> I know what it costs me to produce a pound of honey as does Michael Palmer
> and most commercial beekeepers.

Maybe, but I never did know what it cost me to produce a pound of honey
(cost of production, or COP) -- at least in the sense of having one single
simple number, either before the season started, or even after the crop was
sold.  COP depends on many assumptions.  I did, however, have an idea of a
range of numbers could be used as my cost of production, depending on the
purpose. I did always figure out, in advance, the *range* of probable cost.
This range of numbers depended on other numbers that would never hold still.

Going into a season, I would consider my expected crop yield, the costs of
each expected input (expense), the value of by-products, contingencies,
extraordinary gains and losses, and assign a value to my own labour and
capital using current market benchmarks for small business or agriculture.
I would also look at the Alberta Agriculture industry study of costs and
returns (consensus data). (FWIW, that freely available Alberta data was
crucially helpful to the AHPA in establishing beyond doubt that China and
Argentina were dumping honey into the USA and other countries below cost of
production, since I know of no other jurisdiction that compiles such data,
and in such an impartial and thorough fashion).

Using that, I came up with a fairly soft number that would likely pay all my
bills (and not necessarily myself) that was a drop-dead number.  Below that,
I would be eating up my capital and going broke.

Above that price, I was getting some return, and the farther above that, the
better I made out, until, at some price, I was getting benchmark returns to
capital and labour.  In other words, I was making wages and management fees,
and getting bank interest on the value of my investment.

Higher than that price, I was getting a reward for taking risk (profit),
and, when the price spiked, there was money (windfall profits) to save in
order to weather the future price downturns that inevitably follow price
spikes.  Anyone who just went out and spent that windfall is currently very
likely under water.  Those who used the opportunity to either sell out or
invest carefully in cost-saving or profit-maximizing measures and to
eliminate bottlenecks in their outfit will likely last a few more years.

After each season was over, I, of course, had firmer numbers and a better
idea of what each pound had cost me, especially if I has sold it and did not
have large continuing interest and insurance costs.  That information was of
limited use when selling into a world market, and it applied to 1.) me and
2.) that year, only.

All in all, a cost of production number is only useful for determining
profitability and -- more seriously -- unprofitability, since large profits
are hardly a problem, but increasing unprofitability can only continue as
long as the beekeeper can or will keep paying out for the privilege of
giving honey away. COP is a useful number for seeing the need to either cut
costs -- or fold.

As a tool for setting price, COP is not good for anything, except for
determining where competition may come from (fair competition, anyhow).
Beekeepers are price takers, not generally price setters.  The market sets
the price on bulk honey.

In smaller lots, however, the producer may have some price control, and is
wise to take as much as can be negotiated at each event.  Not to do so is to
leave some money on the table -- money that may come in handy (see below) --
and also to lower the market for all honey.

For the small beekeeper, selling at retail, the best approach -- IMO -- is
to use the current bulk prices as a base and liberally add the cost of
handling, packaging, transporting and selling the honey, plus shrinkage,
risk, etc.  Doubling or tripling the bulk price is not unreasonable.  If the
package size is small, and selling lots small, then the limit is what the
traffic will bear.  Usually there is competition, and that will be the
limiting factor, and takes us back to total COP as the drop-dead number.

Cutting price will often not often increase sales much, but I have seen
beekeepers actually increase sales by charging more than everyone else!
I've also seen beekeepers selling below what we all figured must be their
total costs, losing money on every sale, and hoping to make it up on volume
:)

Since the COP is an elusive number, I've always tried to sell as far above
it as possible.  After all, I make computational errors and omissions on a
fairly regular basis.  My advise to anyone interested; try to make a
handsome profit.   That way, if you miss, you don't fall below break-even,
and you can use any bonus you make to improve your quality, service, and to
relax, making yourself a more pleasant supplier and employer, and, if you
feel guilty (some can't allow themselves too much success), give some to the
charity of your choice or help a needy person.  Or you can give back to this
industry: join and contribute to a club or national organisation, help a
starting beekeeper, start a website, or take some of your well-earned
leisure time to write informative and entertaining articles to BEE-L.

allen

-- Visit www.honeybeeworld.com/bee-l for rules, FAQ and  other info ---