Friday, January 20, 2012

Colony Collapse Disorder: The Market Response to Bee Disease
Although the winter has barely begun and the spring thaw still feels a long way off for ... Northerners, beekeepers are busily preparing for the beginning of the pollination cycle in California and other Southern states. With more than 2.5 million hives of bees on the road each year, honey bee pollination makes our diet more nutritious and tasty. Yet, in 2007 the popular press wrote that Colony Collapse Disorder, or CCD, was a threat to the honey bee and its valuable pollination services. Headlines such as "Bee Colony Collapses Could Threaten U.S. Food Supply," (Associated Press, May 3, 2007) caught the attention of readers, but in reality, Colony Collapse Disorder has had little impact on American consumers.

... Randy Rucker and Wally Thurman [claim] in the most recent installment of the PERC Policy Series, a market response provided a solution to a real problem. Despite early predictions that CCD would cause billions of dollars of direct loss in crop production, people in the beekeeping industry reacted so swiftly that no changes were detected by the consumers. Fruit farmers and beekeepers took into account the effects they have on each other and settled the difference through pollination fees and other contract terms. While overcoming the difficulties of CCD has been no easy matter, beekeepers have proven themselves adept at navigating changing market conditions.

"The state of the honey bee population - numbers, vitality, and economic output - are the products of not just the impact of disease but also the economic decisions made by beekeepers and farmers," writes Rucker and Thurman.
The full report is available free of charge at

In 2007, then-Secretary of Agriculture Mike Johanns warned that “if left unchecked, CCD has the potential to cause a $15 billion direct loss of crop production and $75 billion in indirect losses.”

Three methods are commonly employed by beekeepers to maintain and rebuild hive numbers. Understanding them is key to knowing how the beekeeping industry responds to disease. The first method used to replace weak hives or hives lost over the winter involves a beekeeper splitting a healthy, full-strength hive into two parts.

The second method used to build or replenish hive numbers is to buy packaged bees. There are companies that sell packaged bees for this purpose... The current average price of a three-pound package of bees, which includes roughly 12,000 worker bees and a fertilized queen, is about $55. If an empty hive is stocked with a package of bees, it might be productive immediately. Soon, however, there will be a drop-off in production due to the time lag between the placement of the package of workers in the hive and the time that a new generation of worker bees is hatched and matured to the point of leaving the hive to collect nectar, pollen, and water. Even if the new queen begins laying fertilized eggs immediately upon her placement in the empty hive, it will take 21–25 days before worker bees hatch. If a hive in Oregon or Washington is stocked with packaged bees in mid-April, it probably will not produce surplus honey until the following year.
The average annual rate of winter mortality over 2007–2011 was 33 percent. A reasonable assessment derived from beekeeper surveys is that since the appearance of CCD, mortality rates have at least doubled. Mortality represents an outflow from the population of bees, while the re-queening and splitting of hives and the creation of new colonies represents an inflow. The net result is the observed change in colony numbers.

Estimates of honey bee colony numbers can be obtained from annual surveys of beekeepers conducted by the USDA. Data from these surveys are generally available back to 1939. A prominent feature of the estimates of colony numbers ... is their substantial decline since the mid-20th century. Particularly notable is the gap and abrupt drop in the early- to mid-1980s.... The abrupt drop is the result of a change in 1986 in the data collection procedures used by the USDA....

... Between 2006 and 2007 ... CCD might have had its first impacts. Colony numbers reveal no notable decrease in the years since the onset of CCD. In fact, there were more colonies in 2009 than there were in 2006 (or any other year since 1999). Given that an average of one-third of the honey bee colonies in the United States have died in each of the four winters since the onset of CCD, how can this be? Perhaps it is because beekeepers have always lost hives during the winter. Sustainable and profitable commercial beekeeping requires them to replace dead and weak colonies using the methods described above.

Since the onset of CCD, beekeepers have had to replace more hives to maintain their colony numbers, and the evidence suggests they have done exactly that.
Beekeepers supply the services of bees for two commercial purposes: to provide pollination for farmers and to produce honey. Bee disease that increases the costs of beekeeping should increase the price of the industry’s outputs. Honey is traded internationally; and domestic honey price effects seem less likely than do price effects on pollination services. To look for evidence of increased pollination fees due to Colony Collapse Disorder, consider data from a survey [of almond and apple pollination fees] administered by Michael Burgett of Oregon State University.
Almond fees rose from $59 to $89 between 2004 and 2005, and increased again to nearly $140 in inflation-adjusted terms for the years 2006, 2007, 2008, and 2009. It is tempting to attribute these fees to Colony Collapse Disorder—and CCD may be partly to blame—but the timing is not right. The first reported instance of CCD was during the winter of 2006–2007, which could only have affected fees beginning in spring 2007.
Surveys of California beekeepers conducted by the California State Beekeepers’ Association since 1996 (see Rucker, Thurman, and Burgett 2011 for a statistical analysis of these data sources). They estimate there to be no CCD effect on non-almond pollination fees and $20 of the recent increase in almond fees.
Recent almond fees are near $140, so that the implied almond fee had CCD not arisen is $140 - $20 = $120. The implied percentage increase in almond fees due to CCD is then (20/120) × 100 = 16.7%. Further, with a pollination fee for almonds of $120 per colony and a stocking density of two colonies per acre, the cost per acre of pollinating almonds is 2 × $120 = $240. Suppose, as recent industry data suggest, that the yield of almonds is 2,000 pounds per acre and that the farm-gate price of almonds is $2 per pound. Then revenue per acre is 2,000 × $2 = $4,000 and the cost share of pollination in almonds is $240/$4,000 = 0.06 or 6%.

Next, suppose that Smokehouse® Almonds sell for $7 per pound at the retail level and that one pound requires 1.429 pounds of raw almonds (the rate of conversion from at-the-farm and in-the-shell almonds to retail shelled almonds). Then the cost share of farm almonds in the production of Smokehouse® Almonds is (1.429 × $2)/$7 = 0.41.22 Thus, the cost share of pollination services in retail Smokehouse® Almonds is 0.06 × 0.41 = 0.025 or 2.5 percent.

The stipulated 16.7 percent increase in almond pollination fees due to CCD therefore causes the cost of Smokehouse® Almonds to increase by a proportion of 0.167 × 0.025 = 0.004. Four-tenths of one percent of the $7/lb cost of Smokehouse® Almonds is 2.8¢, the implied increase in the shelf price of the can of almonds.... Given the relatively high cost share of pollination at the farm level, the calculation provides something of an upper bound on what one would find for other commodities and products. Against the backdrop of other sources of food price variation, it is no wonder that evidence of CCD at the grocery store has failed to materialize.
Concluding that CCD has had little effect on consumers does not imply that its effects are of no concern to beekeepers.... Responses to questions in the PNW survey about replacement methods indicate that beekeepers used the method of splitting hives for almost 80 percent of the colonies replaced.... Suppose a beekeeper inspects his hives and finds that 100 of them are dead. To replace them, he must purchase 100 queens to place with the new splits produced from the healthy parent colonies. Recent advertisements in the American Bee Journal suggest these will cost about $15 each. In addition, about 20 minutes of labor will be required per colony to remove the four or five frames of brood, bees, and honey stores from the parent colony to stock the nuc colony. If labor costs are assumed to be $12 per hour, the labor cost per colony is $4 and the total cost of each split is $15 + $4 = $19.23

Burgett, Rucker, and Thurman (2009) estimate that PNW winter mortality rates increased from about 14 percent prior to the appearance of CCD to roughly 30 percent over the winter of 2007–08. Thus, assuming that CCD is responsible for all of this 16 percentage point difference, about half the colony mortality in the 2007–08 winter is attributable to CCD. The beekeepers who responded to the survey owned 62,100 out of the USDA’s estimated 90,000 colonies in the PNW. Assuming that the beekeepers responding to the survey are representative of the non-responding PNW beekeepers, the demise of about 14,400 (= 90,000 x 0.16) colonies in the PNW was due to CCD. The 25 beekeepers who responded to the 2008 PNW survey owned a total of 62,100 colonies as of Oct.1, 2007, or an average of 2,484 colonies each. Assuming these beekeepers lost 16 percent of their bees to CCD on average, the estimated CCD cost per beekeeper was 0.16 × 2,484 × $19 = $7,551. Offsetting these increased costs are increased beekeeper revenues from higher almond pollination fees, and 72 percent of the colonies in the 2008 survey were rented out for almond pollination.

If, as in the previous section, we take the almond fee increase due to CCD to be $20, then the average PNW beekeeper with 2,484 colonies, who uses 72 percent of them (0.72 × 2,484 = 1,788) to pollinate almonds, gains an increase in revenue of 1,788 × $20 = $35,760. The change in net revenue is $35,760 - $7,079 = $28,681, implying that beekeepers benefit.

by Wally Thurman 1 and Randy Rucker 2
1. Professor of agricultural and resource economics at North Carolina State University and PERC senior fellow
2. Professor of agricultural and resource economics at Montana State University and PERC 2011 Lone Mountain Fellow.
PERC the Property and Environment Research Center is dedicated to improving environmental quality through property rights and markets. 2048 Analysis Drive Suite A; Bozeman Montana 59718; Tel: 406.587.9591; Email:
January 17, 2012

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