that have died off. The other is the rise of almond crop in California. This crop needs pollination badly, and needs it pretty much all at the same time early in the season, so demand for bee pollination services has gone up. Moreover, bees who pollinate almonds apparently don\’t make decent honey during that time. This rise in pollination revenues means that beekeepers as a whole now make slightly more money from pollination than from honey–reversing a long-standing pattern.
As those who are constantly on the lookout for an example for an intro econ class will note, we\’re talking about a fall in supply of bees (from colony collapse disorder) and a rise in demand (from more pollination of almonds). One might expect a rise in price, but while the price for almond pollination has indeed risen, other pollination prices have not. As the report says near the end: \”Appropriate here is the adage: `High prices are the solution to their own problem.\’” In this case, higher price brought forth reactions from both beekeepers and bee-users. Also, any higher costs of pollination are relatively small in the context of the overall price of food, and so can be passed down the production chain to retail consumers with little adverse effect.
Here are some comments from the report:
On the number of honeybee colonies
\”Since 2006, annual winter losses of managed honey bee colonies have averaged 28.7 percent, approximately double the historical winter mortality rate of 15.0 percent. These elevated losses have raised concerns that agricultural and food supply chains will suffer disruptions as pollination services become more costly and less available. … Despite higher winter loss rates, the number of U.S. honey bee colonies has remained stable or risen between 1996 and 2016, depending on which of two data sources is considered. Winter loss rates have no negative correlation with yearly changes in the number of U.S. colonies at the national or State level, and loss rates have a positive correlation with the rate of colony additions, which may reflect strategies used by beekeepers to manage colonies.\”
Growing revenues for beekeepers from almond pollination services:
\”Between 1988 and 2016, real beekeeper revenue per colony more than doubled. This increase resulted primarily from a doubling of real honey prices over that time span, as well as dramatic growth in both almond acreage and almond pollination service fees. Industry data indicate that in 2016, pollination service income accounted for 41 percent of beekeeper revenue, whereas pollination services accounted for only 11 percent of revenue in 1988. In 2016, 82 percent of all pollination service revenue came from almond pollination, implying that almond fees accounted for one-third (82 percent of 41 percent) of total beekeeper revenue in that year.
\”The high share of almond service fees in pollination revenues can be attributed to the following: (1) almond fees are substantially higher than fees for other major crops, and (2) almond pollination accounts for 61 percent of all honey bee colonies rented and 52 percent of all crop acres that pay fees for pollination services. A primary driver of the increased share of pollination fee revenue over time is the dramatic expansion in almond acres—from 419,000 bearing acres in 1988 to 940,000 in 2016.
\”For most crops other than almonds, the share of total costs attributable to pollination service fees is less than 5 percent at the farm level and less than 1 percent at the retail level. That small share, along with the relatively modest changes in pollination service fees for most crops, will tend to make the effect of increasing pollinator health problems on food prices very small for most crops. …
\”In recent years, inflation-adjusted almond pollination fees have more than doubled. To the extent that pollination fees for crops that do not compete with almonds for pollination services have increased at all, the increases have been far more modest. High pollination fees for almonds have induced commercial beekeepers to load their honey bees on flatbeds and trek to California from as far away as Florida and North Carolina. In recent years, 60 to 70 percent of all commercial honey bee colonies in the United States have been transported to California in February for the almond bloom.\”
For many crops, growers have some alternatives to honeybee pollination
\”While the honey bee pollinates a wide variety of crops, in certain applications, other pollinators are preferred. Notably, the alfalfa leafcutter bee (ALCB, Megachile rotundata) is used widely as a pollinator in commercial alfalfa seed production owing, in part, to its different physiology (Pitts-Singer and Cane, 2011). The alfalfa flower includes a trigger that a pollinator must trip to release its pollen. Compared to ALCB, honey bees are small and averse to the strike of the trigger mechanism. …
\”ALCB are sold in their pre-pupal stage, and the bees’ maturation and emergence as an adult insect are managed with temperature to coincide with the alfalfa bloom (Pitts-Singer and Cane, 2011). When sold in gallon quantities (roughly 10,000 live bees per gallon), typical stocking rates are 1 to 4 gallons per acre … While ALCB are raised domestically, in 2016, the United States imported $18.8 million worth from Canada, the sole import source. … Since 2012, ALCB imports have grown steadily in volume terms, suggesting that imported bees are not being recovered to use in subsequent years. If recent ALCB import values exceeding $18.8 million over each of the last 3 years represent single-use purchases of pollination services, then the alfalfa seed crop represents the second-largest user of paid pollination services by value after almonds. …
\”Honey bee dependency ratios range from 0.0 to 1.0. For almonds and lemons, the bee dependency ratio is 1.0, indicating that, in the complete absence of managed honey bees, yields for currently planted varieties of these crops would fall by 100 percent and no output would be produced. For strawberries and pumpkins, the dependency ratio is 0.10, indicating that these yields would fall by only 10 percent if all managed honey bees disappeared. In general, a higher bee dependency ratio suggests that farmers will be less able to substitute other methods of pollination for honey bees and that farmers growing honey bee-dependent crops will likely be less responsive to increases (or decreases) in the price of pollination services when making their colony rental decisions.\”
There\’s a lot of inelastic demand along the supply chain for pollination services
\”The farmer’s unresponsiveness to potential increases in pollination service fees enables beekeepers to pass along higher beekeeping management costs to farmers. Similarly, the retail food producers’ general unresponsiveness to wholesale food price increases enables wholesale producers to pass along higher costs of pollination services to retailers. In short, the same mechanisms that mitigate much of the impact of higher management costs on beekeepers also mitigate the impact of higher wholesale food production costs on food producers.\”
Markets for pollination services actually go back 100 years
\”Johnson (1973) suggests that the first recorded renting of colonies for pollination in North America was in 1910, while Lindquist (2016) states that the first bees were rented for pollination in New Jersey in 1909. Olmstead and Wooten (1987) indicate that plum and prune growers started renting hives for pollination services `beginning around World War I\’ and that their success led to the development of similar practices by growers of other fruits and nuts. Rucker and Thurman (2010) provide accounts of migratory beekeeping for the purpose of following the bloom and producing honey going back to the 1870s and suggest that there were commercial beekeepers who “were mobile, migratory, and large by the 1920s” (p. 9). They also provide several accounts of the provision of pollination services for pay in the 1920s, noting that many of the accounts are from California, and the extent to which the practice was widespread at that early date is unclear.\”
As I noted before, those looking for a supply and demand classroom illustration could do worse than spending some time with the bees.