Dr. Jim Sartwelle of Texas A & M University at the January 2000 meeting of the American Beekeeping Federation in Fort Worth, Texas said risk management was the basis of most farming, no matter the commodity. Most operations are highly leveraged and capital intensive he said, and producers should, therefore, focus on profitability rather than profits. Risk equals uncertainly and risk management is an attempt to find a preferred combination of activities to increase profitability or margin. Margin is a measure of how close one is to being in or out of business and the dynamic is always present that the next most vulnerable person could fail.
Dr. Sartwelle discussed the concept and development of the Texas Risk Management Education Project funded by the Texas Legislature. Risk management is based on knowing the costs of production according to Dr. Sartwelle. Without these, it is impossible to market successfully because resulting profitability can only be guesswork. The risk education program covers sources of risk such as price and yield variability, changes in input costs, and environmental regulations. It discusses a large number of specific strategies, including debt management, enterprise diversification, forward contracting, selling and hedging.
Several beekeeping operations have taken risk management to heart and re-positioned themselves for survival in the new millennium as described in Forth Worth. Pat Heitkam has become a pollination broker in California. In essence, he handles others’ bees for almond pollination. Growers are better served under this system. They get a steady supply of good-quality bees and are able to hold someone accountable for their pollination. Beekeepers get more stable and predictable prices for their pollinating bees as well. Darrel Rufer, who used to only produce honey, now sells both nuclei and splits out of Minnesota. Pat Niemeyer delivers package bees. He has purchased a special truck (equipped with insulation and sprinklers) that ensures the bees make it to their destination in the best shape possible. Finally, Fred Rossman has shifted much of his queen and package-bee business into equipment manufacture.
One of the best possibilities for reducing one’s risk mentioned on the Texas Risk Management Education Project is forming cooperatives. That concept was discussed by Mr. James Matson, cooperative marketing specialist at the USDA’s Rural-Business Cooperative Service in Fort Worth. Cooperatives often fill expressed needs, Mr. Matson said, and they can improve bargaining power tremendously. Costs can be reduced and products and services not available to single entrepreneurs may be bargained for collectively. In comparison to corporations owned by stockholders, cooperatives are owned by their members. Some special benefits of cooperatives include single-tax treatment and limited anti-trust exemption. Cooperatives also provide marketing power, diverse ownership, access to value chains and markets (more direct contact with the consumer), ability to provide vertical product control and, of course, risk sharing.
Unfortunately, the idea of a cooperative is sometimes difficult to sell to farmers, Mr. Matson said. He said that getting producers to cooperate is often comparable to “herding cats.” There are also some pitfalls, including boards of directors that may try to micromanage. Most successful co-ops have professional management, which is one way to establish objective control. On the other hand, the manager must also be able to relate to the member owners. Very few beekeeping cooperatives seem to have survived for long periods, Mr. Matson said. He suggested that case studies done on those that have longevity would be valuable exercises.
To my knowledge, the U.S. beekeeping cooperative that has survived longest is located near Sioux City, Iowa. With $200 and 3,000 pounds of honey, five beekeepers formed a cooperative marketing organization in 1921 named Sioux Honey Association. The association is a cooperative in every sense of the word. Members own and control the organization through a board of directors elected by members. The management of the association is responsible to the directors. Other examples exist in Canada, such as Bee Maid, Canada’s largest marketer of consumer packaged honey with distributing centers around the world. Honey for Bee Maid is produced by beekeepers in the WesternPrairies and is processed and packaged at the HAACP-approved facilities in Spruce Grove, Alberta and Winnipeg, Manitoba .
The USDA publishes several documents on cooperatives. The Rural Business-Cooperative also has some good information. A publication on how to develop a business plan, the first step in forming a cooperative, can be found on the Small Business Administration’s site and others.
Types of co-ops that exist include marketing, bargaining, farm supplying and purchasing, servicing, pooling machinery and so-called new generation co-ops. The latter are enjoying a renewed interest. They integrate farm producers further up the agricultural marketing food processing chain, have closed or limited member policies, and require larger contributions of risk or equity than traditional limited-equity cooperative. CSREES has recently launched a new program to assist small farms and beginning cooperatives.