From:??Ron Phipps
Sent: Wednesday, March 12, 2008 2:52 PM
HONEY MARKET REPORT
March 10, 2008
By Ronald P. Phipps
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Introduction
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In his March 9, 2008 front page New York Times article, David Streitfeld
writes:
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??Everywhere, the cost of food is rising sharply.? Whether the world is in
for a long period of continued increases has become one of the most urgent
issues in economics.? Many factors are contributing to the rise, but the
biggest is runaway demand. In recent years, the world?s developing
countries have been growing about 7% a year, an unusually rapid rate by
historical standards.?
?
?The high growth rate means hundreds of millions of people are, for the
first time, getting access to the basics of life, including a better diet.?
That jump in demand is helping to drive up the prices of agricultural
commodities.?
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?Rising food prices in the United States are already helping to fuel
inflation reminiscent of the 1970s.?
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The international honey market has entered a stage which many may describe
as ?crazy.?? Prices are soaring weekly as a result of an international
shortage of honey and the absence of Chinese honey from both the U.S.
market and possibly other major consuming countries.
?
In the March issue of the American Beekeepers Journal, I stated that macro-
economic factors were affecting prices for the majority of commodities,
including honey.? Those factors are the plunge in the value of the U.S.
dollar, and soaring prices for petroleum.? Since that time:? 1) the U.S.
dollar has suffered a further collapse in value relative to the euro which
has now appreciated since its inception by over 200%; ??2) an increase in
the price of petroleum to a historic record, approaching $110/barrel and 3)
the decision by the Federal Reserve, hoping to avoid a recession, to
sharply and continuously reduce interest rates which, in turn, further
weakens the U.S. dollar.? The U.S. economy is haunted by national deficits
and the specter of simultaneous recessionary and inflationary pressures.?
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In addition, macro-global weather patterns have led to unpredictable and
shifting patterns of agricultural production.? Within this context, honey
prices have escalated well beyond the industry?s expectations.
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The U.S.
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The 2007 U.S. honey crop was only 148 million pounds; far below normal for
the fifth consecutive year.? That was largely due to drought in the
southwest where California suffered both its worst drought in a century and
enormous wild fires that extensively destroyed tens of thousands of acres
of wild sage plants and buckwheat.? The colony collapse disorder compounded
problems for American beekeepers in 2007.
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While it is too early to tell, weather conditions in respect to rain and
snow cover are harbingers of much better prospects for a return to a good
2008 American honey crop.? A good crop this summer is essential to
stabilize honey prices.
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Very importantly, the carryover of U.S.A. honey has been depleted.? America?
s largest honey producers, some of whom had held prior crops, are fully
committed at prices which steadily rose month by month as the real
situation in respect to both macro-economic conditions and specific
supply/demand relations became clear to both American packers and producers.
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While weather conditions in California are better than a year ago, problems
with mites and Colony Collapse Disorder have resulted in many beekeepers
putting in the almond groves only 30% to 50% of the bee hives compared to a
year ago.
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Canada
?
In late January, Dr. Ron Fessenden and I spoke at the Annual Meeting of the
Honey Council of Canada which was held in Alberta.? Earlier, I spoke to the
Ontario Beekeepers Association about the International Honey Market and the
work of the International Honey and Health Committee.?
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After the bumper 2006 Canadian honey crop, the 2007 crop was 70% of a
normal crop.? Prices have been steadily rising in Canada.? Canadian
beekeepers, it is worth noting, are obtaining significantly more income
from pollination fees for canola, cranberry and blueberry crops; all of
these crops are increasing as a response to world demand for grains, oil
seeds and antioxidant rich foods.? Currently, the demand in the U.S.A. for
Canadian honey has greatly increased due to the absence of Argentine
honey.?
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Current prices for Canadian honey are in the range of $1.25-$1.30/lb. FOB
beekeeper.? While there have been reports of? Chinese honey rejected in
Canada, those reports, we believe, are exaggerated.
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One important development in the North American honey market is the recent
purchase of Billy Bee Honey Products, Canada?s largest honey packer, by
McCormick Company.? This purchase promises to have a large and long term
impact upon the North American honey market.? Many take this purchase as a
good omen for the entire industry since it manifests the fact that a
company of the size, financial strength, marketing expertise, sophisticated
scientific staff and strong presence in both the retail and industrial
trades is interested to participate in the honey industry.? We believe
interest in honey is growing in part because of the positive implications
for the honey trade of modern scientific research and discoveries that
Honey and Health Committee is encouraging and promulgating.
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Argentina and South America
?
The 2007/2008 Argentine honey crop is now estimated at 60,000 metric tons
plus or minus 10%.? Argentina had a very dry spring followed by a severely
cold winter.? Beekeepers were busy restoring their bees as Argentina?s
spring set in and were not concentrating on honey production.? The first
extraction was late and a disaster, which was not ameliorated by a
carryover, since the 2006/2007 crop was only about 70,000 metric tons,
representing a reduction from the 2005/2006 bumper crop of about 110,000
metric tons.? The very poor first extraction not only reduced total
production, but caused a sharp decline in white honey, including clover and
alfalfa honeys.
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As a result of favorable rains, the second Argentine extraction was greatly
improved over the first extraction but the honey produced was predominately
extra light amber tinged with yellow undertones since much of this honey
was from sunflowers.
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The short 2007 honey crops in Eastern Europe left European packers in
urgent need to replenish their stocks as they anxiously waited for
Argentina?s delayed crop.? The strength of the Euro which was reaching and
then exceeding US$1.50 to1 Euro put European packers in a sharply
advantageous position relative to U.S. importers and packers, who had to
buy and sell in a weak U.S. Dollar.? If Argentina sold honey FOB ? Buenos
Aires at USD3,050/MT, that meant a purchase price for European buyers of
2,000 Euro/MT.
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As a result, Argentina?s honey went to Europe with only 1% from old
contracts being shipped to the U.S.A.? The duty paid, ex-dock prices of
quality honey delivered to European ports from Argentine honey, whether
industrial grade or bottling grade, reached about $1.75/lb.? Even though
European packers are naturally unhappy with such levels, they are
purchasing quality Argentine honey to meet their urgent needs.
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Argentine beekeepers with a short crop in hand that is currently fetching
very high prices are offering honey in very small increments hoping for
these further price increases.? Some Argentine exporters who earlier sold
speculatively are in serious financial difficulty as they are paying
beekeepers much higher prices than the selling prices of old contracts they
have been struggling to fulfill or compelled to cancel.? Margins are either
tight or negative for Argentine honey exporters.
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A recent report that Japan has banned Chinese honey, including the popular
Chinese white acacia honey, has intensified the international scramble to
find white honey, especially from South America.
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Uruguay has also suffered a reduction to 50% of a normal crop.? Chilean and
Uruguayan honeys are obtaining C&F prices in the range of USD1.35/lb.-
USD1.50/lb.
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Brazil is becoming a more important player in the world honey market.?
Currently Brazil produces about 40,000MT, half of which is consumed locally
and the other half exported.? Because of currency considerations, Europe is
viewed as the natural market for conventional Brazilian honey.? America and
Europe will compete on par for Brazilian organic honey.? Normally Brazil?s
honey crop is more or less 50% light amber, 30% extra light amber and only
20% white honey.? In this respect, as well as flavor profiles, Brazilian
honey is the polar opposite of Argentine honey
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Brazil has received official word that the European commission will re-open
its market to imports of Brazilian conventional and organic honey.? The
strong Euro plus the fact that in some European nations 20% of the food is
organic has made Europe the preferred destination for Brazilian honey.?
Conventional Brazilian Light Amber honey is being sold forward to Europe in
very large quantities at around USD1.45/lb., organic Brazilian Light Amber
has fetched around $1.50/lb. and organic White Brazilian honey is over
USD1.60/lb.? Brazil anticipated and is obtaining price increases of 30%-40%
with the re-opening of the European market.? The conditions are expected to
persist and intensify at least until the summer of 2008 when European honey
crops will commence.? It is an unprecedented situation.? Brazilian offers
are becoming more difficult to obtain.
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China
?
South, eastern and central China have suffered the heaviest snow and
coldest weather of the past 6 decades.? Transportation, electricity and
heat were absent in many places for over 15 consecutive days.? This severe
cold spell, as noted, hit Afghanistan and the central highlands of
Vietnam.? Although there was concern about the impact on Chinese bees, most
Chinese beekeepers have a very small number of hives which they brought
into enclosures, homes, farms, etc. There are no reports of unusual losses
of bees in China as China?s spring crop begins in the southwest.
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But more significantly, inflation has grown sharply in China during recent
months, including rising prices for food.? Our government still suffers a
huge trade deficit with China and continues to put great pressure on China
to strengthen the value of the Chinese currency.? China?s currency has
already appreciated 10% relative to the US Dollar and further appreciations
are forecast.? The cost of production of Chinese honey in U.S. dollar terms
has undoubtedly sharply increased given the serious inflation.
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Most importantly, the closing of the bonding loophole through an Act of
Congress, coupled with the increased antidumping rates on Chinese honey
exporters, has virtually eliminated Chinese honey from legally entering the
U.S.A. market.?
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Issues of quality control and safety of Chinese tires, pet food, medicines,
toys, dental implants, seafood, etc., abound in the international press.?
China?s failures in quality control reflect both corruption and the
miniaturized scale of agricultural production in China that has given rise
to a class of ?peddlers? and ?collectors? who collect the tiny lots that
the small ?family farms? can produce.
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The collectors or peddlers do not have the capacity for quality control and
often have the incentive to adulterate products.? Many people do not
recognize how small the farms in China became after introduction of ?family
farms? averaging 1 acre per family.? China?s former Premier Zhu Rong Ju,
during a visit to the U.S.A., commented on the stark contrast between China?
s miniaturized family farms and the North American scale of agricultural
production.
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Recently, multi million dollar fines were levied in Australia against
companies that brought in Chinese honey via Singapore for re-export to the
U.S.A. as ?Australian honey.?? Countries used for transshipment are
suspected to include Indonesia, Malaysia, Thailand, India and Australia.?
The penalties in the U.S.A. for deliberate Customs fraud are not civil, but
criminal.
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The current upward price tendencies coupled with the absence of Chinese
honey from the U.S. market reveal the depressing effect that Chinese honey
has had on the U.S. honey market during recent years.
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Vietnam
?
Our colleague, Barbara Sheehan, has just returned from Vietnam where she
addressed 80 leading members of the Vietnamese honey industry including
some scientists.? The conference was held at a university and lasted about
8 hours during which both trends in the international honey market and the
exciting initiative on honey and health were discussed in detail.? The
Vietnamese are interested to participate in the honey and health initiative
which promises to contribute to a positive transformation of the industry,
provided there will be adequate supply and high quality honey available to
meet the anticipated growth in demand that will result from creative
marketing of this marvelous natural product which is acquiring a health
message based upon modern science.
?
Vietnamese honey exporters are reluctant to offer and are doing so month by
month. ?Vietnam, like China and Afghanistan, was hit by severe cold in
February which harmed the crop in the Central Highlands.? Vietnamese
beekeepers are worried about weakened bees and a weakening U.S. Dollar.?
Prices for Vietnamese light amber honey have been rising over the past 2
months and are currently in the high 90?s with potential for further
escalation.
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Conclusion
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We all know how hard it is to increase prices for commodities.? But this
month petroleum reached $109/barrel and gold $995.? Many packers also
realize that when prices are firm:? 1) all segments of an industry benefit;
2) profits for packers increase and; 3) consumer perception of value
increases.? The latter is an important and strategic fact that our industry
needs to better understand.
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The macro-economic factors described above are converging to create a
soaring international honey market and within the U.S.A. the dual phenomena
of stagnation and inflation. The facts that we are in a global economy and
our domestic honey production is significantly below consumption are
contributing to a sharp and sustained increase in the price of honey.?
Within this context the high quality of American and Canadian honey and
their attractive prices make North American honey the best values in the
market.
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The general thrust of the honey market for at least the next 3 or 4 months
is concern about availability and adequacy of supply rather than price. But
just as low prices discourage production, which leads to increases in
prices, high prices stimulate production which tends to reduce prices.?
Hopefully, a greater equilibrium between supply and demand will develop
during the second half of 2008.
?
Jeanne Bowe
Accounting Manager
CPNA International, Ltd.
100 Jericho Quadrangle, Suite 228
Jericho, New York 11753
?
Tel:? (516) 935-3880
Fax:? (516) 935-3959
e-mail:? [log in to unmask]
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