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Bee Culture

Aggravation Apiaries

By March 11, 2024No Comments

Profit and Loss in a Beekeeping Business
By: John Miller

How are things in American commercial beekeeping? According to a survey of several successful operations in America, conditions are not ideal. The price of North American honey is poor. It is very possible that Argentina, a significant honey-producing country will experience yet another default and currency devaluation, pressuring export prices. The market is uncertain.

Industry donations to fund bee research wither. Beekeepers must carefully consider expenditures. Spending is under scrutiny. I’m not aware of guys canceling their gym memberships, or their wives abandoning yoga, but still, 2024 is challenging. I want to believe a monthly donation of $40, less than the gym membership, fits into anyone’s budget.

I had a wise accountant. He always counseled me to take care of free cash flow. That’s the check from the packer for the load(s) of honey. It’s the almond check(s) we earn, and deposit in our bank account. It is how commercial beekeepers survive.

Do commercial beekeepers create annual budgets? Not many. A business is fraught with all kinds of challenges. Whether an outfit adopts a budget or not, a beekeeper learns over time that certain expenses will occur. Recently, feed costs, an unavoidable expense, have blown budgets apart. Feed syrup is really, really expensive. We feed a lot of calories to our bees. Sugar syrup is just calories colonies consume. It’s never much mattered to me what the blend was – and hallway talk about which syrup is better, the blend, the weight – that all pales now in the face of fifty-cent syrup. It’s calories. Bees need feed. Feed is not expensive until denied. In the following example, Aggravation Apiaries will feed 1,000,000 pounds of feed into it’s imaginary 15,000 hive outfit in 2024. At .50/lb., it’s $500,000; or 66 pounds per colony.

Freight was recently really, really expensive. It is less so now; but still $3.85 per mile for a semi load of bees over 2,000 miles costs $7,700. At $5.20 a mile that’s $10,400; one way.

If you have 40 loads of bees to deliver from Lumberton, MS to Madera, CA (2108 miles at $3.85/mile) that’s $324,632. One way. It’s $438,464 with the more expensive rate. Divide that $10,400 in freight by 432 colonies; that’s $24/colony. One way. To get those colonies up to Devil’s Lake, ND for Summer, it’s another 1813 miles – $6,980 @ $3.85/mile; times 40 semi-loads – $279,000! In October, those hives return to Mississippi, another 1600 miles @ $3.85/mile, another $6,160.00 x 40 loads = $246,400. Total OTR freight bill, for 2024: $849,000.

The following is a hypothetical Profit and Loss Statement (P&L) – the annoying document the banker insists on seeing before agreeing to an operating loan for 2025. How does beekeeping look, through the eyes of lenders?

A good P&L ledgers expenses by category and income by category. Every beekeeping outfit is different. In this analysis, we will stick to the knitting. Beekeeping and the direct expenses of beekeeping. Some P&L’s get weedy; with intermingling of, for example, cattle or other livestock kept on property primarily used as a beekeeping operation. Other outfits may rent portions of the property for other uses or for seasonal uses; renting buildings that house bees indoors during Winter, repurposed for storage of seasonally in-demand goods. This P&L exercise strips out the secondary property uses, say growing a few almonds, or fruit trees, or a small herd of elk.

First, list income. Beekeeping income should be pretty simple; but sometimes it isn’t.

Some outfits pursue pollination of several crops. Some focus solely on almond pollination; then sell colonies after pollination. Some sell bulk bees to queen and package producing outfits. Some do all of it. This P&L does not explore queen and package outfits – they have their own challenges. There are many ways to wring a profit from beekeeping. There are lots of ways to diminish income from beekeeping by attempting to do too many things poorly; no thing with excellence. Honey sales, for example, are in this exercise – trailer loads of honey. This is not an outfit that packs honey for farmers markets.

Table 1: Aggravation Apiaries P%L. Logged by number. Listed by Activity.
101 Bulk bees / Nucs / Brood $38,000
102 Honey $1,000,000
103 Beeswax / Pollen $40,000
104 Fright income (hauling other outfit’s bees) $10,000
105 Gain on sale of used equipment $30,000
Government Assistance:
106 Emergency Livestock Assistance Program $37,000
107 Lack of Rainfall Insurance $300,000
108 Other Government Assistance $400
109 Interest Income $16,000
110 Patronage Income $700
111 Pollination Income – Almonds $2,400,000
112 Pollination Income – Plums $42,000
113 Pollination Income – Apples $130,000
114 Bee Health / Supplies $500
115 Grant $18,000
116 Labor $6,500
117 Refunds $5,000
118 Reimbursements (other) $2,000
119 Rental / Lease income $60,000
Gross Income: $4,136,100

In the example in Table 1, Aggravation Apiaries focuses on pollination income and honey production income. The 2022 honey crop earned a handsome price, but the 2022 honey crop was poor – the 2023 crop was better, but the price fell 30% – because this is farming. Prices rise and fall according to market conditions. Significantly, Emergency Livestock Assistance Program and the Lack of Rainfall insurance provided risk arbitrage income for this outfit. Years when rainfall is normal, no income derives from Lack of Rainfall insurance; a significant risk. Closely-related beekeeping activities, the sale of bulk bees, nucs and brood, the sale of beeswax contributed marginal income. This outfit is focused.

Table 2: Aggravation Apiaries P&L Expenses. Logged by number. Listed by activity.
200 Advertising $4,500
201 Bee Nutrition (syrup, pollen, medications) $470,000
202 Bee Supplies (queens, woodenware, supplies) $350,000
203 Housing Expenses (H2A housing, other buildings) $15,000
204 Key Man Expenses (taxes, utilities, maintenance) $46,000
205 Warehouse Expenses $30,000
206 Indoor Storage Maintenance, Utilities $38,000
207 Corporate Tax Expense $30,000
208 Insurance (auto, property, fen liability) $100,000
209 Key Man Insurance $4,000
210 Lack of Rainfall Insurance $125,000
211 Workmen’s Compensation Insurance $25,000
212 Office & Shop Supplies $40,000
213 Federal & State Payroll Tax $240,000
214 Retirement Expense $50,000
215 Payroll $800,000
216 Cell Phone Reimbursement $2,500
217 Rent: locations, lease, office, landowner meal $450,000
218 Fleet: fuel, maintenance, registrations $320,000
219 Services: license fees, donations, dues $25,000
220 Professional Fees: accounting, H2A expenses, payroll services, contract labor $45,000
221 Travel Expenses: hotel, airfare, meals $85,000
222 Depreciation Expense $300,000
223 Freight Expense $340,000
Total Expenses: $3,938,000
Net Income: $201,100

Observations: lacking from the Expenses is Interest Expenses. No line item in this example. Some outfits operate on their own money, and earn, as noted on the income side, $16,000.

Outfits with a $500,000 operating loan in 2023, for example, endured steadily rising interest rates, up to and exceeding 8%, depending on the terms of the operating loan. If the interest rate on the operating loan is 6%; and the loan was in place for all of 2023, because this is farming and sometimes, some years the operating loan rolls over into the next year; for the 12 months of 2023, interest expenses totaled $30,000 on the $500,000 loan. The spread between interest earned and interest paid is $46,000. $46K used to buy a 5500 cab and chassis – but no more. The point is: interest never sleeps. People who get interest, get interest.

As a young couple, my wife and I bought our first home. It was 1980; and for those of you who remember, Paul Volker and Ronald Reagan were wringing inflation out of an overheated economy with sky-high interest rates. Short term loans topped out at 18% annual interest rate. I have no idea what credit card interest rates were; probably approaching 30%! Outrageous!

With our savings, $30,000, we bought our first home. The interest rate on that $52,000 loan from Hart Federal Savings and Loan was 10.75%. I was so pleased, and relieved. When we began our marriage, our first home was a trailer house. Everyone should start in a trailer house. As a bonus, our mobile home had been flooded in the 1976 failure of the Teton dam above Rexburg, Idaho. And our little home smelled like it had been in a flood. We were motivated to climb a rung on the home-ownership ladder.

The house payment was due on the 5th of each month. We wrote our first monthly payment check for $504 and mailed it in. This was BC (Before Computers) and auto pay conveniences. On about the 10th of the month, a postcard arrived, acknowledging our payment.

I’ll never forget that postcard. It was a pale pastel green, with a ledger noting our payment.

Of the $504 we paid on that first month, $503.96 went to interest payment; .04 went to the principal on the loan. Four pennies. This is called a moment of clarity.

From that moment on, I had a crisp, vivid understanding of interest. That moment is still crystal clear in my memory. It was all I ever needed to know about the burden of debt and interest.

The Aggravation Apiaries example is hypothetical, but not far from what commercial outfits experience.

In this example, I chose 15,000 colonies as the hive-count. It is an arbitrary number.

Beekeeping is a business. It’s also farming. Big risks include hive health, rainfall, market conditions, demand for pollination services, demand for the honey crop and the price earned from those pollination services and sale of the honey crop. Neither the almond pollination market nor the honey market is well-informed; they are not transparent.

In 2024, during January, as usual, there were a lot of beekeepers looking for pollination contracts. In 2024, colonies were again worth stealing, as beekeepers annually learn. I’ve noticed no colony of bees has ever been stolen from an indoor wintering building. As usual, on February 1, there was an oversupply of beehive woodenware in California that used to house live colonies. As usual, on February 15, there was a scarcity of sufficiently strong colonies to meet pollination contracts. This has been true for most of the past 20 years.

One way to strengthen a P&L is to have relationships with almond, plum, apple, cranberry, blueberry, vine crop growers and carrot seed producers, as examples. Another way is to establish a relationship with a reputable honey packer that will endure decades of market ups and downs. Beekeeping is risky. Markets rise and fall. The better a beekeeper understands their own operating expenses and income, the better they will understand the opportunities of financially successful commercial beekeeping.

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