ISET

ISET Economist Blog

A blog about economics in the South Caucasus by ISET

To Bee or not to Bee?

 

The economic significance of bees extends far beyond honey production. As the National Resource Defense Council writes in 2011 (“Why We Need Bees: Nature’s Tiny Workers Put Food on Our Tables”), the value of the honey that bees produced in the US in that year amounted to 150 million dollars, while the value of the harvested crops that were pollinated by bees was 15 billion dollars, i.e., greater by a factor of 100! Having bees around is not primarily beneficial for the beekeepers, but even more for anyone else who grows crops, fruits, or vegetables.

Since almost 30 years, bee colonies all around the globe are under heavy distress. In the United States, calamities started with the spreading of varroa destructor, a parasitic mite that infects beehives and may lead to their entire annihilation. The mite began its global conquest in Japan and the Soviet Union in the 1960s, reached Western Europe in the early 1980s and the USA in the late 1980s. Today, Australia is the only continent where bees are not strained by this vicious parasite. In 1999, it was estimated that mainly due to this parasite the bee population of the USA had decreased by 25% since 1990 (Chavarria in the Renewable Resources Journal 17, 1999).

In the mid-2000s, another, somewhat mysterious phenomenon further endangered bee colonies worldwide: the so called “colony collapse disorder” (CCD). When CCD occurs, most of the worker bees – apparently in a coordinated manner – abandon the hive despite full stocks of food, leaving back the queen and the nurse bees. As bee expert Dennis van Engelsdorp explains in a New York Times documentary (“Colony Collapse – The Mystery of the Missing Bees”), it is now assumed that a multitude of stressors lead the bees to “feel sick”, triggering a biological program which prescribes sick bees to leave the colony in order to prevent the infection of others.

The problems that ensue go beyond pure economic costs. As the famous US biologist Edward Wilson once wrote: “Every third bite of food you take, thank a bee or other pollinator!”, referring to the fact that one third of the world food production depends on pollination. In case bees go extinct, humankind faces a serious problem, and it is unclear whether the RoboBees, artificial pollination robots currently developed by a robotics team at Harvard University, will work sufficiently reliably and assiduously to replace living bees.


AN EXPORT NICHE FOR GEORGIA?

These adverse supply side conditions have affected honey prices worldwide. According to the US National Honey Board, average August prices of one pound of honey have gone up from $3.83 in 2006 to $6.88 in 2016. As bee populations are under distress all over the world, similar price developments can be seen on a global scale.

In this respect, it is important to see that it does not matter whether Georgian honey producers are experiencing the same problems – the higher price of honey improve its export potential in any case. By an old law, going back to the 19th Century Austrian economist Eugen von Böhm-Bawerk, the higher the value-to-weight ratio, the more likely it is that a commodity gets traded over long distances. This is very intuitive, as the transport costs are only determined by the weight, while the trading profit is likely to be proportional to the value. Hence, if two goods have the same weight, it is more profitable to transport the expensive one rather than the cheap one (this insight was inspired by Böhm-Bawerk’s observation that the goods of the highest quality, e.g., the best tomatoes, are usually those that are exported, while those of lesser quality remain for the domestic market).

And indeed, as can be seen in the chart, just from 2014 to 2015, Georgian honey exports to the displayed target countries have gone up from 53 tons to 63.5 tons (an increase by almost 20%). However, it is most striking that there were no honey exports to the European Union, despite the DCFTA being established in September 2014 (while the DCFTA generally does not allow the export of any animal products, it makes an exception for honey).  The existence of a DCFTA does not mean, however, that there are no standards that have to be met when exporting honey to the EU. As the Tbilisi-based Economic Policy Research Center writes in its 2016 study titled “Research of DCFTA Impact on Georgian Small-Holder Farmers”, honey regulations “determine production, processing, packaging, hygiene and distribution requirements. […] One of the major problems was related to the fact that up until September 2015, it was not possible to conduct a full-fledged analysis of honey samples. According to the latest data, around 30 percent of the samples were problematic (with high levels of antibiotics) and did not comply with the minimum requirements, this figure is a good indicator of the scope of the problem. Apart from the level of antibiotics, most of the honey-makers are using aluminum or zinc centrifuge, the latter is strictly forbidden in the EU.”


REMOVING BOTTLENECKS

The above statement points out the factors preventing entrepreneurial Georgians to produce honey and sell it to Europe. However, all these problems are solvable within a limited time horizon.  The necessary developments could be fostered by the government, in particular if a lack of production volume prevents the lucrative establishment of the necessary testing laboratories (a classical coordination problem – without sufficient amount of honey producers it is not profitable to establish a lab, while the absence of a lab prevents beekeepers to upscale their productions). Taking away some of the risk of the investors, both for the honey producers and the laboratories, may cut this Gordian knot. There may be other bottleneck factors too – a typical one, which could be addressed relatively easily, would be shortage of capital. Working in the right direction, the Government of Georgia has launched the Apiculture Agricultural Cooperative Support Program in 2015.

The head of the Georgian Beekeeping Association George Kepashvili states in an article in businesscontact.ge that currently more than 50.000 people are involved in apiculture. According to him, approximately 99% of these are nonprofessionals, and there are only a few farmers who have more than 300 beehives. Kepashvili estimates that Georgia can export 2000 tons of honey per year if it fulfills all the EU requirements. Given the advanced average age of Georgian smallholder farmers of more than 55 years (UNDP/ISET study on knowledge needs among Georgian farmers), which makes modernization of the sector difficult, it is also interesting that according to findings of ISET (within the ENPARD project), apiculture attracts the youngest farmers within Georgian agriculture. Furthermore, 20% of 200 ENPARD supported cooperatives in Georgia are apiculture cooperatives, that makes it the top sub-sector of agriculture financed by ENPARD Georgia. 


 

The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.

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Friday, 26 May 2017

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