• TABLE OF CONTENTS
HIDE
 Copyright
 Introduction
 Profitability
 Fixed costs
 Variable costs
 Return
 Cash flow
 Summary of costs and returns
 Analysis
 Caveats
 Size of the operation
 Conclusions
 References






Group Title: Fact sheet - Florida Cooperative Extension Service, University of Florida - RF-AA089
Title: A study in profitability for a mid-sized beekeeping operation
CITATION PDF VIEWER PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00077122/00001
 Material Information
Title: A study in profitability for a mid-sized beekeeping operation
Series Title: Circular Florida Cooperative Extension Service
Physical Description: 35 4 p. : ; 28 cm.
Language: English
Creator: Sanford, Malcolm T ( Malcolm Thomas ), 1942-
Publisher: Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Publication Date: 1986
 Subjects
Subject: Bee culture -- Economic aspects   ( lcsh )
Bee culture   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 34.
Statement of Responsibility: Malcolm T. Sanford.
General Note: "Aug. 1986."
General Note: Cover title.
Funding: Circular (Florida Cooperative Extension Service) ;
 Record Information
Bibliographic ID: UF00077122
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 000939862
oclc - 16654725
notis - AEQ1258

Downloads
Table of Contents
    Copyright
        Copyright
    Introduction
        Page 1
    Profitability
        Page 2
    Fixed costs
        Page 3
        Page 4
        Page 5
        Page 6
    Variable costs
        Page 7
        Page 8
        Page 9
        Page 10
    Return
        Page 11
        Page 12
        Page 13
    Cash flow
        Page 14
    Summary of costs and returns
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
    Analysis
        Page 19
        Page 20
    Caveats
        Page 21
    Size of the operation
        Page 21
    Conclusions
        Page 22
    References
        Page 22
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida







Fact Sheet RF-AA089
December 1992


UNIVERSITY OF

,'FLORIDA


Florida Cooperative Extension Service



A Study in Profitability for a Mid-Sized Beekeeping
Operation1

Malcolm T. Sanford2


Costs of producing agricultural products have
increased much faster than selling price. Apiculture
suffers as much, if not more, than other agricultural
enterprises because the price of honey has over time
not kept up with production costs. Even though the
1970s saw a dramatic rise in world honey prices from
which producers profited, over the long run they
created competition by foreign producers. Besides far
lower labor costs, the search for sources of hard
currency, no matter the cost, by countries such as the
People's Republic of China has also created havoc in
the world honey market.

Historically, it has been unprofitable to produce
honey, according to most of the limited studies on the
subject. Adams and Todd (1933) figured it cost $.07
to produce one pound of extracted honey for which
the beekeeper received $.045. Rodenberg (1967)
declared that over a ten-year period, the cost of the
most important items used by beekeepers increased
eighteen percent, while the price of honey decreased
seven percent. Coke (1966) analyzed fifteen
commercial honey-producing firms in Florida and
found a net return of $-.0261 per pound of honey. A
detailed study of southwestern and midwestern
beekeepers (1973) concluded:

"Beekeeping for honey production in the United
States is not profitable. The unit price received
by beekeepers for bulk, extracted honey has not
changed in the last twenty-five years, while the


cost of production has increased. Thus,
beekeepers, who rely on honey production for
income must supplement their income from other
sources, such as crop pollination and outside
employment."

The purpose of this publication is to help the
beekeeper better analyze his or her operation to see
if it indeed is profitable. Profitability is defined here
in terms of income versus outgo; it is recognized that
many beekeepers are not interested in monetary gain,
but prefer to keep bees on an amateur basis. This is
in no way discouraged, however, the present study
may be of interest even to those beekeepers who
eschew the profit motive in keeping their bees.
Specific ojectives of the financial model presented
here are:

1. Determine the costs and returns associated with
beekeeping.
2. Aid beekeepers with budgeting and planning.
3. Recommend ways to reduce costs and increase
returns.
4. Suggest how operation size affects costs and
returns.

It is the author's opinion that beekeeping can be
a profitable agricultural enterprise. It is also
recognized that in order to be profitable, the
beekeeping operation must be analyzed carefully and
the beekeeper ready to diversify activities based on


1. This document is Fact Sheet RF-AA089, a series of the Entomology and Nematology Department, Florida Cooperative Extension Service,
Institute of Food and Agricultural Sciences, University of Florida. Publication date: December 1992.
2. Malcolm T. Sanford, extension beekeeping specialist, Entomology and Nematology Department, Cooperative Extension Service, Institute of
Food and Agricultural Sciences, University of Florida, Gainesville FL 32611.
The Institute of Food and Agricultural Sciences is an equal opportunity/affirmative action employer authorized to provide research, educational
information and other services only to individuals and institutions that function without regard to race, color, sex, age, handicap, or national
origin. For information on obtaining other extension publications, contact your county Cooperative Extension Service office.
Florida Cooperative Extension Service / Institute of Food and Agricultural Sciences / University of Florida / Christine Taylor Stephens, Dean







A Study in Profitability for a Mid-Sized Beekeeping Operation


economic imperatives. This publication will examine
investment, operating expenses, cash flow and other
indices to reflect effects of decision-making at several
different levels within a beekeeping operation.

No study is any better than the data or numbers
that go into it; this means that the key to making
reasonable decisions is adequate record keeping. This
simple fact cannot be overemphasized. Without good
records of individual colonies and beeyards, there is
no way production can be analyzed. The same is true
of financial records. If this publication does nothing
more than help the beekeeper produce better
financial records, it will have served its purpose
admirably.

As previously uggL s1 d, the beekeeping industry
is currently in a state of flux. There are a number of
reasons for this, including high interest rates for
borrowing funds, expensive manual labor
requirements, increasing production costs of all kinds,
as well as the virtual river of imported honey entering
into the United States each year from the developing
world. Beekeepers in the United States have
traditionally made their living producing honey, at the
same time providing pollination to a wide range of
cultivated and non-cultivated plants virtually free of
charge. Those suggesting that beekeepers can solve
the economic ills of the beekeeping industry by
increasing pollination fees are simply not informed
about the true nature of this endeavor. As a
consequence, this study is based on honey production
and seeks to find "niches" of profitability for the
beekeeper in that activity.

There are two major strategies, often overlooked
by beekeepers, that may be employed to improve
profitability. The first is developing a local market
based on promoting honey for what it is, a unique
product with an excellent reputation as a topping,
recipe ingredient or snack. Unfortunately, honey has
not been promoted as vigorously as other sweets in
the past, and the market has suffered erosion from
introduction of substitutes.

A second strategy is to more closely examine
management of the beekeeping operation.
Traditionally, beekeeping has been an extensive
activity. There have always been many locations for
bees and moving them from one area to another has
been relatively easy. This is no longer the case.
Locations, especially in Florida, are at a premium and
difficult to come by. In addition, as agricultural areas
give way to urban development, prime locations


become even more difficult to find. The time has
come to carefully examine the profitability of more
intensively managing honey bee colonies.
Fortunately, this is possible, for conventional wisdom
dictates that intensive bee colony management results
in more production per unit.

Intensive financial management is also a concept
whose time has come. In the past, financial analysis
has taken a back seat to production. This has been
true of most agricultural operations, but can no
longer be ignored. In-depth financial management
takes a good deal of head scratching and pencil
pushing. Fortunately, the microcomputer revolution
will take some of the burden off the producer by
allowing greater ease in financial simulation. As a
case in point, the numbers in this publication are
developed on templates of a spreadsheet program
called Multiplan.

This model and publication examine the
profitablility of a small-scale beekeeping enterprise
with about 500 colonies of bees that moves once a
year. The study is specifically for Florida conditions,
however, many of the considerations here will apply
with some modification to any size operation located
in any part of the nation.

PROFITABILITY

Profit is equal to income from an operation minus
outgo. If income is more than outgo, profitability is
established.

Income is collectively all the returns from an
activity, such as money received for sale of bee
products (honey, royal jelly, pollen, package bees) or
for pollination rental. Selling bees and queens or
equipment for one reason or another that normally
would be used in an operation is not income, but is
considered a reduction in investment or fixed costs.

Outgo includes two kinds of costs: fixed and
variable. Fixed costs are those funds expended
whether or not any production or sale of products
results. In other words, they must be paid whether or
not income is produced. Fixed costs include
depreciation on equipment, interest expenses, taxes,
insurance and rent. Variable costs, on the other
hand, generally fluctuate depending on the scale of
the operation. Labor is a large variable cost and as
more honey is produced, labor costs will go up
proportionally. Other variable costs are repairs, fuel,
supplies and bee feed.


Page 2







A Study in Profitability for a Mid-Sized Beekeeping Operation


FIXED COSTS


Land


The following fixed costs are analyzed in this
section. They are: building investment, land
investment, bee investment, beehive investment, fence
investment and machinery investment.

Building

Most operations need a building as a base of
operations and place to do honey extraction and
equipment repair. The figures in Table 1 show
estimated costs of a building with 2500 square feet, at
$17.00 per square foot and a life of 50 years. Annual
interest on the building is calculated as follows:
(Total investment/2 x .075). The 7.5% interest is an
average figure used throughout the fixed cost
categories.

Table 1. Estimated Costs of a Building


Number of square feet
Amount per square feet
Total building value
Electricity
Air
Truck Doors
Total building investment
Trade in value (none)
Years to depreciate
Annual depreciation
Annual interest*


$3,883.50
$3,452.00
$3,020.50
$2,589.00
$2,157.50


2500
$17.00
$42,500.00
300.00
100.00
250.00
$43,150.00
$0.00
18
(ACRS) $3,883.50
$1,618.13
9% 1st & 2nd year
8% 3rd year
7% 4th & 5th years
6% 6th year
5% 7th & 8th years


$1,726.00 4% until year 19
(Represents potential interest income if funds were
placed elsewhere)



ACRS is the Accelerated Cost Recovery System
instituted in 1981. First year's depreciation is
$3,883.50. Caution: Consult your attorney,
accountant or tax preparer for the latest IRS rules.
The figures presented in Table 1 for both interest and
depreciation are not necessarily those best for all
years and all operations.


The operation may have investments in land
besides the building mentioned above. Here land
investment is estimated to be $1,875.00. Land cannot
be depreciated; the interest cost is calculated as
shown in Equation 1 and Table 2:

2 total land investment x .075
2 x x .075


Various land invested in
Trade-in value
Annual depreciation (none)
Annual interest on investment


$ 1875.00
1875.00
0.00
140.63


Bees


The bee investment is separated into two areas.
It is calculated on the basis of 500 packages
purchased at $18.00. The bees have no depreciable
value and the interest rate on the investment is
calculated the same as for the land (Equation 1 and
Table 3).


Number of packages (new colonies)
Price per package
Total package costs
Other associated costs
Total investment in bees
Trade-in value
Annual depreciation (none)
Annual interest


500
$ 18.00
9000.00
0.00
9000.00
0.00
0.00
$ 675.00


Hives

The estimated costs of putting one colony
together are listed in Table 4. Costs are based on
making 500 hives, each consisting of one brood
chamber and five supers. Notice that over 70% of
the costs are in beeswax (foundation), supers (wooden
ware) and labor. Hive investment is depreciable and
the interest on the investment is calculated the same
as for the building.

Fence

A major predator of honey bee colonies in
Florida is the black bear. The estimated fixed costs
associated with three bear fences are listed in Table
5. Fences have a seven-year estimated life; annual


ACRS
Depreciation
(18 year
property class)


Page 3







A Study in Profitability for a Mid-Sized Beekeeping Operation


interest rate on the investment is calculated the same
as for the building.


Table 4. Costs Per Colony
Costs per colony Percent of Cost
1 Hive bottom $4.80 4%
5 Standard supers @ $5.80/ea $29.00 22%
50 Standard frames $.42/ea $21.00 16%
50 Sheets foundation $.70/ea $35.00 26%
Rabbits 2/super x 5 @ $.25/pr $2.50 2%
1 Inner cover @ $2.95 $2.95 2%
1 Entrance reducer @ $.25 $0.25 0%
1 Hive cover @ $4.25/ea $4.25 3%
1 Quart paint @ $3.00 $3.00 2%
8 hours labor @ $3.85/hr $30.80 23%
Total per new colony built $133.55 100%

Number of new colonies built 500
Total hive investment $66,775.00
Trade in value $0.00
Years to depreciate 10
Annual depreciation (ACRS) $5,342.00
Annual interest $2,504.06

ACRS Depreciation template for hives $5,342.00 8% first year
10 year class property $9,348.50 14% second year
$8,013.00 12% third year
$6,677.50 10% 4th 6th year
$6,009.75 9% 7th 10th year
Caution: A case can be made to place hives in different property classes. Consult your accountant!



Table 5. Costs Per Fence
Percent of Cost
1 Roll wire $15.00 7%
14 Posts 109.90 51%
Insulators 14.56 7%
Fencer 50.00 23%
Labor:
2.5 hours @ $7.15/hr 17.88 8%
2.5 hours @ $3.85/hr 9.63 4%
Total $216.96 100%
Total number of fences 3 times $216.96 (previous screen)
Total fence investment $650.88
Trade in value $0.00
Years to depreciate 5


Annual depreciation
Annual interest


$136.68 (ACRS)
$24.47


Page 4







A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 5. Costs Per Fence
Percent of Cost
ACRS Depreciation template for First year @ 15% $97.63
fence 5 year class: Second year @ 22% $143.19
Third thru fifth @ 21% $136.68



Machinery and Equipment How the investment is financed is also important.
Table 6 is a ,u,'_l sk financing scenario and a detail
Estimated fixed costs of machinery and equipment of the monthly payments necessary for cash flow
associated with this scale of operation are detailed in analysis is shown in Table 9. A total of $142,005.88
Table 7. Replacement values for the 3/4 ton truck is to be financed over five years at 12%. This means
and used 1/2 ton truck are based on 50% personal use a monthly payment of $2,717.63. A good portion of
and 50% business use. Interest on each of these this is tax deductible interest expense.
investments is calculated the same as for the building.
Total financial investment $ 142,005.88
A summary of investment (fixed) costs (Table 7) Amount down $ 19,834.88
for this operation is outlined in Table 8. These are To finance: $ 122,171.00
only estimates. Certain investment costs may or may Interest rate 12%
not occur, depending on circumstances. Column two Years to finance 5
reveals a total investment of $284.01 per hive. The Monthly Payments are: $ 2,717.63
third column provides an idea of the percentage of
investment each category represents. Notice that
hives make up 47% of the investment, the building is Another fixed cost item is repairs on machinery
30% and machinery and equipment are 14%. and equipment, hives, building, etc. They are
estimated here at one percent of investment and
listed in Table 10. This means a monthly repair bill
of $103.44.

Table 7. Equipment
Replacement Salvage Depreciation Annual Annual Interest
Equipment Item Value Value Value Depreciation
3-Year Class
3/4 ton truck (1) $5,000.00 $840.00 $4,160.00 --- $219.00
5th wheel trailer 5,000.00 900.00 4,100.00 --- 221.25
Used 1/2 ton truck (1) 2,000.00 100.00 1,900.00 ---- 78.75
Total 3-year class (2) $12,000.00 $1,840.00 $10,160.00 (3) $2,540.00 $519.00
5-Year Class
Extractor $1,700.00 $510.00 $1,190.00 ---- $82.88
Whirl dry 1,200.00 360.00 840.00 --- 58.50
Brand Melter 800.00 50.00 750.00 --- 31.88
Sump pump tank 500.00 50.00 450.00 --- 20.63
Uncapper 100.00 0.00 100.00 --- 3.75
4-1000 Ib tanks 620.00 180.00 440.00 ---- 30.00
Boiler 50.00 0.00 50.00 ---- 1.88
Feeders 500.00 0.00 500.00 ---- 18.75
Moving screens 600.00 0.00 600.00 ---- 22.50
5 batteries 200.00 0.00 200.00 --- 7.50
Bee blower 450.00 0.00 450.00 --- 16.88
Storage containers 1,835.00 0.00 1,835.00 --- 68.81
Total 5-year class (4) $8,555.00 $1,150.00 $7,405.00 (5) $1,110.75 $363.94
Totals for Annual Summary $20,555.00 $2,990.00 $17,565.00 $3,650.75 (6) $882.94


Page 5








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 7. Equipment
Replacement Salvage Depreciation Annual Annual Interest
Equipment Item Value Value Value Depreciation
(1) Based on 50% personal use.
(2) Annual depreciation for 3-yr class property (ACRS Depreciation template):
$2,540.001st year @ 25%
$3,860.802nd year @ 38%
$3,759.203rd year @ 37%
(3) Annual depreciation for 5-yr class property: (ACRS Depreciation template):
$1,110.751st year @ 5%
$1,629.102nd year @ 22%
$1,555.053rd 5th @ 12%
(4) Total cost to estimate 3-year repair costs less trucks: $5,000.00
(5) Total cost to estimate 5-year repair costs: $8,555.00
(6) Interest = replacement cost plus salvage value/2 .075



Table 8. Summary of Fixed Costs
Replacement Inv. Cost Percent of Trade in Annual Annual
Value per Hive Investment Value Depreciation Interest
Building $43,150.00 $86.30 30% $0.00 $3,883.50 $1,618.13
Hives 66,775.00 133.55 47% 0.00 5,342.00 2,504.06
Bees 9,000.00 18.00 6% 0.00 0.00 675.50
Machinery 20,555.00 41.11 14% 2,990.00 3,650.75 882.94
Fences 650.88 1.30 0% 0.00 97.63 24.41
Land 1,875.00 3.75 1% 1,875.00 0.00 140.63
Totals $142,005.88 $284.01 100% $4,865.00 $12,973.88 $5,845.16



Table 9. Payment Schedule
Payment Number 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 $13,639.55



Table 10. Repairs on Machinery and Equipment
Investment Est. Repair Per month


$43,150.00


$431.50 $35.96


Building @ 1% of cost


Page 6







A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 10. Repairs on Machinery and Equipment
Investment Est. Repair Per month
Hives @ 1% of cost 66,775.00 667.75 55.65
Machinery, 3-year class @ 1% 5,000.00 50.00 4.17
Machinery, 5-year class @ 1% 8,555.00 85.55 7.13
Fences @ 1% of cost 650.00 6.51 0.54
Total $1241.31 $103.44



VARIABLE COSTS

Estimated variable costs for this operation follow.
Again, these vary according to number of colonies
operated and amount of product (honey) produced.
In order to analyze these costs, the first thing to do is
examine the beekeeper's activities throughout the
year. Keeping bees is a seasonal occupation, hectic to
frenzied in pace during spring and summer, while
often providing an abundance of time in fall and
winter.

The following is a probable sequence of events for
a 500 colony beekeeping operation in Florida. It is
based on one move per year to take advantage of the
citrus flow. The figures provided here are aggregates
of all the yards in the operation, which might number
as many as twelve to sixteen. Costs are accounted for
according to the month accrued and fed into a yearly
cash flow statement for comparison and to aid in
financial planning.

In Florida, the beekeeping year can start as early
as January. During this month, the beekeeper makes
his first colony inspection and may begin to feed the
bees for population buildup. The estimated costs in
Table 11 for the month of January are for 450
colonies, supposing a 50 colony loss over winter from
the usual 500. The total number of hives will be
brought to 500 in February.

In February, maple and willow are blooming
heavily and populations are beginning to increase
rapidly. At this time, the beekeeper makes increase
or divisions to replenish colony numbers, 50 new
colonies are made by divisions. The estimated costs
for the month of February are shown in Table 12.

Beekeeping gets into full swing in March, and
colonies are moved into the citrus groves and supered
up by the middle of the month. The estimated costs
for March 1 through 15 are shown in Table 13.


Page 7







A Study in Profitability for a Mid-Sized Beekeeping Operation


From the middle of March to mid April, citrus
honey is harvested and extracted. The estimated costs
for March 15 through April 15 are shown in Table 14.

From mid April until the end of May, the bees
are moved from citrus into gallberry and/or palmetto
locations. The estimated costs for April 15 through
May 20 are shown in Table 15.


The end of May and first half of June marks the
harvest of gallberry and palmetto honey. The
estimated costs for May 20 through June 15 are
shown in Table 16.

Extraction is finished up in June and July. The
honey is also being packed at this time. The
estimated costs from June 15 through July 15 are
shown in Table 17.

From mid July until September 1, there is little
work in the bee yard. However, packing and
marketing the crop is in full swing. Beginning some
time in September, colonies are requeened and fed in
preparation for winter. The estimated costs for July
15 through September 15 are shown in Table 18.

During the latter part of September, colonies are
checked for queen acceptance and population level.
A further, final inspection occurs in October or
November and colonies weak in numbers are
combined with stronger ones, in keeping with the
beekeeper's philosophy of taking winter losses in the
fall. The estimated costs for September 15 through
November 15 are shown in Table 19.

There are a number of miscellaneous activities for
the beekeeper to be engaged in from November
through December. These include hive maintenance
(repair and painting) and perhaps most important,
planning for the coming year. The estimated costs for
November 15 through December 31 are shown in
Table 20.

Totals for the year for each category along with
the percentage accounted for by each are provided in
Table 21. This shows that operator labor, hired labor,
sugar and queen costs are high in comparison to
other categories (drugs, trucking). Reducing queen
costs, for example, might provide savings, although
stock performance should never be slighted in
intensive bee management. Hired labor too, may be
substituted for operator labor, which is less expensive
per hour by comparison.


Page 8







A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 11. Estimated Costs for January

@ Total Hours
10 Ib sugar $.25/lb x 450 colonies $1125.00 ---
.01 Ib TM 25 $6/lb x 450 colonies $27.00 ---
10 min operator labor / colony X 450 $6.50/hr $487.50 75
5 min hired labor / colony X 450 $3.50/hr $131.25 37.5
150 truck miles $.32/mile $48.00 ---
2 hr operator drive time $6.50/hr $13.00 2
1 hr hired drive time $3.50/hr $3.50 1
Note: Terramycin (TM 25) is routinely used as a disease preventative in most beekeeping operations.



Table 12. Estimated Costs for February

@ Total Hours
7 Ib sugar $.25/lb x 50 colonies $87.50
10 min operator labor / colony X 50 $6.50/hr $54.17 8
5 min hired labor / colony x 50 $3.50/hr $14.58 4
20 truck miles $.32/mile $6.40
1 hr operator drive time $6.50/hr $6.50 1
1 hr hired drive time $3.50/hr $3.50 1
50 queens $5.00/ea $250.00



Table 13. Extimated Costs for March (1 15)

@ Total Hours
10 min operator labor / colony x 500 colonies $6.50/hr $541.67 83
10 min hired labor/ colony x 500 colonies $3.50/hr $291.67 83
800 truck miles $.32/mile $256.00
8 hr operator drive time $6.50/hr $52.00 8
8 hr hired drive time $3.50/hr $28.00 8
Meals, hotel, telephone --- $160.00 --



Table 14. Estimated Costs for March 15 April 15

@ Total Hours
Pull Citrus Honey on 500 colonies:
5 min operator labor / colony x 500 colonies $6.50/hr $270.83 42
5 min hired labor / colony x 500 colonies $3.50/hr $145.83 42
500 truck miles $.32/mile $160.00 --
5 hr operator drive time $6.50/hr $32.50 5
5 hr hired drive time $3.50/hr $17.50 5
Meals, hotel, telephone -- $160.00


Page 9







A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 14. Estimated Costs for March 15 April 15

1 @ Total Hours

Extract Citrus Honey on 500 colonies:
50 hr operator labor X 500 colonies $6.50/hr $325.00 50
50 hr hired labor X 500 colonies $3.50/hr $175.00 50
100 truck miles $.32/mile $32.00
2 hr operator drive time $6.50/hr $13.00 2
2 hr hired drive time $3.50/hr $7.00 2



Table 15. Estimated Costs for April 15 May 20

@ Total Hours
10 min operator labor / colony x 500 colonies $6.50/hr $541.67 83
10 min hired labor / colony x 500 colonies $3.50/hr $291.67 83
800 truck miles $.32/mi $256.00 --
8 hr operator drive time $6.50/hr $52.00 8
8 hr hired drive time $3.50/hr $28.00 8
Meals hotel, telephone --- $160.00 --



Table 16. Estimated Costs for May 20 June 15

@ Total Hours
5 min operator labor / colony x 500 colonies $6.50/hr $270.83 42
5 min hired labor / colony x 500 colonies $3.50/hr $145.83 42
500 truck miles $.32/mile $160.00 --
5 hr operator drive time $6.50/hr $32.50 5
5 hr hired drive time $3.50/hr $17.50 5
Meals, hotel, telephone -- $160.00



Table 17. Estimated Costs for June 15 July 15

@ Total Hours
40 hr operator labor $6.50/hr $260.00 40
40 hr hired labor $3.50/hr $140.00 40
200 truck miles $.32/mile $64.00 ---
2 hr operator drive time $6.50/hr $13.00 2
2 hr hired drive time $3.50/hr $7.00 2


Page 10







A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 18. Estimated Costs for July 15 September 15

@ Total Hours
250 queens $5.00/ea $1250.00 --
10 Ib sugar $.25 x 500 colony $1250.00
.01 TM 25 $6/lb x 500 colony $30.00 --
1 tsp fumagillin $1.30 x 500 $650.00 --
10 min operator labor/ colony $6.50 (500) $541.67 83
5 min hired labor / colony $3.50 (500) $145.83 42
300 truck miles $.32/mile $96.00
3 hr operator drive time $6.50/hr $19.50 3
3 hr hired drive time $3.50/hr $10.50 3



Table 19. Estimated Costs for September 15 November 15

@ Total Hours
5 min operator labor x 250 colonies $6.50/hr $135.42 21
150 truck miles $.32/mile $48.00 --
3 hr operator drive time $6.50/hr $19.50 20



Table 20. Estimated Costs for November 15 December 31

@ Total Hours
Maintenance 200 operator labor hrs. $6.50/hr. $1300.00 200
Maintenance 200 hired labor hrs. $3.50/hr. $700.00 200
600 truck miles $.32/mile $192.00 ---
Planning 40 operator hrs. $6.50/hr. $260.00 40



Table 21. Annual Totals and Percentages
Operator Hired
Sugar Drug Misc. Labor Labor Truck Queens
Annual totals $2,462.50 $707.00 $640.00 $5,242.25 $2,304.17 $1,318.40 $1,500.00
Percent of total 17% 5% 5% 37% 16% 9% 11%
Total operator hours = 823
Total hired hours = 658 Total or 100% of costs are $14,174.32
Total truck miles = 4120


RETURN

Now that production costs have been examined,
they must be offset by income from the operation.
There are two major ways honey is sold by the
beekeeper: retail and wholesale. Most large
beekeepers sell on the wholesale market; the crop is
extracted, packed in fifty-five gallon drums and


shipped off to be processed by middlemen, called
packers. Alternatively, the beekeeper may prefer to
develop a local market and sell retail.

This study seeks to examine the effects of both
wholesaling and retailing honey. As such, it assumes
the beekeeper will do some of both. The honey
return per colony in this study is estimated to be 106


Page 11







A Study in Profitability for a Mid-Sized Beekeeping Operation


pounds. This is an optimistic figure and represents an
average of about 50 pounds per major flow (citrus,
gallberry). This yield multiplied by the number of
colonies equals 53,000 pounds. The following are
estimated costs and returns for retailing 25,500
pounds (48% of the crop).

In this case, gross retail sales are projected at
$26,545.00. Container costs (Table 22) are shown as
$7710.00.

Other variables are marketing costs (Table 23)
and include $0.04 per pound advertising and $0.32 per
mile transportation costs.

Wholesaling costs of packing 27,500 pounds (52%
of the crop) in drums is shown in Table 24; Projected
wholesale sales are $12,100.00, container costs are
$1,083.33.


Projected profit from total sales of $38,645.00 is
$26,820.17 (Table 25). Notice that 62% of the profit
is derived from retail sales and 38% from wholesale
sales. Total retail sales is 69% of total sales.

The figures reveal that the majority of costs in the
packing are for containers, 74% overall, and 77% and
60% for the retail and wholesale sides respectively.
Advertising also takes up a large share as well, being
13% of overall costs.

Again, marketing costs are not incurred equally
throughout the year. As a consequence, the figures in
Table 26 show total costs and the months they are
paid. These figures are projected in the cash flow for
the first year of operation.


Table 22. Container Costs
Number Total cost Price per
Retail Container Size Total Ibs. needed Cost of container Pound Total Sales
60 12,000 200 $4.00 $800.00 $0.95 $11,400.00
5 4,000 800 $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 6,000 6,000 $0.62 $3,720.00 $1.20 $7,200.00
Totals 25,500 $7,710.00 $26,545.00



Table 23. Marketing Costs
Cost/lb of Cost/mile Cost/hr
Retail Marketing Costs 25500 Ibs 2000 miles 100 hrs Total Cost
Advertising $.04 $1,020.00
Transportation $0.32 $640.00
Operator labor $6.50 $650.00
Total $2,310.00



Table 24. Wholesaling Costs
Cost/lb of Cost/mile
Wholesale Marketing Costs 27500 Ibs 300 miles Hrs. Cost/hr Total Cost
Advertising $.02 $550.00
Transportation $0.32 $96.00
Operator labor 10 $6.50 $65.00
Hired labor 4 $3.50 $10.00
Total $721.50


Page 12








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 25. Profit and Cost Analysis
Retail % Sales % Retail Costs
Total Retail Sales $26,545.00 69%
Retail Container Costs $7,710.00 77%
Retail Advertising Costs 1020.00 10%
Retail Transport Costs 640.00 6%
Retail Hired Labor Costs 0.00 0%
Retail Operator Labor Costs 650.00 6%
Total Costs $10,020.00
Retail Profit $16,525.00 62% Percent Total Profit
Wholesale % Sales % Costs
Total Wholesale Sales $12,100.00 31%
Wholesale Container Costs $1,083.33 60%
Wholesale Advertising Costs 550.00 30%
Wholesale Transport Costs 96.00 5%
Wholesale Hired Labor Costs 10.50 1%
Wholesale Operator Labor Costs 65.00 4%
Total Costs $1,804.83
Wholesale Profit $10,295.17 38% Percent Total Profit
Total Sales $38,645.00
Total Profit $26,820.17 % Total Costs
Total Retail Costs $10,020.00 85%
Total Wholesale Costs $1,804.83 15%
Retail and Wholesale Costs $11,824.83 100%



Table 26. Total Costs and Returns

% Cost
Total container costs $8,793.33 Jul & Aug 74%
Total advertising costs 1,570.00 Sept & Oct 13%
Total transport costs 736.00 Oct & Nov 7%
Total hired labor costs 10.50 November 0%
Total operator labor costs 715.00 Dec & Jan 6%
Total Honey Return $38,645.00 Sept-Jan 100%


Lbs Cappings Lbs Other $/lb Total
Cappings 250 $2.00 $500.00
Other wax rendering 500 $2.00 $1,000.00
Total wax return (Oct & Nov) $1,500.00
Total return (honey and wax) $40,145.00


Page 13







A Study in Profitability for a Mid-Sized Beekeeping Operation


CASH FLOW

A positive cash flow over a long period of time is
important, if a business is to survive. However, many
operations, especially ones like b l ki L pinill can have
widely fluctuating costs and returns over the year.
This is the reason the present study attempts to
estimate the time at which costs might be incurred
and income gained.

Detailed examination of the cash flow statements
in Tables 27 30 show income produced only five
months out of the year (September through January).
Costs, however, are incurred every month and vary
from a high of $6,767.78 in August to $561.26 in
February.

Use of a cash flow summary helps to separate out
effects of debt retirement and operator labor. Some
beekeepers prefer not to pay themselves first.
Investment advisors discourage this practice, but it
would eliminate this direct cost from the cash flow
statement and thus, from those of direct cash costs
and returns. Neither depreciation nor interest on
capital investments are cash costs and as a
consequence, are not figured into the cash flow
statement.

The cash flow statement shows a negative balance
at the end of the first year ($22,331.98). This
indicates that at least that much cash will be needed
at some time during the year, if the business is to
remain solvent. There is a positive cash flow of
$16,136.79, but this is before the beekeeper is paid
(operator labor in the cash flow summary) and debt
is retired. Debt retirement is a major factor in
negative cash flow; it has been reduced from
$119,453.37 to $89,559.48.


Table 27. Cash Flow Analysis for January thru
March
Table 28. Cash Flow Analysis for April thru June
Table 29. Cash Flow Analysis for July thru
September
Table 30. Cash Flow Analysis for October thru
Year's End

SUMMARY OF COSTS AND RETURNS

Table 31 provides a summary of costs and returns
pertaining to this operation. Analysis of cost
percentages again reveals the part played by container
expenses (18% of total costs). Depreciation
represents 22% of total costs and Interest on the
investment, 12%. Gross return over cash costs the
first year is $15,236.48, representing $30.47 per colony
and $.28 per pound of honey produced. Return to
investment, operator labor and management is $4.53
per colony and $.04 per pound of honey.

If operator labor is paid directly, the return is
($9,539.81), or a loss of $19.08 per colony and $.17
per pound of honey produced. It is obvious from this
analysis that the operation lost money its first year.
This does not mean the business is a failure. Most
beginning businesses lose money during the first few
years of operation, especially if, as in this case, a
substantial debt must be paid off.


Page 14







A Study in Profitability for a Mid-Sized Beekeeping Operation


CASH FLOW

A positive cash flow over a long period of time is
important, if a business is to survive. However, many
operations, especially ones like b l ki L pinill can have
widely fluctuating costs and returns over the year.
This is the reason the present study attempts to
estimate the time at which costs might be incurred
and income gained.

Detailed examination of the cash flow statements
in Tables 27 30 show income produced only five
months out of the year (September through January).
Costs, however, are incurred every month and vary
from a high of $6,767.78 in August to $561.26 in
February.

Use of a cash flow summary helps to separate out
effects of debt retirement and operator labor. Some
beekeepers prefer not to pay themselves first.
Investment advisors discourage this practice, but it
would eliminate this direct cost from the cash flow
statement and thus, from those of direct cash costs
and returns. Neither depreciation nor interest on
capital investments are cash costs and as a
consequence, are not figured into the cash flow
statement.

The cash flow statement shows a negative balance
at the end of the first year ($22,331.98). This
indicates that at least that much cash will be needed
at some time during the year, if the business is to
remain solvent. There is a positive cash flow of
$16,136.79, but this is before the beekeeper is paid
(operator labor in the cash flow summary) and debt
is retired. Debt retirement is a major factor in
negative cash flow; it has been reduced from
$119,453.37 to $89,559.48.


Table 27. Cash Flow Analysis for January thru
March
Table 28. Cash Flow Analysis for April thru June
Table 29. Cash Flow Analysis for July thru
September
Table 30. Cash Flow Analysis for October thru
Year's End

SUMMARY OF COSTS AND RETURNS

Table 31 provides a summary of costs and returns
pertaining to this operation. Analysis of cost
percentages again reveals the part played by container
expenses (18% of total costs). Depreciation
represents 22% of total costs and Interest on the
investment, 12%. Gross return over cash costs the
first year is $15,236.48, representing $30.47 per colony
and $.28 per pound of honey produced. Return to
investment, operator labor and management is $4.53
per colony and $.04 per pound of honey.

If operator labor is paid directly, the return is
($9,539.81), or a loss of $19.08 per colony and $.17
per pound of honey produced. It is obvious from this
analysis that the operation lost money its first year.
This does not mean the business is a failure. Most
beginning businesses lose money during the first few
years of operation, especially if, as in this case, a
substantial debt must be paid off.


Page 14








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 27. Cash Flow Analysis for January thru March
January February March
CASH INFLOW
Honey sales $7,729.00 $0.00 $0.00
Wax sales 0.00 0.00 0.00
Total Cash Inflow $7,729.00 $0.00 $0.00

CASH OUTFLOW
Sugar $1,125.00 $87.50 $0.00
Drugs 27.00 0.00 0.00
Misc. expenses (production) 0.00 0.00 240.00
Hired labor (production) 134.75 18.08 319.67
Truck costs (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
Hired labor (packing) 0.00 0.00 0.00
Truck costs (packing) 0.00 0.00 0.00
Rent 33.33 33.33 33.33
Office supplies 12.50 12.50 12.50
Tools 16.67 16.67 16.67
Accounting service 0.00 0.00 0.00
Insurance 0.00 0.00 0.00
Real estate taxes 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
Total Cash Outflow $1,734.03 $561.26 $1,014.94
Total Cash Flow $5,994.97 ($561.26) ($1,014.94)
CASH FLOW SUMMARY
Net cash flow $5,994.97 ($561.26) ($1,014.94)
+Beginning cash balance 100.00 2,876.85 (462.70)
-New capital investment 142,005.88 0.00 0.00
+Down payment (cash) 19,834.88 0.00 0.00
+New long-term borrowing 122,171.00 0.00 0.00
-Monthly long-term principal 1,495.92 1,510.88 1,525.98
-Long-term interest expense 1,221.71 1,206.75 1,191.64
-Operator labor (production) 500.50 60.67 593.67
-Operator labor (packing) 0.00 0.00 0.00
+Short-term borrowing 0.00 0.00 0.00
-Short-term principal 0.00 0.00 0.00
-Short-term interest expense 0.00 0.00 0.00
Ending Cash Balance $2,876.85 ($462.70) ($4,788.94)
Accumulated Borrowings $119,453.37 $116,735.75 $114,018.12


Page 15








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 28. Cash Flow Analysis for April thru June
April May June
CASH INFLOW
Honey sales $0.00 $0.00 $0.00
Wax sales 0.00 0.00 0.00
Total Cash Inflow $0.00 $0.00 $0.00

CASH OUTFLOW
Sugar $0.00 $0.00 $0.00
Drugs 0.00 0.00 0.00
Misc. expenses (production) 80.00 160.00 160.00
Hired labor (production) 345.33 465.50 157.50
Truck costs (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
Hired labor (packing) 0.00 0.00 0.00
Truck costs (packing) 0.00 0.00 0.00
Rent 33.33 33.33 33.33
Office supplies 12.50 12.50 12.50
Tools 16.67 16.67 16.67
Accounting service 0.00 0.00 0.00
Insurance 0.00 0.00 0.00
Real estate taxes 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
Total Cash Outflow $816.61 $1,080.78 $1,126.78
Total Cash Flow ($816.61) ($1,080.78) ($1,126.78)
CASH FLOW SUMMARY
Net cash flow ($816.61) ($1,080.78) ($1,126.78)
+Beginning cash balance (4,788.94) (8,964.51) (13,659.91)
-New capital investment 0.00 0.00 0.00
+Down payment (cash) 0.00 0.00 0.00
+New long-term borrowing 0.00 0.00 0.00
-Monthly long-term principal 1,541.24 1,556.66 1,572.22
-Long-term interest expense 1,176.38 1,160.97 1,145.40
-Operator labor (production) 641.33 897.00 260.00
-Operator labor (packing) 0.00 0.00 0.00
+Short-term borrowing 0.00 0.00 0.00
-Short-term principal 0.00 0.00 0.00
-Short-term interest expense 0.00 0.00 0.00
Ending Cash Balance ($8,964.51) ($13,659.91) ($17,764.31)
Accumulated Borrowings $111,300.49 $108,582.87 $105,865.24


Page 16








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 29. Cash Flow Analysis for July thru September
July August September
CASH INFLOW
Honey sales $0.00 $0.00 $7,729.00
Wax sales 0.00 0.00 0.00
Total Cash Inflow 0.00 0.00 $7,729.00

CASH OUTFLOW
Sugar $1,250.00 $0.00 $0.00
Drugs 0.00 680.00 0.00
Misc. expenses (production) 0.00 0.00 0.00
Hired labor (production) 7.00 145.83 10.50
Truck costs (production) 64.00 96.00 48.00
Containers 4,396.67 4,396.67 0.00
Queens 0.00 1,250.00 0.00
Repairs 103.44 103.44 103.44
Hired labor (packing) 0.00 0.00 0.00
Truck costs (packing) 0.00 0.00 0.00
Rent 33.33 33.33 33.33
Office supplies 12.50 12.50 12.50
Tools 16.67 16.67 16.67
Accounting service 0.00 0.00 0.00
Insurance 0.00 0.00 0.00
Real estate taxes 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
Total Cash Outflow $5,916.94 $6,767.78 $1,042.78
Total Cash Flow ($5,916.94) ($6,767.78) $6,686.22
CASH FLOW SUMMARY
Net cash flow ($5,916.94) ($6,767.78) $6,686.22
+Beginning cash balance (17,764.31) (26,411.88) (36,458.45)
-New capital investment 0.00 0.00 0.00
+Down payment (cash) 0.00 0.00 0.00
+New long-term borrowing 0.00 0.00 0.00
-Monthly long-term principal 1,587.95 1,603.82 1,619.86
-Long-term interest expense 1,129.68 1,113.80 1,097.76
-Operator labor (production) 13.00 561.17 154.92
-Operator labor (packing) 0.00 0.00 0.00
+Short-term borrowing 0.00 0.00 0.00
-Short-term principal 0.00 0.00 0.00
-Short-term interest expense 0.00 0.00 0.00
Ending Cash Balance ($26,411.88) ($36,458.45) ($32,644.77)
Accumulated Borrowings $103,147.62 $100,429.99 $97,712.36


Page 17








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 30. Cash Flow Analysis for October thru Year's End
October November December Year totals
CASH INFLOW
Honey sales $7,729.00 $7,729.00 $7,729.00 $38,645.00
Wax sales 750.00 750.00 0.00 $1,500.00
Total Cash Inflow $8,479.00 $8,479.00 $7,729.00 $40,145.00

CASH OUTFLOW
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
Hired labor (production) 350.00 350.00 0.00 $2,304.17
Truck costs (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
Hired labor (packing) 0.00 10.50 0.00 $10.50
Truck costs (packing) 368.00 368.00 0.00 $736.00
Rent 33.33 33.33 33.33 $400.00
Office supplies 12.50 12.50 12.50 $150.00
Tools 16.67 16.67 16.67 $200.00
Accounting service 0.00 87.50 87.50 $175.00
Insurance 0.00 500.00 0.00 $500.00
Real estate taxes 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
Total Cash Outflow $1,702.28 $1,707.28 $536.78 $24,008.21
Total Cash Flow $6,776.72 $6,771.72 $7,192.22 $16,136.79
CASH FLOW SUMMARY
Net cash flow $6,776.72 $6,771.72 $7,192.22 $16,136.79
+Beginning cash balance (32,644.77) (29,593.17) (26,546.57) ($22,331.98)
-New capital investment 0.00 0.00 0.00 $142,005.88
+Down payment (cash) 0.00 0.00 0.00 $19,834.88
+New long-term borrowing 0.00 0.00 0.00 $122,171.00
-Monthly long-term principal 1,636.06 1,652.42 1,668.95 $18,971.96
-Long-term interest expense 1,081.56 1,065.20 1,048.68 $13,639.55
-Operator labor (production) 650.00 650.00 260.00 $5,242.25
-Operator labor (packing) 357.50 357.50 0.00 $715.00
+Short-term borrowing 0.00 0.00 0.00 0.00
-Short-term principal 0.00 0.00 0.00 0.00
-Short-term interest expense 0.00 0.00 0.00 0.00
Ending Cash Balance ($29,593.17) ($26,546.57) ($22,331.98) ($22,331.98)
Accumulated Borrowings $94,994.74 $92,277.11 $89,559.48 $89,559.48


Page 18








A Study in Profitability for a Mid-Sized Beekeeping Operation


Table 31. Summary of Costs and Returns
Total Annual Percent of Per Ib
Costs Total Cost Per Hive of Honey
COSTS
Sugar $2,462.50 5% $4.93 $0.04
Medication 707.00 1% 1.41 0.01
Hired labor (production) 2,304.17 5% 4.61 0.04
Truck costs (production) 1,318.40 3% 2.64 0.02
Containers 8,793.33 18% 17.59 0.16
Queens 1,500.00 3% 3.00 0.03
Repairs 1,241.31 2% 2.48 0.02
Truck costs (packing) 736.00 1% 1.47 0.01
Hired labor (packing) 10.50 0% 0.02 0.00
Rent 400.00 1% 0.80 0.01
Office supplies 150.00 0% 0.30 0.00
Tools 200.00 0% 0.40 0.00
Accounting service 175.00 0% 0.35 0.00
Real estate taxes 500.00 1% 1.00 0.01
Insurance, except trucks 500.00 1% 1.00 0.01
Advertising 1,570.00 3% 3.14 0.03
Associations & conven. 400.00 1% 0.80 0.01
Misc. Expenses (prod.) 640.00 1% 1.28 0.01
Heating, fuel 400.00 1% 0.80 0.01
Total operating capital $24,008.21 48% $48.02 $0.44
Interest (operating cap.) $900.31 2% $1.80 $0.02
TOTAL CASH COSTS $24,908.52 50% $49.82 $0.45
Depreciation 12,973.88 26% 25.95 0.24
Interest on investment 5,845.16 12% 11.69 0.11
Operator labor (packing) 715.00 1% 1.43 0.01
Operator labor (prod.) 5,242.25 11% 10.48 0.10
TOTAL COSTS $49,684.81 100% $99.37 $0.90
RETURNS
Expected gross return $40,145.00 -- $80.29 $0.73
less total cash 24,908.52 49.82 0.45
Return over cash costs 15,236.48 -- 30.47 0.28
less depreciation 12,973.88 25.95 0.24
Return to inv., operator labor 2,262.60 -- 4.53 0.04
and mgmt* (less interest) 5,845.16 11.69 0.11
Return to operator labor & mgmt (less (3,582.56) -- (7.17) (0.07)
operator labor) 5,957.25 11.91 0.11
Return to management ($9,539.81) -- ($19.08) ($0.17)
Investment, operator labor and management



ANALYSIS $9000.00. However, there are extenuating
circumstances that come into play. First, the business
Now that the model of a small-scale beekeeping is paying off a heavy debt load; second the operator
enterprise has been constructed, some generalizations is receiving $6.50 per hour for his/her labor.
are in order about this particular operation. At the Assuming the family has other income, the loss could
outset, it appears that the business is not profitable, also be a significant tax shelter, while the beekeeping
because the return to management is in the red some operation is becoming established.


Page 19







A Study in Profitability for a Mid-Sized Beekeeping Operation


An examination of investment costs shows that
they could be reduced in a number of ways. The
building could be rented, reduced in size or an old
one purchased and renovated. Many beekeepers have
little investment in excess land. Most beekeepers do
not go into large-scale honey production with totally
new equipment and bees. Thus, the possibility exists
that land, hive and bee investments can be
substantially reduced. Machinery and equipment
investment may also be modified, depending on the
operation. Any savings on investments,however,
reduces depreciation possibilities. Quality
investments are important for the business as it grows
and their acquisition should be evaluated carefully.

Obviously, the amount of financing required for
this operation is important to profitability. Anything
reducing the amount of money that needs to be
borrowed would improve profitability. This means a
larger down payment or perhaps extending the
payments beyond five years. Fluctuating interest rates
are sure to remain important factors in the future. It
is important to remember these investments are fixed
costs and must be paid whether or not any honey is
produced.

Variable costs in this operation could be
examined carefully for savings opportunities.
Analyzing expenses out in the bee yard provides
insight into several savings possibilities. One is queen
cost; this represents 11% total production outlay
(notice this cost is for requeening only one-half the
hives each year). One consideration is to rear ones
own queens, another to find less-expensive providers
of queen bees. Again, quality considerations take on
prime importance here, for no colony is better than
its queen. Sugar is another large cost (17% of total).
The price varies considerably and substitutes such as
high fructose corn syrup (HFCS) have recently been
substantially less expensive. Because it is already in
liquid form, HFCS also saves labor in mixing.
However, it must be recognized that bees store HFCS
more readily than food made from sucrose (table
sugar) and thus the possibility of the resultant honey
being declared illegally adulterated increases.

Operator labor is the largest variable production
cost (37% in this example) and so must be looked at
carefully in terms of cost reduction. As u.4 1.-slNd
before, any duties that can be done by hired labor, if
it frees the operator up for more "important" work,
should be carefully considered. As in many
management situations, often the conventional
wisdom of "do it yourself" is not the best. Hiring and


delegating duties in beekeeping seem to make
eminent sense, but only studying their effects on the
operation's economics will prove the point.

The concept of intensively managing bee colonies
also comes into play when considering variable costs.
Reducing the number of colonies, also potentially
reduces bee yards and thus driving time. Spending
more management time on one colony also qualifies
as intensive activity. Most beekeepers agree more
intensive colony management will pay greater
dividends in the long run.

Beyond production costs, an in-depth analysis of
returns in terms of honey and marketing costs can be
extremely important. Much of the markup in
agricultural produce occurs "beyond the farm gate,"
and the beekeeper should, therefore, position him or
herself so as to take advantage of this. All too many
sell their hard-won honey inexpensively to honey
processors, who take advantage of markup. In this
example, for instance, potential profit of $16,525.00 is
expected in the retail side of the operation (packing
only 48% of honey produced). This is five times the
profit expected from the wholesale side of the
operation (packing 52% of the crop). It may be
worthwhile then to look critically at advertising and
promotion in the local market; there appears to exist
a large potential profit in increasing efforts here with
relatively little increased expense.

A significant amount of cost is represented by
containers in both retail and wholesale sales; these
costs should be examined carefully because they
represent such a great percentage of possible profits.
Labor, too, represents a significant part of marketing
expense; the same considerations hold true here as
for labor in the production side of the business.

Cash flow analysis in this study adds a significant
dimension to the results presented here. It shows the
relative importance of loan payments, as well as the
ups and downs of income and disbursements
throughout the year. It also helps to predict when
short term borrowing might me essential to keep the
business afloat, and reveals the critical need for
working capital in starting operation. All too many
businesses simply don't have enough working capital
to carry them through the first few years, when a few
dollars one way or another can spell success or
disaster.


Page 20







A Study in Profitability for a Mid-Sized Beekeeping Operation


CAVEATS

This study is based on a number of assumptions;
figures presented here are not in any sense a
consensus, but rather best "guesses." Present and
potential producers should not take them as
absolutes. The value of the model lies not so much
in the numbers printed here,, but in the fact that
economic simulation with any set of figures is made
possible with relative ease.

There are a number of ways to calculate interest
on investments, for example, and some are quite
complicated. Your attorney or tax consultant may not
agree with how interest in figured here. The estimate
of 106 pounds of honey per colony is just that, an
estimate. Some would say that is high in Florida;
another "arguable" figure is the number of hours of
both operator and hired labor needed. And the list
goes on: truck costs, driving time, packing costs and
labor, and prevailing interest rates.

SIZE OF THE OPERATION

Although the model presented here is quite
comprehensive, it does not reveal everything about a
potential business. Perhaps one of the most elusive
considerations in any endeavor is the effect of size,
sometimes called economies of scale. The basic
concept is that as size increases, so does efficiency.
However, there is a limit to this;efficiency may in fact
decrease due to limitations in any of several variables:
labor, equipment, management, working capital, etc.

There is a noticeable lack of economic data on
beekeeping operations in the United States, however,
our Canadian neighbors have investigated several
aspects of beekeeping economics, including effects of
size. In a study from the Province of Alberta (1982)
the following preface is published:

"As the size of the operation increases, cost
savings can be expected in areas of operations
and fixed investment components. For example,
specialized bee equipment costs will be spread
over a wider base as the number of hives
increase. Operating cost savings can come about
from the use of larger equipment, bulk buying,
and more efficient use of labor and land. Lower
production costs per pound of honey with
increased size would result in increased returns to
management."


One trend found in this study was a general
decrease in return per pound of honey as the size of
the operation increased. The average price received
per pound of honey sold was 78.65 cents, 61.58 cents
and 58.11 cents for operations with fewer than 100
hives, between 100 and 699 hives, and over 700 hives,
respectively.

Investment costs per hive ranged from $546.58 for
apiaries with less than 10 hives, to a low of $194.75
for operations with 700 to 999 hives. Operations with
1000 hives or more had significantly higher building
and honey equipment costs (about 22 percent) when
compared to those having 700 to 999 hives. This
appears to be justified because of purchase of labor-
saving devices such as forklifts and hive loaders.

Economies of size were most apparent for labor
use in the Alberta study. Labor per pound ranged
from 87.84 cents for operations with less than 10 hives
to 13.97 cents for operations with 700 to 999 hives.
Average vehicle expenses were 5.87 cents, 5.49 cents
and 3.74 cents for operations with fewer than 100
hives, 100 to 699 hives, and over 700 hives,
respectively. Building and repair costs also declined
with size, as did operating costs.

The Alberta study indicated a positive return to
management or profit was only seen in the 700 to 999
hive class and a positive return on investment was
only realized by operations having 400 or more hives.
In summary, 700 to 999 hive class operations has
lowest investment costs, labor costs, operating costs
and total production cost on a per pound of honey
sold basis. In addition, the relatively high honey
production of 151.04 pounds per hive yielded a
profitable return to apiaries within this class.

Although the Canadian study suggests that
economies of scale favor operations of 700 to 999
hives, that data must be tempered by present and
future conditions in Florida. Unlike the prairie
provinces of Canada, the Sunshine State is rapidly
becoming urban with the concomitant problems of
decrease in bee pasturage, increase in urban pesticide
usage, and increase in potential for neighbor to
neighbor conflicts resulting in beekeeping ordinances.


Page 21







A Study in Profitability for a Mid-Sized Beekeeping Operation


CAVEATS

This study is based on a number of assumptions;
figures presented here are not in any sense a
consensus, but rather best "guesses." Present and
potential producers should not take them as
absolutes. The value of the model lies not so much
in the numbers printed here,, but in the fact that
economic simulation with any set of figures is made
possible with relative ease.

There are a number of ways to calculate interest
on investments, for example, and some are quite
complicated. Your attorney or tax consultant may not
agree with how interest in figured here. The estimate
of 106 pounds of honey per colony is just that, an
estimate. Some would say that is high in Florida;
another "arguable" figure is the number of hours of
both operator and hired labor needed. And the list
goes on: truck costs, driving time, packing costs and
labor, and prevailing interest rates.

SIZE OF THE OPERATION

Although the model presented here is quite
comprehensive, it does not reveal everything about a
potential business. Perhaps one of the most elusive
considerations in any endeavor is the effect of size,
sometimes called economies of scale. The basic
concept is that as size increases, so does efficiency.
However, there is a limit to this;efficiency may in fact
decrease due to limitations in any of several variables:
labor, equipment, management, working capital, etc.

There is a noticeable lack of economic data on
beekeeping operations in the United States, however,
our Canadian neighbors have investigated several
aspects of beekeeping economics, including effects of
size. In a study from the Province of Alberta (1982)
the following preface is published:

"As the size of the operation increases, cost
savings can be expected in areas of operations
and fixed investment components. For example,
specialized bee equipment costs will be spread
over a wider base as the number of hives
increase. Operating cost savings can come about
from the use of larger equipment, bulk buying,
and more efficient use of labor and land. Lower
production costs per pound of honey with
increased size would result in increased returns to
management."


One trend found in this study was a general
decrease in return per pound of honey as the size of
the operation increased. The average price received
per pound of honey sold was 78.65 cents, 61.58 cents
and 58.11 cents for operations with fewer than 100
hives, between 100 and 699 hives, and over 700 hives,
respectively.

Investment costs per hive ranged from $546.58 for
apiaries with less than 10 hives, to a low of $194.75
for operations with 700 to 999 hives. Operations with
1000 hives or more had significantly higher building
and honey equipment costs (about 22 percent) when
compared to those having 700 to 999 hives. This
appears to be justified because of purchase of labor-
saving devices such as forklifts and hive loaders.

Economies of size were most apparent for labor
use in the Alberta study. Labor per pound ranged
from 87.84 cents for operations with less than 10 hives
to 13.97 cents for operations with 700 to 999 hives.
Average vehicle expenses were 5.87 cents, 5.49 cents
and 3.74 cents for operations with fewer than 100
hives, 100 to 699 hives, and over 700 hives,
respectively. Building and repair costs also declined
with size, as did operating costs.

The Alberta study indicated a positive return to
management or profit was only seen in the 700 to 999
hive class and a positive return on investment was
only realized by operations having 400 or more hives.
In summary, 700 to 999 hive class operations has
lowest investment costs, labor costs, operating costs
and total production cost on a per pound of honey
sold basis. In addition, the relatively high honey
production of 151.04 pounds per hive yielded a
profitable return to apiaries within this class.

Although the Canadian study suggests that
economies of scale favor operations of 700 to 999
hives, that data must be tempered by present and
future conditions in Florida. Unlike the prairie
provinces of Canada, the Sunshine State is rapidly
becoming urban with the concomitant problems of
decrease in bee pasturage, increase in urban pesticide
usage, and increase in potential for neighbor to
neighbor conflicts resulting in beekeeping ordinances.


Page 21







A Study in Profitability for a Mid-Sized Beekeeping Operation


CONCLUSIONS

The financial model presented here can provide
significant help to those contemplating a career in
commercial beekeeping. It follows decision-making
through investment costs, probable operating costs in
the field as correlated with the Florida Beekeeping
Almanac (1979), and costs and returns in marketing
honey on a retail and wholesale basis.

The aim of this publication is to fill a void that
has existed for sometime, by providing a guide to use
in developing detailed financial analysis. The 1980s
business climate demands a "sharper pencil."
Fortunately, the decade has also provided an
electronic sharpener in the form of the micro
computer. Perhaps this easy-to-use simulation enable
far more beekeepers to be able to say with some
degree of assurance how much it costs them to
produce a pound of honey.

REFERENCES

Adams, R. L. and Frank E. Todd. "Cost of
Producing Extracted Honey in California,"
Technical Bulletin No. 656, United States
Department of Agriculture, Washington, D.C.,
1939.


Andruchow, Lloyd. "The Economics of Beekeeping
in Alberta 1980," Agdex 821-16, Economic
Services Division, Alberta
Agriculture,September, 1982.

Coke, E. W. "Apiary Records of Citrus and Tupelo
Honey Producers as Discussed at the 12th
Annual Florida Beekeepers Institute," Florida
Agricultural Extension Service, Institute of
Food and Agricultural Sciences, University of
Florida, 1966.

Owens, Charles D., Thayer Cleaver and Rodger E.
Schneider. "An Analysis of Beekeeping
Production Costs and Returns," Production
Research Report No. 151, Agricultural
Research Service, United States Department of
Agriculture, 1973.

RWAg, Harry. "Cost of Production Survey Related to
Market Price of Honey," American Bee
Journal, Vol. 107, April 1967, p. 139.


Page 22







A Study in Profitability for a Mid-Sized Beekeeping Operation


CONCLUSIONS

The financial model presented here can provide
significant help to those contemplating a career in
commercial beekeeping. It follows decision-making
through investment costs, probable operating costs in
the field as correlated with the Florida Beekeeping
Almanac (1979), and costs and returns in marketing
honey on a retail and wholesale basis.

The aim of this publication is to fill a void that
has existed for sometime, by providing a guide to use
in developing detailed financial analysis. The 1980s
business climate demands a "sharper pencil."
Fortunately, the decade has also provided an
electronic sharpener in the form of the micro
computer. Perhaps this easy-to-use simulation enable
far more beekeepers to be able to say with some
degree of assurance how much it costs them to
produce a pound of honey.

REFERENCES

Adams, R. L. and Frank E. Todd. "Cost of
Producing Extracted Honey in California,"
Technical Bulletin No. 656, United States
Department of Agriculture, Washington, D.C.,
1939.


Andruchow, Lloyd. "The Economics of Beekeeping
in Alberta 1980," Agdex 821-16, Economic
Services Division, Alberta
Agriculture,September, 1982.

Coke, E. W. "Apiary Records of Citrus and Tupelo
Honey Producers as Discussed at the 12th
Annual Florida Beekeepers Institute," Florida
Agricultural Extension Service, Institute of
Food and Agricultural Sciences, University of
Florida, 1966.

Owens, Charles D., Thayer Cleaver and Rodger E.
Schneider. "An Analysis of Beekeeping
Production Costs and Returns," Production
Research Report No. 151, Agricultural
Research Service, United States Department of
Agriculture, 1973.

RWAg, Harry. "Cost of Production Survey Related to
Market Price of Honey," American Bee
Journal, Vol. 107, April 1967, p. 139.


Page 22




University of Florida Home Page
© 2004 - 2010 University of Florida George A. Smathers Libraries.
All rights reserved.

Acceptable Use, Copyright, and Disclaimer Statement
Last updated October 10, 2010 - - mvs