Are All Colonies Created Equal? The Role of Honey Bee Colony Strength in Almond Pollination Contracts

• Agricultural Economics Workshop

Date and Location

Thursday, October 27, 2016, 4:10 PM - 5:30 PM

Abstract

Managed honey bee colonies provide pollination services, an essential input in the production of many crops in the United States. Over the last decade, the supply of honey bee colonies in the U.S. has become more volatile as a result of multiple factors inhibiting colony health. This paper investigates the impact of uncertainty in the supply of colonies on the California almond pollination market—the largest user of managed pollinators in the world, providing nearly a third of U.S. commercial beekeeper yearly revenues (Bond et al., 2014; NASS, 2015). I develop a theoretical model to show that almond growers can reduce moral hazard in almond pollination by paying beekeepers according to delivered colony strength—the approximate number of bees in a colony. To test the predictions of the theoretical model, I utilize two unique datasets from the perspectives of both parties in almond pollination transactions. First, I perform a cluster analysis using data from an almond grower pollination contract survey that I conducted at the Almond Board of California's 2015 Almond Conference. I find that in 2015, many almond growers used pollination contracts consistent with the theoretical model's profit-maximizing contract under moral hazard. Second, I analyze the California State Beekeeper's Association pollination fee survey for years 2008-2015 and find that providing weak colonies for almond pollination results in lower fees collected by the beekeeper. Both sets of empirical results support the theoretical model's finding that almond growers use colony strength requirements in almond pollination agreements to elicit beekeepers' effort. By implication, beekeepers who experience high winter mortality rates likely also receive lower per-colony almond pollination fees due to low delivered colony strength. I estimate that a five percent increase in winter mortality rates leads to a seven to eight percent decrease in total revenues from almond pollination, a substantial overall loss given that almond pollination makes up such a large share of commercial beekeeping revenues. This paper highlights the need for additional research on the total economic impact of threats to honey bee colony health to effectively implement policies that promote the health of managed pollinators.