A Study In Profitability For A Mid-Sized Beekeeping Operation

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A Study In Profitability For A Mid-Sized Beekeeping Operation
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Fact sheet
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Sanford, Malcolm T.
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University of Florida Cooperative Extension Service, Institute of Food and Agriculture Sciences, EDIS
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"December 1992."
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"RF-AA089"

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FactSheetRF-AA089 December1992AStudyinProfitabilityforaMid-SizedBeekeeping Operation1 MalcolmT.Sanford2Costsofproducingagriculturalproductshave increasedmuchfasterthansellingprice.Apiculture suffersasmuch,ifnotmore,thanotheragricultural enterprisesbecausethepriceofhoneyhasovertime notkeptupwithproductioncosts.Eventhoughthe 1970ssawadramaticriseinworldhoneypricesfrom whichproducersprofited,overthelongrunthey createdcompetitionbyforeignproducers.Besidesfar lowerlaborcosts,thesearchforsourcesofhard currency,nomatterthecost,bycountriessuchasthe People'sRepublicofChinahasalsocreatedhavocin theworldhoneymarket. Historically,ithasbeenunprofitabletoproduce honey,accordingtomostofthelimitedstudiesonthe subject.AdamsandTodd(1933)figureditcost$.07 toproduceonepoundofextractedhoneyforwhich thebeekeeperreceived$.045.Rodenberg(1967) declaredthatoveraten-yearperiod,thecostofthe mostimportantitemsusedbybeekeepersincreased eighteenpercent,whilethepriceofhoneydecreased sevenpercent.Coke(1966)analyzedfifteen commercialhoney-producingfirmsinFloridaand foundanetreturnof$-.0261perpoundofhoney.A detailedstudyofsouthwesternandmidwestern beekeepers(1973)concluded: "BeekeepingforhoneyproductionintheUnited Statesisnotprofitable.Theunitpricereceived bybeekeepersforbulk,extractedhoneyhasnot changedinthelasttwenty-fiveyears,whilethe costofproductionhasincreased.Thus, beekeepers,whorelyonhoneyproductionfor incomemustsupplementtheirincomefromother sources,suchascroppollinationandoutside employment." Thepurposeofthispublicationistohelpthe beekeeperbetteranalyzehisorheroperationtosee ifitindeedisprofitable.Profitabilityisdefinedhere intermsofincomeversusoutgo;itisrecognizedthat manybeekeepersarenotinterestedinmonetarygain, butprefertokeepbeesonanamateurbasis.Thisis innowaydiscouraged,however,thepresentstudy maybeofinteresteventothosebeekeeperswho eschewtheprofitmotiveinkeepingtheirbees. Specificojectivesofthefinancialmodelpresented hereare: 1.Determinethecostsandreturnsassociatedwith beekeeping. 2.Aidbeekeeperswithbudgetingandplanning. 3.Recommendwaystoreducecostsandincrease returns. 4.Suggesthowoperationsizeaffectscostsand returns. Itistheauthor'sopinionthatbeekeepingcanbe aprofitableagriculturalenterprise.Itisalso recognizedthatinordertobeprofitable,the beekeepingoperationmustbeanalyzedcarefullyand thebeekeeperreadytodiversifyactivitiesbasedon 1.ThisdocumentisFactSheetRF-AA089,aseriesoftheEntomologyandNematologyDepartment,FloridaCooperativeExtensionService, InstituteofFoodandAgriculturalSciences,UniversityofFlorida.Publicationdate:December1992. 2.MalcolmT.Sanford,extensionbeekeepingspecialist,EntomologyandNematologyDepartment,CooperativeExtensionService,Instituteof FoodandAgriculturalSciences,UniversityofFlorida,GainesvilleFL32611. TheInstituteofFoodandAgriculturalSciencesisanequalopportunity/affirmativeactionemployerauthorizedtoprovideresearch,educational informationandotherservicesonlytoindividualsandinstitutionsthatfunctionwithoutregardtorace,color,sex,age,handicap,ornational origin.Forinformationonobtainingotherextensionpublications,contactyourcountyCooperativeExtensionServiceoffice. FloridaCooperativeExtensionService/InstituteofFoodandAgriculturalSciences/UniversityofFlorida/ChristineTaylorStephens,Dean

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page2economicimperatives.Thispublicationwillexamine investment,operatingexpenses,cashflowandother indicestoreflecteffectsofdecision-makingatseveral differentlevelswithinabeekeepingoperation. Nostudyisanybetterthanthedataornumbers thatgointoit;thismeansthatthekeytomaking reasonabledecisionsisadequaterecordkeeping.This simplefactcannotbeoveremphasized.Withoutgood recordsofindividualcoloniesandbeeyards,thereis nowayproductioncanbeanalyzed.Thesameistrue offinancialrecords.Ifthispublicationdoesnothing morethanhelpthebeekeeperproducebetter financialrecords,itwillhaveserveditspurpose admirably. Aspreviouslysuggested,thebeekeepingindustry iscurrentlyinastateofflux.Thereareanumberof reasonsforthis,includinghighinterestratesfor borrowingfunds,expensivemanuallabor requirements,increasingproductioncostsofallkinds, aswellasthevirtualriverofimportedhoneyentering intotheUnitedStateseachyearfromthedeveloping world.BeekeepersintheUnitedStateshave traditionallymadetheirlivingproducinghoney,atthe sametimeprovidingpollinationtoawiderangeof cultivatedandnon-cultivatedplantsvirtuallyfreeof charge.Thosesuggestingthatbeekeeperscansolve theeconomicillsofthebeekeepingindustryby increasingpollinationfeesaresimplynotinformed aboutthetruenatureofthisendeavor.Asa consequence,thisstudyisbasedonhoneyproduction andseekstofind"niches"ofprofitabilityforthe beekeeperinthatactivity. Therearetwomajorstrategies,oftenoverlooked bybeekeepers,thatmaybeemployedtoimprove profitability.Thefirstisdevelopingalocalmarket basedonpromotinghoneyforwhatitis,aunique productwithanexcellentreputationasatopping, recipeingredientorsnack.Unfortunately,honeyhas notbeenpromotedasvigorouslyasothersweetsin thepast,andthemarkethassufferederosionfrom introductionofsubstitutes. Asecondstrategyistomorecloselyexamine managementofthebeekeepingoperation. Traditionally,beekeepinghasbeenanextensive activity.Therehavealwaysbeenmanylocationsfor beesandmovingthemfromoneareatoanotherhas beenrelativelyeasy.Thisisnolongerthecase. Locations,especiallyinFlorida,areatapremiumand difficulttocomeby.Inaddition,asagriculturalareas givewaytourbandevelopment,primelocations becomeevenmoredifficulttofind.Thetimehas cometocarefullyexaminetheprofitabilityofmore intensivelymanaginghoneybeecolonies. Fortunately,thisispossible,forconventionalwisdom dictatesthatintensivebeecolonymanagementresults inmoreproductionperunit. Intensivefinancialmanagementisalsoaconcept whosetimehascome.Inthepast,financialanalysis hastakenabackseattoproduction.Thishasbeen trueofmostagriculturaloperations,butcanno longerbeignored.In-depthfinancialmanagement takesagooddealofheadscratchingandpencil pushing.Fortunately,themicrocomputerrevolution willtakesomeoftheburdenofftheproducerby allowinggreatereaseinfinancialsimulation.Asa caseinpoint,thenumbersinthispublicationare developedontemplatesofaspreadsheetprogram calledMultiplan. Thismodelandpublicationexaminethe profitablilityofasmall-scalebeekeepingenterprise withabout500coloniesofbeesthatmovesoncea year.ThestudyisspecificallyforFloridaconditions, however,manyoftheconsiderationsherewillapply withsomemodificationtoanysizeoperationlocated inanypartofthenation.PROFITABILITYProfitisequaltoincomefromanoperationminus outgo.Ifincomeismorethanoutgo,profitabilityis established. Incomeiscollectivelyallthereturnsfroman activity,suchasmoneyreceivedforsaleofbee products(honey,royaljelly,pollen,packagebees)or forpollinationrental.Sellingbeesandqueensor equipmentforonereasonoranotherthatnormally wouldbeusedinanoperationisnotincome,butis consideredareductionininvestmentorfixedcosts. Outgoincludestwokindsofcosts:fixedand variable.Fixedcostsarethosefundsexpended whetherornotanyproductionorsaleofproducts results.Inotherwords,theymustbepaidwhetheror notincomeisproduced.Fixedcostsinclude depreciationonequipment,interestexpenses,taxes, insuranceandrent.Variablecosts,ontheother hand,generallyfluctuatedependingonthescaleof theoperation.Laborisalargevariablecostandas morehoneyisproduced,laborcostswillgoup proportionally.Othervariablecostsarerepairs,fuel, suppliesandbeefeed.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page3FIXEDCOSTSThefollowingfixedcostsareanalyzedinthis section.Theyare:buildinginvestment,land investment,beeinvestment,beehiveinvestment,fence investmentandmachineryinvestment.BuildingMostoperationsneedabuildingasabaseof operationsandplacetodohoneyextractionand equipmentrepair.ThefiguresinTable1show estimatedcostsofabuildingwith2500squarefeet,at $17.00persquarefootandalifeof50years.Annual interestonthebuildingiscalculatedasfollows: (Totalinvestment/2x.075).The7.5%interestisan averagefigureusedthroughoutthefixedcost categories. ACRSistheAcceleratedCostRecoverySystem Table1. EstimatedCostsofaBuilding Numberofsquarefeet 2500 Amountpersquarefeet $17.00 Totalbuildingvalue $42,500.00 Electricity 300.00 Air 100.00 TruckDoors 250.00 Totalbuildinginvestment $43,150.00 Tradeinvalue(none) $0.00 Yearstodepreciate 18 Annualdepreciation (ACRS)$3,883.50 Annualinterest* $1,618.13 ACRS Depreciation (18year propertyclass) $3,883.509%1st&2ndyear $3,452.008%3rdyear $3,020.507%4th&5thyears $2,589.006%6thyear $2,157.505%7th&8thyears $1,726.004%untilyear19 *(Representspotentialinterestincomeiffundswere placedelsewhere)institutedin1981.Firstyear'sdepreciationis $3,883.50.Caution:Consultyourattorney, accountantortaxpreparerforthelatestIRSrules. ThefigurespresentedinTable1forbothinterestand depreciationarenotnecessarilythosebestforall yearsandalloperations.LandTheoperationmayhaveinvestmentsinland besidesthebuildingmentionedabove.Hereland investmentisestimatedtobe$1,875.00.Landcannot bedepreciated;theinterestcostiscalculatedas showninEquation1andTable2: Variouslandinvestedin $1875.00 Trade-invalue1875.00 Annualdepreciation(none)0.00 Annualinterestoninvestment140.63BeesThebeeinvestmentisseparatedintotwoareas. Itiscalculatedonthebasisof500packages purchasedat$18.00.Thebeeshavenodepreciable valueandtheinterestrateontheinvestmentis calculatedthesameasfortheland(Equation1and Table3). Numberofpackages(newcolonies) 500 Priceperpackage $18.00 Totalpackagecosts 9000.00 Otherassociatedcosts 0.00 Totalinvestmentinbees 9000.00 Trade-invalue 0.00 Annualdepreciation(none) 0.00 Annualinterest $675.00HivesTheestimatedcostsofputtingonecolony togetherarelistedinTable4.Costsarebasedon making500hives,eachconsistingofonebrood chamberandfivesupers.Noticethatover70%of thecostsareinbeeswax(foundation),supers(wooden ware)andlabor.Hiveinvestmentisdepreciableand theinterestontheinvestmentiscalculatedthesame asforthebuilding.FenceAmajorpredatorofhoneybeecoloniesin Floridaistheblackbear.Theestimatedfixedcosts associatedwiththreebearfencesarelistedinTable 5.Fenceshaveaseven-yearestimatedlife;annual

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page4interestrateontheinvestmentiscalculatedthesame asforthebuilding.Table4. CostsPerColony Costspercolony PercentofCost 1Hivebottom $4.80 4% 5Standardsupers@$5.80/ea $29.00 22% 50Standardframes$.42/ea $21.00 16% 50Sheetsfoundation$.70/ea $35.00 26% Rabbits2/superx5@ $.25/pr $2.50 2% 1Innercover@$2.95 $2.95 2% 1Entrancereducer@$.25 $0.25 0% 1Hivecover@$4.25/ea $4.25 3% 1Quartpaint@$3.00 $3.00 2% 8hourslabor@$3.85/hr $30.80 23% Totalpernewcolonybuilt $133.55 100% Numberofnewcoloniesbuilt 500 Totalhiveinvestment $66,775.00 Tradeinvalue $0.00 Yearstodepreciate 10 Annualdepreciation (ACRS)$5,342.00 Annualinterest $2,504.06 ACRSDepreciationtemplateforhives10yearclassproperty $5,342.00 8%firstyear $9,348.50 14%secondyear $8,013.00 12%thirdyear $6,677.50 10%4th-6thyear $6,009.75 9%7th-10thyear Caution:Acasecanbemadetoplacehivesindifferentpropertyclasses.Consultyouraccountant!Table5. CostsPerFence PercentofCost 1Rollwire $15.00 7% 14Posts 109.90 51% Insulators 14.56 7% Fencer 50.00 23% Labor: 2.5hours@$7.15/hr 17.88 8% 2.5hours@$3.85/hr 9.63 4% Total $216.96 100% Totalnumberoffences 3times$216.96(previousscreen) Totalfenceinvestment $650.88 Tradeinvalue $0.00 Yearstodepreciate 5 Annualdepreciation $136.68(ACRS) Annualinterest $24.47

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page5Table5. CostsPerFence PercentofCost ACRSDepreciationtemplatefor fence-5yearclass: Firstyear@15% $97.63 Secondyear@22% $143.19 Thirdthrufifth@21% $136.68MachineryandEquipmentEstimatedfixedcostsofmachineryandequipment associatedwiththisscaleofoperationaredetailedin Table7.Replacementvaluesforthe3/4tontruck andused1/2tontruckarebasedon50%personaluse and50%businessuse.Interestoneachofthese investmentsiscalculatedthesameasforthebuilding. Asummaryofinvestment(fixed)costs(Table7) forthisoperationisoutlinedinTable8.Theseare onlyestimates.Certaininvestmentcostsmayormay notoccur,dependingoncircumstances.Columntwo revealsatotalinvestmentof$284.01perhive.The thirdcolumnprovidesanideaofthepercentageof investmenteachcategoryrepresents.Noticethat hivesmakeup47%oftheinvestment,thebuildingis 30%andmachineryandequipmentare14%. Howtheinvestmentisfinancedisalsoimportant. Table6isasuggestedfinancingscenarioandadetail ofthemonthlypaymentsnecessaryforcashflow analysisisshowninTable9.Atotalof$142,005.88 istobefinancedoverfiveyearsat12%.Thismeans amonthlypaymentof$2,717.63.Agoodportionof thisistaxdeductibleinterestexpense. Anotherfixedcostitemisrepairsonmachinery Totalfinancialinvestment $142,005.88 Amountdown $19,834.88 Tofinance: $122,171.00 Interestrate 12% Yearstofinance5 MonthlyPaymentsare:$2,717.63andequipment,hives,building,etc.Theyare estimatedhereatonepercentofinvestmentand listedinTable10.Thismeansamonthlyrepairbill of$103.44.Table7. Equipment EquipmentItem Replacement Value Salvage Value Depreciation Value Annual Depreciation AnnualInterest 3-YearClass 3/4tontruck (1)$5,000.00 $840.00 $4,160.00 ---$219.00 5thwheeltrailer 5,000.00900.004,100.00 ---221.25 Used1/2tontruck (1)2,000.00 100.00 1,900.00 ---78.75 Total3-yearclass (2)$12,000.00$1,840.00$10,160.00(3)$2,540.00 $519.00 5-YearClass Extractor $1,700.00 $510.00 $1,190.00 ---$82.88 Whirldry 1,200.00360.00 840.00 ---58.50 BrandMelter 800.00 50.00 750.00 ---3l.88 Sumppumptank 500.0050.00 450.00 ---20.63 Uncapper 100.00 0.00 100.00 ---3.75 4-1000lbtanks 620.00180.00 440.00 ---30.00 Boiler 50.00 0.00 50.00 ---1.88 Feeders 500.000.00 500.00 ---18.75 Movingscreens 600.00 0.00 600.00 ---22.50 5batteries 200.000.00 200.00 ---7.50 Beeblower 450.00 0.00 450.00 ---16.88 Storagecontainers 1,835.000.001,835.00 ---68.81 Total5-yearclass (4)$8,555.00 $1,150.00 $7,405.00 (5)$1,110.75 $363.94 TotalsforAnnualSummary $20,555.00 $2,990.00 $17,565.00 $3,650.75 (6)$882.94

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page6Table7. Equipment EquipmentItem Replacement Value Salvage Value Depreciation Value Annual Depreciation AnnualInterest (1)Basedon50%personaluse. (2)Annualdepreciationfor3-yrclassproperty(ACRSDepreciationtemplate): $2,540.001styear@25% $3,860.802ndyear@38% $3,759.203rdyear@37% (3)Annualdepreciationfor5-yrclassproperty:(ACRSDepreciationtemplate): $1,110.751styear@5% $1,629.102ndyear@22% $1,555.053rd-5th@12% (4)Totalcosttoestimate3-yearrepaircostslesstrucks:$5,000.00 (5)Totalcosttoestimate5-yearrepaircosts:$8,555.00 (6)Interest=replacementcostplussalvagevalue/2*.075 Table8. SummaryofFixedCosts Replacement Value Inv.Cost perHive Percentof Investment Tradein Value Annual Depreciation Annual Interest Building $43,150.00 $86.30 30% $0.00 $3,883.50 $1,618.13 Hives 66,775.00133.5547% 0.00 5,342.00 2,504.06 Bees 9,000.00 18.00 6% 0.00 0.00 675.50 Machinery 20,555.0041.1114% 2,990.00 3,650.75 882.94 Fences 650.88 1.30 0% 0.00 97.63 24.41 Land 1,875.003.751% 1,875.00 0.00 140.63 Totals $142,005.88 $284.01 100% $4,865.00 $12,973.88 $5,845.16 Table9. PaymentSchedule PaymentNumber Principal Interest Balance 1 $1,495.92 $1,221.71 $12,0675.08 2 1,510.88 1,206.75 11,9164.21 3 1,525.99 1,191.64 11,7638.22 4 1,541.25 1,176.38 11,6096.98 5 1,556.66 1,160.97 11,4540.32 6 1,572.23 1,145.40 11,2968.10 7 1,587.95 1,129.68 11,1380.10 8 1,603.83 1,113.80 10,9776.30 9 1,619.87 1,097.76 10,8156.40 10 1,636.07 1,081.56 10,6520.40 11 1,652.43 1,065.20 10,4867.98 12 1,668.95 1,048.68 10,3199.04 Totals $18,971.96 $l3,639.55 Table10. RepairsonMachineryandEquipment Investment Est.Repair Permonth Building@1%ofcost $43,150.00 $431.50 $35.96

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page7Table10. RepairsonMachineryandEquipment Investment Est.Repair Permonth Hives@1%ofcost 66,775.00 667.75 55.65 Machinery,3-yearclass@1% 5,000.00 50.00 4.17 Machinery,5-yearclass@1% 8,555.00 85.55 7.13 Fences@1%ofcost 650.00 6.51 0.54 Total $1241.31 $103.44VARIABLECOSTSEstimatedvariablecostsforthisoperationfollow. Again,thesevaryaccordingtonumberofcolonies operatedandamountofproduct(honey)produced. Inordertoanalyzethesecosts,thefirstthingtodois examinethebeekeeper'sactivitiesthroughoutthe year.Keepingbeesisaseasonaloccupation,hecticto frenziedinpaceduringspringandsummer,while oftenprovidinganabundanceoftimeinfalland winter. Thefollowingisaprobablesequenceofeventsfor a500colonybeekeepingoperationinFlorida.Itis basedononemoveperyeartotakeadvantageofthe citrusflow.Thefiguresprovidedhereareaggregates ofalltheyardsintheoperation,whichmightnumber asmanyastwelvetosixteen.Costsareaccountedfor accordingtothemonthaccruedandfedintoayearly cashflowstatementforcomparisonandtoaidin financialplanning. InFlorida,thebeekeepingyearcanstartasearly asJanuary.Duringthismonth,thebeekeepermakes hisfirstcolonyinspectionandmaybegintofeedthe beesforpopulationbuildup.Theestimatedcostsin Table11forthemonthofJanuaryarefor450 colonies,supposinga50colonylossoverwinterfrom theusual500.Thetotalnumberofhiveswillbe broughtto500inFebruary. InFebruary,mapleandwillowareblooming heavilyandpopulationsarebeginningtoincrease rapidly.Atthistime,thebeekeepermakesincrease ordivisionstoreplenishcolonynumbers,50new coloniesaremadebydivisions.Theestimatedcosts forthemonthofFebruaryareshowninTable12. BeekeepinggetsintofullswinginMarch,and coloniesaremovedintothecitrusgrovesandsupered upbythemiddleofthemonth.Theestimatedcosts forMarch1through15areshowninTable13.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page8FromthemiddleofMarchtomidApril,citrus honeyisharvestedandextracted.Theestimatedcosts forMarch15throughApril15areshowninTable14. FrommidApriluntiltheendofMay,thebees aremovedfromcitrusintogallberryand/orpalmetto locations.TheestimatedcostsforApril15through May20areshowninTable15. TheendofMayandfirsthalfofJunemarksthe harvestofgallberryandpalmettohoney.The estimatedcostsforMay20throughJune15are showninTable16. ExtractionisfinishedupinJuneandJuly.The honeyisalsobeingpackedatthistime.The estimatedcostsfromJune15throughJuly15are showninTable17. FrommidJulyuntilSeptember1,thereislittle workinthebeeyard.However,packingand marketingthecropisinfullswing.Beginningsome timeinSeptember,coloniesarerequeenedandfedin preparationforwinter.TheestimatedcostsforJuly 15throughSeptember15areshowninTable18. DuringthelatterpartofSeptember,coloniesare checkedforqueenacceptanceandpopulationlevel. Afurther,finalinspectionoccursinOctoberor Novemberandcoloniesweakinnumbersare combinedwithstrongerones,inkeepingwiththe beekeeper'sphilosophyoftakingwinterlossesinthe fall.TheestimatedcostsforSeptember15through November15areshowninTable19. Thereareanumberofmiscellaneousactivitiesfor thebeekeepertobeengagedinfromNovember throughDecember.Theseincludehivemaintenance (repairandpainting)andperhapsmostimportant, planningforthecomingyear.Theestimatedcostsfor November15throughDecember31areshownin Table20. Totalsfortheyearforeachcategoryalongwith thepercentageaccountedforbyeachareprovidedin Table21.Thisshowsthatoperatorlabor,hiredlabor, sugarandqueencostsarehighincomparisonto othercategories(drugs,trucking).Reducingqueen costs,forexample,mightprovidesavings,although stockperformanceshouldneverbeslightedin intensivebeemanagement.Hiredlabortoo,maybe substitutedforoperatorlabor,whichislessexpensive perhourbycomparison.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page9Table11. EstimatedCostsforJanuary @ Total Hours 10lbsugar $.25/lbx450colonies $1125.00 --.01lbTM25 $6/lbx450colonies $27.00 --10minoperatorlabor/colonyX450 $6.50/hr $487.50 75 5minhiredlabor/colonyX450 $3.50/hr $131.25 37.5 150truckmiles $.32/mile $48.00 --2hroperatordrivetime $6.50/hr $13.00 2 1hrhireddrivetime $3.50/hr $3.50 1 Note:Terramycin(TM25)isroutinelyusedasadiseasepreventativeinmostbeekeepingoperations. Table12. EstimatedCostsforFebruary @ Total Hours 7lbsugar $.25/lbx50colonies $87.50 -10minoperatorlabor/colonyX50 $6.50/hr $54.17 8 5minhiredlabor/colonyx50 $3.50/hr $14.58 4 20truckmiles $.32/mile $6.40 -1hroperatordrivetime $6.50/hr $6.50 1 1hrhireddrivetime $3.50/hr $3.50 1 50queens $5.00/ea $250.00 -Table13. ExtimatedCostsforMarch(1-15) @ Total Hours 10minoperatorlabor/colonyx500colonies $6.50/hr $541.67 83 10minhiredlabor/colonyx500colonies $3.50/hr $291.67 83 800truckmiles $.32/mile $256.00 -8hroperatordrivetime $6.50/hr $52.00 8 8hrhireddrivetime $3.50/hr $28.00 8 Meals,hotel,telephone --$160.00 --Table14. EstimatedCostsforMarch15-April15 @ Total Hours PullCitrusHoneyon500colonies: 5minoperatorlabor/colonyx500colonies $6.50/hr $270.83 42 5minhiredlabor/colonyx500colonies $3.50/hr $145.83 42 500truckmiles $.32/mile $160.00 -5hroperatordrivetime $6.50/hr $32.50 5 5hrhireddrivetime $3.50/hr $17.50 5 Meals,hotel,telephone --$160.00 --

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page10Table14. EstimatedCostsforMarch15-April15 @ Total Hours ExtractCitrusHoneyon500colonies: 50hroperatorlaborX500colonies $6.50/hr $325.00 50 50hrhiredlaborX500colonies $3.50/hr $175.00 50 100truckmiles $.32/mile $32.00 -2hroperatordrivetime $6.50/hr $13.00 2 2hrhireddrivetime $3.50/hr $7.00 2Table15. EstimatedCostsforApril15-May20 @ Total Hours 10minoperatorlabor/colonyx500colonies $6.50/hr $541.67 83 10minhiredlabor/colonyx500colonies $3.50/hr $291.67 83 800truckmiles $.32/mi $256.00 -8hroperatordrivetime $6.50/hr $52.00 8 8hrhireddrivetime $3.50/hr $28.00 8 Mealshotel,telephone --$160.00 -Table16. EstimatedCostsforMay20-June15 @ Total Hours 5minoperatorlabor/colonyx500colonies $6.50/hr $270.83 42 5minhiredlabor/colonyx500colonies $3.50/hr $145.83 42 500truckmiles $.32/mile $160.00 -5hroperatordrivetime $6.50/hr $32.50 5 5hrhireddrivetime $3.50/hr $17.50 5 Meals,hotel,telephone --$160.00 -Table17. EstimatedCostsforJune15-July15 @ Total Hours 40hroperatorlabor $6.50/hr $260.00 40 40hrhiredlabor $3.50/hr $140.00 40 200truckmiles $.32/mile $64.00 --2hroperatordrivetime $6.50/hr $13.00 2 2hrhireddrivetime $3.50/hr $7.00 2

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page11Table18. EstimatedCostsforJuly15-September15 @ Total Hours 250queens $5.00/ea $1250.00 -10lbsugar $.25x500colony$1250.00 -.01TM25 $6/lbx500colony $30.00 -1tspfumagillin $1.30x500 $650.00 -10minoperatorlabor/colony $6.50(500) $541.67 83 5minhiredlabor/colony $3.50(500) $145.83 42 300truckmiles $.32/mile $96.00 -3hroperatordrivetime $6.50/hr $19.50 3 3hrhireddrivetime $3.50/hr $10.50 3 Table19. EstimatedCostsforSeptember15-November15 @ Total Hours 5minoperatorlaborx250colonies $6.50/hr $135.42 21 150truckmiles $.32/mile $48.00 -3hroperatordrivetime $6.50/hr $19.50 20 Table20. EstimatedCostsforNovember15-December31 @ Total Hours Maintenance200operatorlaborhrs. $6.50/hr. $1300.00 200 Maintenance200hiredlaborhrs. $3.50/hr. $700.00 200 600truckmiles $.32/mile $192.00 --Planning40operatorhrs. $6.50/hr. $260.00 40 Table21. AnnualTotalsandPercentages Sugar Drug Misc. Operator Labor Hired Labor Truck Queens Annualtotals $2,462.50 $707.00 $640.00 $5,242.25 $2,304.17 $1,318.40 $1,500.00 Percentoftotal 17% 5% 5% 37% 16% 9% 11% Totaloperatorhours=823 Totalor100%ofcostsare$14,174.32 Totalhiredhours=658 Totaltruckmiles=4120 RETURNNowthatproductioncostshavebeenexamined, theymustbeoffsetbyincomefromtheoperation. Therearetwomajorwayshoneyissoldbythe beekeeper:retailandwholesale.Mostlarge beekeeperssellonthewholesalemarket;thecropis extracted,packedinfifty-fivegallondrumsand shippedofftobeprocessedbymiddlemen,called packers.Alternatively,thebeekeepermaypreferto developalocalmarketandsellretail. Thisstudyseekstoexaminetheeffectsofboth wholesalingandretailinghoney.Assuch,itassumes thebeekeeperwilldosomeofboth.Thehoney returnpercolonyinthisstudyisestimatedtobe106

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page12pounds.Thisisanoptimisticfigureandrepresentsan averageofabout50poundspermajorflow(citrus, gallberry).Thisyieldmultipliedbythenumberof coloniesequals53,000pounds.Thefollowingare estimatedcostsandreturnsforretailing25,500 pounds(48%ofthecrop). Inthiscase,grossretailsalesareprojectedat $26,545.00.Containercosts(Table22)areshownas $7710.00. Othervariablesaremarketingcosts(Table23) andinclude$0.04perpoundadvertisingand$0.32per miletransportationcosts. Wholesalingcostsofpacking27,500pounds(52% ofthecrop)indrumsisshowninTable24;Projected wholesalesalesare$12,100.00,containercostsare $1,083.33. Projectedprofitfromtotalsalesof$38,645.00is $26,820.17(Table25).Noticethat62%oftheprofit isderivedfromretailsalesand38%fromwholesale sales.Totalretailsalesis69%oftotalsales. Thefiguresrevealthatthemajorityofcostsinthe packingareforcontainers,74%overall,and77%and 60%fortheretailandwholesalesidesrespectively. Advertisingalsotakesupalargeshareaswell,being 13%ofoverallcosts. Again,marketingcostsarenotincurredequally throughouttheyear.Asaconsequence,thefiguresin Table26showtotalcostsandthemonthstheyare paid.Thesefiguresareprojectedinthecashflowfor thefirstyearofoperation.Table22. ContainerCosts RetailContainerSize Totallbs. Number needed Cost Totalcost ofcontainer Priceper Pound TotalSales 60 12,000 200 $4.00 $800.00 $0.95 $11,400.00 5 4,000800$1.80$1,440.00$0.98 $3,920.00 2 3,500 1,750 $1.00 $1,750.00 $1.15 $4,025.00 1 6,0006,000$0.62$3,720.00$1.20 $7,200.00 Totals 25,500 $7,710.00 $26,545.00 Table23. MarketingCosts RetailMarketingCosts Cost/lbof 25500lbs Cost/mile 2000miles Cost/hr 100hrs TotalCost Advertising $.04 $1,020.00 Transportation $0.32 $640.00 Operatorlabor $6.50 $650.00 Total $2,310.00 Table24. WholesalingCosts WholesaleMarketingCosts Cost/lbof 27500lbs Cost/mile 300miles Hrs. Cost/hr TotalCost Advertising $.02 $550.00 Transportation $0.32 $96.00 Operatorlabor 10 $6.50 $65.00 Hiredlabor 4 $3.50 $10.00 Total $721.50

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page13Table25. ProfitandCostAnalysis Retail %Sales %RetailCosts TotalRetailSales $26,545.0069% RetailContainerCosts $7,7l0.00 77% RetailAdvertisingCosts 1020.00 10% RetailTransportCosts 640.00 6% RetailHiredLaborCosts 0.00 0% RetailOperatorLaborCosts 650.00 6% TotalCosts $10,020.00 RetailProfit $16,525.00 62%PercentTotalProfit Wholesale %Sales %Costs TotalWholesaleSales $12,100.0031% WholesaleContainerCosts $1,083.33 60% WholesaleAdvertisingCosts 550.00 30% WholesaleTransportCosts 96.00 5% WholesaleHiredLaborCosts 10.50 1% WholesaleOperatorLaborCosts 65.00 4% TotalCosts $1,804.83 WholesaleProfit $10,295.17 38%PercentTotalProfit TotalSales $38,645.00 TotalProfit $26,820.17 %TotalCosts TotalRetailCosts $10,020.00 85% TotalWholesaleCosts $1,804.83 15% RetailandWholesaleCosts $11,824.83 100% Table26. TotalCostsandReturns %Cost Totalcontainercosts $8,793.33 Jul&Aug 74% Totaladvertisingcosts 1,570.00Sept&Oct 13% Totaltransportcosts 736.00 Oct&Nov 7% Totalhiredlaborcosts 10.50November 0% Totaloperatorlaborcosts 715.00 Dec&Jan 6% TotalHoneyReturn $38,645.00Sept-Jan 100% LbsCappings LbsOther $/lb Total Cappings 250 $2.00 $500.00 Otherwaxrendering 500 $2.00 $1,000.00 Totalwaxreturn(Oct&Nov) $1,500.00 Totalreturn(honeyandwax) $40,145.00

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page14CASHFLOWApositivecashflowoveralongperiodoftimeis important,ifabusinessistosurvive.However,many operations,especiallyoneslikebeekeeping,canhave widelyfluctuatingcostsandreturnsovertheyear. Thisisthereasonthepresentstudyattemptsto estimatethetimeatwhichcostsmightbeincurred andincomegained. Detailedexaminationofthecashflowstatements inTables27-30showincomeproducedonlyfive monthsoutoftheyear(SeptemberthroughJanuary). Costs,however,areincurredeverymonthandvary fromahighof$6,767.78inAugustto$561.26in February. Useofacashflowsummaryhelpstoseparateout effectsofdebtretirementandoperatorlabor.Some beekeepersprefernottopaythemselvesfirst. Investmentadvisorsdiscouragethispractice,butit wouldeliminatethisdirectcostfromthecashflow statementandthus,fromthoseofdirectcashcosts andreturns.Neitherdepreciationnorintereston capitalinvestmentsarecashcostsandasa consequence,arenotfiguredintothecashflow statement. Thecashflowstatementshowsanegativebalance attheendofthefirstyear($22,331.98).This indicatesthatatleastthatmuchcashwillbeneeded atsometimeduringtheyear,ifthebusinessisto remainsolvent.Thereisapositivecashflowof $16,136.79,butthisisbeforethebeekeeperispaid (operatorlaborinthecashflowsummary)anddebt isretired.Debtretirementisamajorfactorin negativecashflow;ithasbeenreducedfrom $119,453.37to$89,559.48. Table27. CashFlowAnalysisforJanuarythru March Table28. CashFlowAnalysisforAprilthruJune Table29. CashFlowAnalysisforJulythru September Table30. CashFlowAnalysisforOctoberthru Year'sEndSUMMARYOFCOSTSANDRETURNSTable31providesasummaryofcostsandreturns pertainingtothisoperation.Analysisofcost percentagesagainrevealsthepartplayedbycontainer expenses(18%oftotalcosts).Depreciation represents22%oftotalcostsandInterestonthe investment,12%.Grossreturnovercashcoststhe firstyearis$15,236.48,representing$30.47percolony and$.28perpoundofhoneyproduced.Returnto investment,operatorlaborandmanagementis$4.53 percolonyand$.04perpoundofhoney. Ifoperatorlaborispaiddirectly,thereturnis ($9,539.81),oralossof$19.08percolonyand$.17 perpoundofhoneyproduced.Itisobviousfromthis analysisthattheoperationlostmoneyitsfirstyear. Thisdoesnotmeanthebusinessisafailure.Most beginningbusinesseslosemoneyduringthefirstfew yearsofoperation,especiallyif,asinthiscase,a substantialdebtmustbepaidoff.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page15Table27. CashFlowAnalysisforJanuarythruMarch January February March CASHINFLOW Honeysales $7,729.00 $0.00 $0.00 Waxsales 0.00 0.00 0.00 TotalCashInflow $7,729.00 $0.00 $0.00 CASHOUTFLOW Sugar $1,125.00 $87.50 $0.00 Drugs 27.00 0.00 0.00 Misc.expenses(production) 0.00 0.00 240.00 Hiredlabor(production) 134.75 18.08 319.67 Truckcosts(production) 48.00 6.40 256.00 Containers 0.00 0.00 0.00 Queens 0.00 250.00 0.00 Repairs 103.44 103.44 103.44 Hiredlabor(packing) 0.00 0.00 0.00 Truckcosts(packing) 0.00 0.00 0.00 Rent 33.33 33.33 33.33 Officesupplies 12.50 12.50 12.50 Tools 16.67 16.67 16.67 Accountingservice 0.00 0.00 0.00 Insurance 0.00 0.00 0.00 Realestatetaxes 0.00 0.00 0.00 Advertising 0.00 0.00 0.00 Associations&Conventions 200.00 0.00 0.00 Heating,fuel 33.33 33.33 33.33 TotalCashOutflow $1,734.03 $561.26 $1,014.94 TotalCashFlow $5,994.97 ($561.26) ($1,014.94) CASHFLOWSUMMARY Netcashflow $5,994.97 ($561.26) ($1,014.94) +Beginningcashbalance 100.002,876.85 (462.70) -Newcapitalinvestment 142,005.88 0.00 0.00 +Downpayment(cash) 19,834.88 0.00 0.00 +Newlong-termborrowing 122,171.00 0.00 0.00 -Monthlylong-termprincipal 1,495.921,510.88 1,525.98 -Long-terminterestexpense 1,221.71 1,206.75 1,191.64 -Operatorlabor(production) 500.50 60.67 593.67 -Operatorlabor(packing) 0.00 0.00 0.00 +Short-termborrowing 0.00 0.00 0.00 -Short-termprincipal 0.00 0.00 0.00 -Short-terminterestexpense 0.00 0.00 0.00 EndingCashBalance $2,876.85 ($462.70) ($4,788.94) AccumulatedBorrowings $119,453.37 $116,735.75 $114,018.12

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page16Table28. CashFlowAnalysisforAprilthruJune April May June CASHINFLOW Honeysales $0.00 $0.00 $0.00 Waxsales 0.00 0.00 0.00 TotalCashInflow $0.00 $0.00 $0.00 CASHOUTFLOW Sugar $0.00 $0.00 $0.00 Drugs 0.00 0.00 0.00 Misc.expenses(production) 80.00 160.00 160.00 Hiredlabor(production) 345.33 465.50 157.50 Truckcosts(production) 192.00 256.00 160.00 Containers 0.00 0.00 0.00 Queens 0.00 0.00 0.00 Repairs 103.44 103.44 103.44 Hiredlabor(packing) 0.00 0.00 0.00 Truckcosts(packing) 0.00 0.00 0.00 Rent 33.33 33.33 33.33 Officesupplies 12.50 12.50 12.50 Tools 16.67 16.67 16.67 Accountingservice 0.00 0.00 0.00 Insurance 0.00 0.00 0.00 Realestatetaxes 0.00 0.00 250.00 Advertising 0.00 0.00 0.00 Associations&Conventions 0.00 0.00 200.00 Heating,fuel 33.33 33.33 33.33 TotalCashOutflow $816.61$1,080.78 $1,126.78 TotalCashFlow ($816.61) ($1,080.78) ($1,126.78) CASHFLOWSUMMARY Netcashflow ($816.61) ($1,080.78) ($1,126.78) +Beginningcashbalance (4,788.94)(8,964.51) (13,659.91) -Newcapitalinvestment 0.00 0.00 0.00 +Downpayment(cash) 0.00 0.00 0.00 +Newlong-termborrowing 0.00 0.00 0.00 -Monthlylong-termprincipal 1,541.241,556.66 1,572.22 -Long-terminterestexpense 1,176.38 1,160.97 1,145.40 -Operatorlabor(production) 641.33 897.00 260.00 -Operatorlabor(packing) 0.00 0.00 0.00 +Short-termborrowing 0.00 0.00 0.00 -Short-termprincipal 0.00 0.00 0.00 -Short-terminterestexpense 0.00 0.00 0.00 EndingCashBalance ($8,964.51) ($13,659.91) ($17,764.31) AccumulatedBorrowings $111,300.49 $108,582.87 $105,865.24

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page17Table29. CashFlowAnalysisforJulythruSeptember July August September CASHINFLOW Honeysales $0.00 $0.00 $7,729.00 Waxsales 0.00 0.00 0.00 TotalCashInflow 0.00 0.00 $7,729.00 CASHOUTFLOW Sugar $1,250.00 $0.00 $0.00 Drugs 0.00 680.00 0.00 Misc.expenses(production) 0.00 0.00 0.00 Hiredlabor(production) 7.00 145.83 10.50 Truckcosts(production) 64.00 96.00 48.00 Containers 4,396.674,396.67 0.00 Queens 0.00 1,250.00 0.00 Repairs 103.44 103.44 103.44 Hiredlabor(packing) 0.00 0.00 0.00 Truckcosts(packing) 0.00 0.00 0.00 Rent 33.33 33.33 33.33 Officesupplies 12.50 12.50 12.50 Tools 16.67 16.67 16.67 Accountingservice 0.00 0.00 0.00 Insurance 0.00 0.00 0.00 Realestatetaxes 0.00 0.00 0.00 Advertising 0.00 0.00 785.00 Associations&Conventions 0.00 0.00 0.00 Heating,fuel 33.33 33.33 33.33 TotalCashOutflow $5,916.94$6,767.78 $1,042.78 TotalCashFlow ($5,916.94) ($6,767.78) $6,686.22 CASHFLOWSUMMARY Netcashflow ($5,916.94) ($6,767.78) $6,686.22 +Beginningcashbalance (17,764.31)(26,411.88) (36,458.45) -Newcapitalinvestment 0.00 0.00 0.00 +Downpayment(cash) 0.00 0.00 0.00 +Newlong-termborrowing 0.00 0.00 0.00 -Monthlylong-termprincipal 1,587.951,603.82 1,619.86 -Long-terminterestexpense 1,129.68 1,113.80 1,097.76 -Operatorlabor(production) 13.00 561.17 154.92 -Operatorlabor(packing) 0.00 0.00 0.00 +Short-termborrowing 0.00 0.00 0.00 -Short-termprincipal 0.00 0.00 0.00 -Short-terminterestexpense 0.00 0.00 0.00 EndingCashBalance ($26,411.88) ($36,458.45) ($32,644.77) AccumulatedBorrowings $103,147.62 $100,429.99 $97,712.36

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page18Table30. CashFlowAnalysisforOctoberthruYear'sEnd October November December Yeartotals CASHINFLOW Honeysales $7,729.00 $7,729.00 $7,729.00 $38,645.00 Waxsales 750.00 750.00 0.00 $1,500.00 TotalCashInflow $8,479.00 $8,479.00 $7,729.00 $40,145.00 CASHOUTFLOW Sugar 0.00 0.00 0.00 $2,462.50 Drugs 0.00 0.00 0.00 $707.00 Misc.expenses(production) 0.00 0.00 0.00 $640.00 Hiredlabor(production) 350.00 350.00 0.00 $2,304.17 Truckcosts(production) 0.00 192.00 0.00 $1,318.40 Containers 0.00 0.00 0.00 $8,793.33 Queens 0.00 0.00 0.00 $1,500.00 Repairs 103.44 103.44 103.44 $1,241.31 Hiredlabor(packing) 0.00 10.50 0.00 $10.50 Truckcosts(packing) 368.00 368.00 0.00 $736.00 Rent 33.33 33.33 33.33 $400.00 Officesupplies 12.50 12.50 12.50 $150.00 Tools 16.67 16.67 16.67 $200.00 Accountingservice 0.00 87.50 87.50 $175.00 Insurance 0.00 500.00 0.00 $500.00 Realestatetaxes 0.00 0.00 250.00 $500.00 Advertising 785.00 0.00 0.00 $1,570.00 Associations&Conventions 0.00 0.00 0.00 $400.00 Heating,fuel 33.33 33.33 33.33 $400.00 TotalCashOutflow $1,702.28$1,707.28$536.78 $24,008.21 TotalCashFlow $6,776.72 $6,771.72 $7,192.22 $16,136.79 CASHFLOWSUMMARY Netcashflow $6,776.72 $6,771.72 $7,192.22 $16,136.79 +Beginningcashbalance (32,644.77)(29,593.17)(26,546.57) ($22,331.98) -Newcapitalinvestment 0.00 0.00 0.00 $142,005.88 +Downpayment(cash) 0.00 0.00 0.00 $19,834.88 +Newlong-termborrowing 0.00 0.00 0.00 $122,171.00 -Monthlylong-termprincipal 1,636.061,652.421,668.95 $18,971.96 -Long-terminterestexpense 1,081.56 1,065.20 1,048.68 $13,639.55 -Operatorlabor(production) 650.00 650.00 260.00 $5,242.25 -Operatorlabor(packing) 357.50 357.50 0.00 $715.00 +Short-termborrowing 0.00 0.00 0.00 0.00 -Short-termprincipal 0.00 0.00 0.00 0.00 -Short-terminterestexpense 0.00 0.00 0.00 0.00 EndingCashBalance ($29,593.17) ($26,546.57) ($22,331.98) ($22,331.98) AccumulatedBorrowings $94,994.74 $92,277.11 $89,559.48 $89,559.48

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page19Table31. SummaryofCostsandReturns TotalAnnual Costs Percentof TotalCost PerHive Perlb ofHoney COSTS Sugar $2,462.50 5% $4.93 $0.04 Medication 707.001% 1.41 0.01 Hiredlabor(production) 2,304.17 5% 4.61 0.04 Truckcosts(production) 1,318.403% 2.64 0.02 Containers 8,793.33 18% 17.59 0.16 Queens 1,500.003% 3.00 0.03 Repairs 1,241.31 2% 2.48 0.02 Truckcosts(packing) 736.001% 1.47 0.01 Hiredlabor(packing) 10.50 0% 0.02 0.00 Rent 400.001% 0.80 0.01 Officesupplies 150.00 0% 0.30 0.00 Tools 200.000% 0.40 0.00 Accountingservice 175.00 0% 0.35 0.00 Realestatetaxes 500.001% 1.00 0.01 Insurance,excepttrucks 500.00 1% 1.00 0.01 Advertising 1,570.003% 3.14 0.03 Associations&conven. 400.00 1% 0.80 0.01 Misc.Expenses(prod.) 640.001% 1.28 0.01 Heating,fuel 400.00 1% 0.80 0.01 Totaloperatingcapital $24,008.2148% $48.02 $0.44 Interest(operatingcap.) $900.31 2% $1.80 $0.02 TOTALCASHCOSTS $24,908.52 50% $49.82 $0.45 Depreciation 12,973.8826% 25.95 0.24 Interestoninvestment 5,845.16 12% 11.69 0.11 Operatorlabor(packing) 715.001% 1.43 0.01 Operatorlabor(prod.) 5,242.25 11% 10.48 0.10 TOTALCOSTS $49,684.81100% $99.37 $0.90 RETURNS Expectedgrossreturn lesstotalcash $40,145.00 24,908.52 --$80.29 49.82 $0.73 0.45 Returnovercashcosts lessdepreciation 15,236.48 12,973.88 ---30.47 25.95 0.28 0.24 Returntoinv.,operatorlabor andmgmt*(lessinterest) 2,262.60 5,845.16 --4.53 11.69 0.04 0.11 Returntooperatorlabor&mgmt(less operatorlabor) (3,582.56) 5,957.25 ---(7.17) 11.91 (0.07) 0.11 Returntomanagement ($9,539.81) --($19.08) ($0.17) *Investment,operatorlaborandmanagementANALYSISNowthatthemodelofasmall-scalebeekeeping enterprisehasbeenconstructed,somegeneralizations areinorderaboutthisparticularoperation.Atthe outset,itappearsthatthebusinessisnotprofitable, becausethereturntomanagementisintheredsome $9000.00.However,thereareextenuating circumstancesthatcomeintoplay.First,thebusiness ispayingoffaheavydebtload;secondtheoperator isreceiving$6.50perhourforhis/herlabor. Assumingthefamilyhasotherincome,thelosscould alsobeasignificanttaxshelter,whilethebeekeeping operationisbecomingestablished.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page20Anexaminationofinvestmentcostsshowsthat theycouldbereducedinanumberofways.The buildingcouldberented,reducedinsizeoranold onepurchasedandrenovated.Manybeekeepershave littleinvestmentinexcessland.Mostbeekeepersdo notgointolarge-scalehoneyproductionwithtotally newequipmentandbees.Thus,thepossibilityexists thatland,hiveandbeeinvestmentscanbe substantiallyreduced.Machineryandequipment investmentmayalsobemodified,dependingonthe operation.Anysavingsoninvestments,however, reducesdepreciationpossibilities.Quality investmentsareimportantforthebusinessasitgrows andtheiracquisitionshouldbeevaluatedcarefully. Obviously,theamountoffinancingrequiredfor thisoperationisimportanttoprofitability.Anything reducingtheamountofmoneythatneedstobe borrowedwouldimproveprofitability.Thismeansa largerdownpaymentorperhapsextendingthe paymentsbeyondfiveyears.Fluctuatinginterestrates aresuretoremainimportantfactorsinthefuture.It isimportanttoremembertheseinvestmentsarefixed costsandmustbepaidwhetherornotanyhoneyis produced. Variablecostsinthisoperationcouldbe examinedcarefullyforsavingsopportunities. Analyzingexpensesoutinthebeeyardprovides insightintoseveralsavingspossibilities.Oneisqueen cost;thisrepresents11%totalproductionoutlay (noticethiscostisforrequeeningonlyone-halfthe hiveseachyear).Oneconsiderationistorearones ownqueens,anothertofindless-expensiveproviders ofqueenbees.Again,qualityconsiderationstakeon primeimportancehere,fornocolonyisbetterthan itsqueen.Sugarisanotherlargecost(17%oftotal). Thepricevariesconsiderablyandsubstitutessuchas highfructosecornsyrup(HFCS)haverecentlybeen substantiallylessexpensive.Becauseitisalreadyin liquidform,HFCSalsosaveslaborinmixing. However,itmustberecognizedthatbeesstoreHFCS morereadilythanfoodmadefromsucrose(table sugar)andthusthepossibilityoftheresultanthoney beingdeclaredillegallyadulteratedincreases. Operatorlaboristhelargestvariableproduction cost(37%inthisexample)andsomustbelookedat carefullyintermsofcostreduction.Assuggested before,anydutiesthatcanbedonebyhiredlabor,if itfreestheoperatorupformore"important"work, shouldbecarefullyconsidered.Asinmany managementsituations,oftentheconventional wisdomof"doityourself"isnotthebest.Hiringand delegatingdutiesinbeekeepingseemtomake eminentsense,butonlystudyingtheireffectsonthe operation'seconomicswillprovethepoint. Theconceptofintensivelymanagingbeecolonies alsocomesintoplaywhenconsideringvariablecosts. Reducingthenumberofcolonies,alsopotentially reducesbeeyardsandthusdrivingtime.Spending moremanagementtimeononecolonyalsoqualifies asintensiveactivity.Mostbeekeepersagreemore intensivecolonymanagementwillpaygreater dividendsinthelongrun. Beyondproductioncosts,anin-depthanalysisof returnsintermsofhoneyandmarketingcostscanbe extremelyimportant.Muchofthemarkupin agriculturalproduceoccurs"beyondthefarmgate," andthebeekeepershould,therefore,positionhimor herselfsoastotakeadvantageofthis.Alltoomany selltheirhard-wonhoneyinexpensivelytohoney processors,whotakeadvantageofmarkup.Inthis example,forinstance,potentialprofitof$16,525.00is expectedintheretailsideoftheoperation(packing only48%ofhoneyproduced).Thisisfivetimesthe profitexpectedfromthewholesalesideofthe operation(packing52%ofthecrop).Itmaybe worthwhilethentolookcriticallyatadvertisingand promotioninthelocalmarket;thereappearstoexist alargepotentialprofitinincreasingeffortsherewith relativelylittleincreasedexpense. Asignificantamountofcostisrepresentedby containersinbothretailandwholesalesales;these costsshouldbeexaminedcarefullybecausethey representsuchagreatpercentageofpossibleprofits. Labor,too,representsasignificantpartofmarketing expense;thesameconsiderationsholdtruehereas forlaborintheproductionsideofthebusiness. Cashflowanalysisinthisstudyaddsasignificant dimensiontotheresultspresentedhere.Itshowsthe relativeimportanceofloanpayments,aswellasthe upsanddownsofincomeanddisbursements throughouttheyear.Italsohelpstopredictwhen shorttermborrowingmightmeessentialtokeepthe businessafloat,andrevealsthecriticalneedfor workingcapitalinstartingoperation.Alltoomany businessessimplydon'thaveenoughworkingcapital tocarrythemthroughthefirstfewyears,whenafew dollarsonewayoranothercanspellsuccessor disaster.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page21CAVEATSThisstudyisbasedonanumberofassumptions; figurespresentedherearenotinanysensea consensus,butratherbest"guesses."Presentand potentialproducersshouldnottakethemas absolutes.Thevalueofthemodelliesnotsomuch inthenumbersprintedhere,,butinthefactthat economicsimulationwithanysetoffiguresismade possiblewithrelativeease. Thereareanumberofwaystocalculateinterest oninvestments,forexample,andsomearequite complicated.Yourattorneyortaxconsultantmaynot agreewithhowinterestinfiguredhere.Theestimate of106poundsofhoneypercolonyisjustthat,an estimate.SomewouldsaythatishighinFlorida; another"arguable"figureisthenumberofhoursof bothoperatorandhiredlaborneeded.Andthelist goeson:truckcosts,drivingtime,packingcostsand labor,andprevailinginterestrates.SIZEOFTHEOPERATIONAlthoughthemodelpresentedhereisquite comprehensive,itdoesnotrevealeverythingabouta potentialbusiness.Perhapsoneofthemostelusive considerationsinanyendeavoristheeffectofsize, sometimescalledeconomiesofscale.Thebasic conceptisthatassizeincreases,sodoesefficiency. However,thereisalimittothis;efficiencymayinfact decreaseduetolimitationsinanyofseveralvariables: labor,equipment,management,workingcapital,etc. Thereisanoticeablelackofeconomicdataon beekeepingoperationsintheUnitedStates,however, ourCanadianneighborshaveinvestigatedseveral aspectsofbeekeepingeconomics,includingeffectsof size.InastudyfromtheProvinceofAlberta(1982) thefollowingprefaceispublished: "Asthesizeoftheoperationincreases,cost savingscanbeexpectedinareasofoperations andfixedinvestmentcomponents.Forexample, specializedbeeequipmentcostswillbespread overawiderbaseasthenumberofhives increase.Operatingcostsavingscancomeabout fromtheuseoflargerequipment,bulkbuying, andmoreefficientuseoflaborandland.Lower productioncostsperpoundofhoneywith increasedsizewouldresultinincreasedreturnsto management." Onetrendfoundinthisstudywasageneral decreaseinreturnperpoundofhoneyasthesizeof theoperationincreased.Theaveragepricereceived perpoundofhoneysoldwas78.65cents,61.58cents and58.11centsforoperationswithfewerthan100 hives,between100and699hives,andover700hives, respectively. Investmentcostsperhiverangedfrom$546.58for apiarieswithlessthan10hives,toalowof$194.75 foroperationswith700to999hives.Operationswith 1000hivesormorehadsignificantlyhigherbuilding andhoneyequipmentcosts(about22percent)when comparedtothosehaving700to999hives.This appearstobejustifiedbecauseofpurchaseoflaborsavingdevicessuchasforkliftsandhiveloaders. Economiesofsizeweremostapparentforlabor useintheAlbertastudy.Laborperpoundranged from87.84centsforoperationswithlessthan10hives to13.97centsforoperationswith700to999hives. Averagevehicleexpenseswere5.87cents,5.49cents and3.74centsforoperationswithfewerthan100 hives,100to699hives,andover700hives, respectively.Buildingandrepaircostsalsodeclined withsize,asdidoperatingcosts. TheAlbertastudyindicatedapositivereturnto managementorprofitwasonlyseeninthe700to999 hiveclassandapositivereturnoninvestmentwas onlyrealizedbyoperationshaving400ormorehives. Insummary,700to999hiveclassoperationshas lowestinvestmentcosts,laborcosts,operatingcosts andtotalproductioncostonaperpoundofhoney soldbasis.Inaddition,therelativelyhighhoney productionof151.04poundsperhiveyieldeda profitablereturntoapiarieswithinthisclass. AlthoughtheCanadianstudysuggeststhat economiesofscalefavoroperationsof700to999 hives,thatdatamustbetemperedbypresentand futureconditionsinFlorida.Unliketheprairie provincesofCanada,theSunshineStateisrapidly becomingurbanwiththeconcomitantproblemsof decreaseinbeepasturage,increaseinurbanpesticide usage,andincreaseinpotentialforneighborto neighborconflictsresultinginbeekeepingordinances.

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AStudyinProfitabilityforaMid-SizedBeekeepingOperation Page22CONCLUSIONSThefinancialmodelpresentedherecanprovide significanthelptothosecontemplatingacareerin commercialbeekeeping.Itfollowsdecision-making throughinvestmentcosts,probableoperatingcostsin thefieldascorrelatedwiththeFloridaBeekeeping Almanac(1979),andcostsandreturnsinmarketing honeyonaretailandwholesalebasis. Theaimofthispublicationistofillavoidthat hasexistedforsometime,byprovidingaguidetouse indevelopingdetailedfinancialanalysis.The1980s businessclimatedemandsa"sharperpencil." Fortunately,thedecadehasalsoprovidedan electronicsharpenerintheformofthemicro computer.Perhapsthiseasy-to-usesimulationenable farmorebeekeeperstobeabletosaywithsome degreeofassurancehowmuchitcoststhemto produceapoundofhoney.REFERENCESAdams,R.L.andFrankE.Todd."Costof ProducingExtractedHoneyinCalifornia," TechnicalBulletinNo.656,UnitedStates DepartmentofAgriculture,Washington,D.C., 1939. Andruchow,Lloyd."TheEconomicsofBeekeeping inAlberta1980,"Agdex821-16,Economic ServicesDivision,Alberta Agriculture,September,1982. Coke,E.W."ApiaryRecordsofCitrusandTupelo HoneyProducersasDiscussedatthe12th AnnualFloridaBeekeepersInstitute,"Florida AgriculturalExtensionService,Instituteof FoodandAgriculturalSciences,Universityof Florida,1966. Owens,CharlesD.,ThayerCleaverandRodgerE. Schneider."AnAnalysisofBeekeeping ProductionCostsandReturns,"Production ResearchReportNo.151,Agricultural ResearchService,UnitedStatesDepartmentof Agriculture,1973. Rodenberg,Harry."CostofProductionSurveyRelatedto MarketPriceofHoney," AmericanBee Journal,Vol.107,April1967,p.139.