Farm Commodity Programs: Honey

Farm Commodity Programs: Honey

Order Code RS20759
Updated October 4, 2006
CRS Report for Congress
Received through the CRS Web
Farm Commodity Programs: Honey
Carol Canada
Technical Information Specialist
Resources, Science, and Industry Division
Jasper Womach
Agriculture Policy Specialist
Resources, Science, and Industry Division
Summary
The honey price support program was first created by the Agricultural Act of 1949
(P.L. 81-439) to provide market price stability for honey producers and to encourage
maintenance of sufficient bee populations for pollination. It was repealed by the Federal
Agricultural Improvement and Reform Act of 1996 (P.L. 104-127) following several
years of suspension by appropriations laws. Limited assistance in the form of recourse
loans was restored for the 1998 and 1999 honey crops. More marketing loan program
support was approved for 2000, but funding was not provided for the 2001 honey crop.
The 2002 farm bill (P.L. 107-171) restored marketing assistance loan program benefits
for crop years 2002-2007. With the program expiring at the end of 2007, its future may
be determined by the anticipated 2007 farm bill. This report will be updated as
legislative developments transpire.
Industry Profile
Production and Prices. In 2002, according to the U.S. Census of Agriculture,
there were 12,029 beekeepers with 2.4 million honey bee colonies, and they produced 175
million pounds of honey. In 2005, the national average yield was 73 pounds per colony
and the farm price averaged $0.90 per pound. As shown in Figure 1, honey production
stayed near 250 million pounds until the mid-1960s. Then it gradually trended downward
and became more variable from year to year.
Beekeeping is heavily concentrated along the U.S. northern border from Michigan
to Washington, where there are large areas of alfalfa and clover nectar, and in Florida,
California, and Texas, where fruits and vegetables are sources of nectar and the growers
need pollination services. The four leading states (ND, SD, FL, CA) account for nearly
50% of U.S. honey production.
Congressional Research Service ˜ The Library of Congress

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Imports. Honey imports were negligible until the early 1970s, when they began to
grow rapidly. In 2005, honey imports reached a record high of 233 million pounds. The
top five foreign suppliers in 2005, accounting for 80% of total imports, were China
(28%), Argentina (22%), Vietnam (13%), Canada (10%), and India (7%).
Figure 1. Production, Imports, and Total Honey, 1950-2005
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Source: Economic Research Service, U.S. Department of Agriculture.
In 2001, the U.S. International Trade Commission (USITC) determined that the
domestic honey industry had been harmed by imports of honey from Argentina and China.
In addition, the International Trade Administration (ITA) found that honey from these
countries was being imported at less than fair value,1 and that the honey industry in
Argentina was being subsidized.2 Consequently, the ITA imposed antidumping duties on
honey from these countries. Also, countervailing duties were imposed on imports from
Argentina. A five-year sunset review of these determinations begins in 2006.3 The U.S.
1 Notice of Amended Final Determination of Sales at Less than Fair Value and Antidumping Duty
Order: Honey from the People’s Republic of China, 66 FR 63670-72, December 10, 2001.
Notice of Amended Final Determination of Sales at Less than Fair Value: Honey from Argentina,
66 FR 58434-35, November 21, 2001.
2 See CRS Report RL32371, Trade Remedies: A Primer, by Vivian C. Jones, for information on
antidumping and countervailing duty procedure.
3 ITA and the ITC review each outstanding antidumping and countervailing duty order every five
years to determine whether revocation of the order would be likely to lead to (1) a continuation
(continued...)

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honey industry accused Chinese honey exporters of circumventing antidumping and
countervailing duty orders. However, remedial legislation was adopted by the 109th
Congress that is expected to eliminate those problems.4
Farm Structure. While not distinguished by size in the Census of Agriculture, the
nation’s 12,029 beekeepers have been classified by USDA as (a) hobbyist, (b) part-time
or sideliner, or (c) commercial or full-time.5 Hobbyist beekeepers own fewer than 25
colonies and keep bees for a hobby or for small-scale pollination of orchard or field crops.
Most honey produced by hobbyists is consumed at home, given away, or sold directly by
the beekeeper. Part-time or sideliner beekeepers each own between 25 and 299 colonies
and market their honey either through direct sales to consumers or retail outlets, or
through bulk sales to honey processors. Commercial or full-time beekeepers each own
300 or more colonies and, according to the USDA, are responsible for about 60% of the
extracted honey produced in the United States.
Many commercial specialty crops require pollination by insects to bear seeds or fruit.
In some cases, farmers contract with beekeepers for pollination services, rather than
maintaining their own bee colonies or relying on wild insects. Hobbyist and part-time
beekeepers generally do not engage in contract pollination, but pollination fees can be an
important source of income for some commercial beekeepers. For most beekeepers,
however, the receipts from honey and beeswax sales far exceed the fees received from
pollination services.
Some fruit and vegetable farmers are concerned, because of the decreasing number
of honeybee colonies, about future pollination services. Over the past 20 years, bee
colonies have dropped about 25% (from 3.2 million to 2.4 million). In addition to honey
import competition, other threats to the beekeeping industry include diseases and parasites
that are difficult to control, inadvertent exposure to insecticides, and northward migration
of the Africanized honeybee.6
National Honey Board. The Honey Research, Promotion, and Consumer
Information Act of 1984 (P.L. 98-590) authorized creation of a 13-member National
Honey Board. The board receives an assessment of 1¢ per pound on all domestic and
imported honey, which it uses to finance and administer a national research, promotion,
and consumer information program to expand domestic and foreign markets for U.S.
honey. Assessments totaled $3.6 million in 2005. USDA’s Agricultural Marketing
Service is responsible for overseeing the board’s activities and reviewing its programs,
budgets, and expenditures.
3 (...continued)
or recurrence of dumping or subsidies and (2) material injury. If both agencies make affirmative
determinations, the order is continued for another five years; if not, the order is revoked.
4 P.L. 109-280, Sec. 1632, requires “new shippers” to post cash deposits while awaiting the
assignment by ITA of a duty rate. For more detail, see CRS Report RS22290, Trade Remedies:
New Shipper Reviews.
5 The Census of Agriculture surveys farms with five or more colonies. Therefore, this number
understates the producer count by excluding some of the small hobby or part-time beekeepers.
6 The threat to fruit and vegetable farmers lies in beekeepers not providing services in areas
where the more aggressive Africanized bees drive out or breed into domestic colonies.

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Honey Support Program History
The Agricultural Act of 1949 (P.L. 81-439, Section 201) provided permanent
authority and made available price support for honey through USDA’s Commodity Credit
Corporation (CCC). The support program offered nonrecourse loans to producers who
supplied honey as loan collateral. Effectively, this made the loan rate the price received
by farmers whenever market prices were below the loan rate. As shown in Figure 2, from
1982 to 1990 the average loan rate of honey was higher than the average market price of
honey. This caused producers to forfeit honey to the CCC, and honey packers and
industrial users to import honey.
Encouraged by high loan forfeitures, and by a report from the General Accounting
Office (GAO, now the Government Accountability Office) stating that the honey price
support program was not needed to ensure crop pollination, the 1985 farm bill (P.L. 99-
198, Section 1041) reduced the level of support and dropped the escalation formula. The
1990 farm bill (P.L. 101-624, Section 207) allowed producers to choose loan deficiency
payments instead of nonrecourse loans.7
In the mid-1990s, Congress and the Administration were trying to reduce the budget
deficit, and farm programs were one target for spending cuts. The USDA appropriation
acts for FY1994 (P.L. 103-111) and FY1995 (P.L. 103-330) provided no funding for the
honey support program. Then, the 1996 farm bill (P.L. 104-127, Section 171) repealed
altogether the honey price support authority. Subsequent laws instituted recourse loans
for the 1998, 1999, and 2000 crop years (P.L. 105-277, Section 1122; P.L. 106-78,
Section 801; P.L. 106-224, Section 204). Before the end of 2000, that year’s entire honey
crop was made eligible for marketing loan benefits at a support price of $0.65 per pound
(P.L. 106-387, Section 812). Though no support was approved for the 2001 honey crop,
the 2002 farm bill (P.L. 107-171, Subtitle B) brought honey back into the group of
commodities eligible for nonrecourse marketing assistance loans and loan deficiency
payments with a loan rate of $0.60 for crop years 2002-2007.
The honey program reached a record high cost of $100 million in FY1988. More
recently, annual net outlays for FY2001 through FY2005 were, respectively, $23 million,
$3 million, $1 million, $3 million, and $8 million. Budget estimates as of July 2006 put
FY2006 net outlays at $7 million.8
7 Nonrecourse loans allow the borrower to forfeit the honey pledged as collateral as full
satisfaction of the repayment obligation, no matter how low the market price of honey. No
additional recourse is available to the lender to recover the full loan principal and interest. A
payment for the difference between the higher loan rate and the lower market price is called a
loan deficiency payment. Loan deficiency payments give producers the monetary benefit of the
commodity loan program and allow them to retain ownership of the honey. The advantage to the
government is in not taking possession and having to manage and dispose of forfeited honey. For
more detailed explanations of nonrecourse loans and loan deficiency payments, see CRS Report
RL33271, Farm Commodity Programs: Direct Payments, Counter-Cyclical Payments, and
Marketing Loans.
8 Note that the honey marketing year corresponds to the calendar year, whereas program
expenditure data are reported by fiscal year.

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Figure 2. Average Market Prices and National Loan Rates
for Honey, 1950-2007
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Market Price
Nonrecourse Loan
Marketing Loan
Source: Economic Research Service, U.S. Department of Agriculture.
2007 Farm Bill Issues
Along with other commodities receiving mandatory federal support, the honey
program expires after the 2007 crop. The future of the program may be decided by the
anticipated 2007 farm bill.9 Unlike periods in the past, there appears to be no opposition
directed specifically at the honey program. However, it likely would be folded into the
overall commodity support issues of economics, budget, and trade policy.
Two economic considerations affecting all commodities receiving mandatory support
are (1) the effect of subsidies on competitiveness, and (2) the equity of concentrating most
of the benefits in the hands of a small proportion of the farmers. Economists have
determined that for crop farms, much of the benefit from commodity subsidies has been
capitalized into land prices. This raises the cost of production and makes these U.S. crops
less competitive in the global marketplace. Historically, this has been remedied by larger
subsidies. This is a cycle that some policymakers want to escape, and honey could be
impacted.
9 See CRS Report RL33037, Previewing a 2007 Farm Bill, coordinated by Jasper Womach.

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As a consequence of economies of size throughout agriculture, the benefits of farm
subsidies are increasingly concentrated in the hands of a few large operations.
Specifically, for honey, one analysis has determined that over the 1995-2004 period, all
$29 million in honey subsidies went to 2,727 recipients (these recipients amount to 23%
of the 12,029 producers counted in the 2002 Census). Furthermore, 57% of the money
went to 10% of recipients (272 producers).10 Honey producers counter that this
concentration simply reflects the comparatively small number of commercial producers
producing most of the honey and large number of hobbyists that produce little honey.
Also, it is the commercial beekeepers, not the hobbyists, that fruit and vegetable growers
rely upon for crop pollination.
A large overall federal budget deficit is expected to put pressure on all commodity
support program spending. This is in the face of pressure to broaden assistance to crops
that heretofore have not received support, namely the fruit and vegetable crops. In
addition, conservation and environmental groups are pressing for a “greening” of farm
assistance, with increased spending on such programs as the Environmental Quality
Incentives Program (EQIP), the Conservation Security Program (CSP), and the
Conservation Reserve Program (CRP). Without additional funds, broadening the uses of
commodity support funds would diminish the amount available for commodity support.
On the trade policy side, the marketing loan program is classified by the World Trade
Organization (WTO) as highly production- and trade-distorting. There is the possibility
that a competing country could bring a dispute claim to the WTO, arguing that the
marketing loan program effectively displaces imports from the U.S. market and functions
as an export subsidy in violation of the Agreement on Agriculture. Concern over this
possibility could encourage a change in policy for all commodities in the next farm bill.
Beekeepers, especially the commercial operators, see the honey support program as
critically import to stabilizing their income in an era of instability. Recently, honey prices
have been high, but only because of a worldwide honey shortage caused by droughts in
China, Argentina, and the United States. At some point production likely will rebound.
Then, according to a spokesman for the American Honey Producers Association, when
prices drop, not only the beekeepers will be sustained through the hard times by the honey
program, but also the fruit and vegetable producers who would continue to have available
the pollination services that are essential to their crops.
Additional public policy initiatives by the beekeepers include (a) a petition to the
Food and Drug Administration to create a standard of identity for honey as a
countermeasure to adulteration and labeling problems, (b) establishment of a Postal
Service requirement that, like its own carriers, all of its contract carriers deliver packaged
bees, and (c) increased funding for bee-related research at the four federal bee
laboratories.
10 The analysis, Honey Subsidies in the United States, was done by the Environmental Working
Group using data from the USDA and is available at [http://www.ewg.org].