The California Almond Pollination Market PDF Download

Economists have been interested in markets for pollination services since Meade (1952) described the reciprocal benefits of pollination. However, the California almond pollination market does not fit the typical reciprocal benefits perspective because beekeepers and almond growers have diverging preferences. It is not profitable for beekeepers to extract and market almond honey, because it is not palatable to humans. Furthermore, California almonds bloom in mid-February, a time when colonies are naturally at their smallest size in a state of winter dormancy. Honey bee colonies exhibit increasing returns to scale in pollination, so almond growers prefer high colony strength. Beekeepers must invest inputs into colonies to increase colony strength for almond pollination. During and immediately after almond bloom very little is blooming elsewhere. Because California almond pollination now requires over three-fourths of all colonies in the United States, immediately following almond bloom most beekeepers must either feed their colonies food supplements or compete for the small number of other crop pollination contracts in California and the Pacific Northwest. An incentive problem thus exists in almond pollination: delivering colonies with high colony strength is costly to the beekeeper while high colony strength is desired by the almond grower. I develop a principal-agent model in Chapter 2 to show that a profit-maximizing almond grower conditions the per-colony fee on delivered colony strength to incentivize beekeepers to invest effort into increasing colony strength. I then explore the types of contracts used during the 2015 almond pollination season using a grower survey that I conducted at the Almond Board of California's 2015 Almond Conference. Although I find variation in the contract provisions used, nearly 90 percent of the 74 analyzed respondents had contracts which included a minimum colony strength requirement. Chapter 3 is a complete summary of the almond grower survey, which provides the first formal information on provisions used in almond pollination contracts reported publicly. In this chapter, I find that almond pollination agreements are often relational in nature and repeated over many pollination seasons. I conclude that growers likely vary in preferences for almond pollination contract provisions and enforcement based on their trust and relationships with beekeepers, expectations regarding yield benefits, experience in the industry, and monitoring costs due to the amount of acreage they own. In Chapter 4, I explore outcomes of the contract provisions discussed in Chapters 2 and 3. I estimate the effect of delivered colony strength on per-colony almond pollination fees using the California State Beekeeper's Association survey responses from years 2008-2016. Because a beekeeper's colony mortality rate over the winter and her delivered colony strength for almond pollination should be related through exogenous colony health issues, I use a beekeeper's reported winter mortality rate as a proxy for her delivered colony strength. I estimate that a 10 percentage point increase in a beekeeper's winter mortality rate leads to an average decrease of 16 percent in total revenues from almond pollination, due to the beekeeper having fewer colonies to rent and receiving lower per-colony fees for her surviving colonies. Chapter 5 highlights the interdependent relationship of almond production and honey bee colony health caused by the large demand for colonies for almond pollination relative to the U.S. honey bee colony population. I analyze data provided by the California Department of Food and Agriculture, which contains information on each out-of-state apiary shipment entering California. I determine that shipments into California are concentrated in major almond-producing counties, often at densities over 35 colonies per square mile. In 2016, roughly 76 percent of colonies shipped into California for almond pollination came from eight states, most of which are in the northwestern U.S. Since 2008, the state with the largest increase in colony shipments into California was Florida, whose shipments increased by 278 percent. Florida has relatively high transportation costs of supplying colonies to California, suggesting that the per-colony cost of the marginal supplier of colonies for almond pollination has increased since 2008. I find that when a state's winter mortality rate is above average, the number of colony shipments into California from that state is often below average. Alternatively, when California beekeepers experience higher than average winter mortality rates, out-of state shipments increase to make up for the smaller in-state supply of colonies. The conclusions of this dissertation provide many contributions to the economic literature on pollination services, as well as to policy regarding the improvement of pollinator health. Chapters 2, 3, and 4 show that colony strength is an important consideration for beekeepers and almond growers alike. Because colony strength varies and fees are conditional on colony strength, averaging almond pollination fees is equivalent to averaging prices of heterogeneous products which can result in incorrect inference regarding supply and demand. Thus, it is important to collect survey data on colony strength requirements as well as pollination fees to get an accurate representation of market conditions. Ignoring the role of colony strength underestimates the economic impacts of colony health issues. First, such issues often lead to low delivered colony strength in addition to high winter mortality rates. Thus, beekeepers' returns per surviving colony are reduced. These losses can be substantial given that almond pollination is a large share of commercial beekeepers' revenues. Second, the findings of Chapter 5 highlight the sizable risks faced by beekeepers and almond growers due to the interdependent relationship between honey bee colony health and almond production. High concentrations of honey bee colonies in California almond-producing counties could lead to the rapid spread of pest and diseases among colonies, while colony health issues in regions that are main suppliers of colonies for almond pollination could significantly decrease the number and strength of colonies available for almond pollination.