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Department of Agriculture

Recommendations and Actions

USDA02: Eliminate Federal Support for Honey

The federal government has supported honey production since 1950. The program was enacted after honey prices dropped following World War II because of reduced demand and excess inventories. During the war, the government declared beekeeping war-essential and encouraged heavy production.(1) Beeswax was used in place of petroleum to waterproof ammunition and other equipment, and honey replaced tightly rationed sugar.

When demand decreased after the war, beekeepers and honey packers found it difficult to cover costs, and the number of honeybee colonies began to decline.(2) Congress reacted by introducing price supports for honey in the Agricultural Act of 1949. The basic purpose of the legislation was to ensure that enough honeybees would be available for crop pollination. However, since receipts from honey and beeswax far exceeded revenue from pollination, Congress subsidized honey production at prices that would allow beekeepers to maintain viable operations. The program was to be in effect only until beekeepers could receive adequate pay for pollination services.(3)

The honey program allows beekeepers to obtain a federal loan using the honey they produce as collateral. The minimum support price is set in the statute but can be increased by the Secretary of Agriculture. Borrowers can repay the loan and redeem their collateral at either the support price or at a loan repayment rate determined by the Secretary using legislatively established guidelines, whichever is lower. They also may default on the loan and forfeit the honey used as collateral.

There are about 212,000 beekeepers in the United States, all of whom are eligible to participate in the program.(4) The U.S. Department of Agriculture (USDA) describes 200,000 of them as hobbyists, and another 10,000 as "sideliners," or part-time beekeepers. Commercial producers, those owning 300 or more colonies, number about 2,000 and produce about 60 percent of the honey extracted annually in the United States.

Only about 3,000 to 5,000 beekeepers participate in the USDA program, with just over three million colonies of bees. As with other agricultural commodity programs that base benefits on production, the largest beekeeping operations tend to receive the most federal support. About 10 percent of program participants receive over 50 percent of payments. Sideliners and hobbyists make little use of the program.

Critics of the honey program, including the General Accounting Office (GAO), claim price supports are no longer necessary to provide crop pollination services. According to GAO, producers of seed and fruit crops to which bee pollination is critical either pay beekeepers to place bee colonies near their crops or operate their own beekeeping enterprises. Unofficial estimates of beekeepers who do not participate in the honey program, but instead use their bees exclusively for pollination services, rival the number within the program. Crop producers indicate they believe honeybee pollination would still be cost-effective, even if the service price rose as a result of eliminating honey price supports.(5)

Critics also point out that commercial beekeepers who benefit most from the program emphasize honey production instead of pollination services. Since the program began, honey production has increased significantly in those states, such as North Dakota and South Dakota, where crops with abundant flowers are grown. These crops produce large amounts of nectar needed for honey production; however, they do not require pollination. At the same time, states in which honey production has declined, such as New York and Michigan, are significant producers of apples, cherries, and other fruits that need honeybee pollinators.(6)

The Omnibus Budget Reconciliation Act of 1993 will reduce federal subsidies for honey by reducing the support price and by tightening the limit on the payments which any one producer can receive. The payment limit will decline from $150,000 in 1993 to $50,000 in 1997.

Action

Legislation should be enacted to eliminate federal support for honey.

Market forces have overcome the original need for the program. Instead, a small number of commercial honey producers benefit from an unnecessary government subsidy for their product.

Implications

According to USDA, if the honey price support program is terminated, there will be a decline in the number of honeybee colonies available to provide pollination services, at higher cost, to fruit and vegetable producers. Production of these crops is generally concentrated in a few geographic areas, such as Florida and California, and USDA believes it is unlikely these areas contain a sufficient number of wild bees or honeybees managed by local beekeepers to provide adequate pollination.(7) However, there does not seem to be a clear connection between federal subsidies for beekeepers and effective pollination services. Commercial beekeeping is already heavily concentrated on honey production, and there are about as many beekeepers performing pollination activities outside the program as there are program participants (about three million colonies each). Eliminating the honey program is unlikely to radically alter either trend.

Fiscal Impact

Eliminating the program will save about $15 million over the 1994- 1999 period.

 Budget Authority (BA) and Outlays (Dollars in Millions) 

Fiscal Year 1994 1995 1996 1997 1998 1999 Total

BA -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0

Out lays -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0

Change in FTEs 0 0 0 0 0 0 0

Endnotes

1. Economic Research Service (ERS), Background for 1990 Farm Legislation, Honey (Washington, D.C., September 1989), p.2.

2. U.S. General Accounting Office (GAO), Federal Price Support for Honey Should be Phased Out (Washington, D.C.: U.S. General Accounting Office, August 1985), p. 6.

3. Ibid., pp. 6-7.

4. ERS, p. 3.

5. GAO, p. ii.

6. Ibid., p. 15.

7. ERS, p. 35.

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