Tom Ward
Recently I got interested in the state of the honey business in New Zealand.
Twenty years ago, when I was a bank manager, honey production appeared a poor man’s game, barely registering in rural finance. In the last decade, annual honey production has increased from 10,000 tonnes a year to between 15,000 and 20,000t, depending on the season.
In the same period, hive numbers have increased from 343,000 to 925,000.
According to MPI, over the last 15 years, honey exports have increased from $20 million to $340m.
This stellar increase in production, most of which was successfully exported, has been driven by the “manuka honey” phenomenon, which also pulled up the price of ordinary honeys.
Beekeepers who have expanded rapidly and are highly geared will need to sell their stockpiles and possibly exit the industry. Others, who have been in the industry a long time, may have been preparing for this downturn and have paid down debt and improved their efficiency.
Clover honey lifted from $5-$6/kg to the producer to $9-$11/kg, and poorer “manuka” honey peaked at $15 to $16/kg.
Pure manuka honey (high UMF – unique manuka factor) may have been in the $70-$100/kg to the producer bracket, it’s hard to get a clear picture. I have been told the best manuka honey can retail for $1000 to $3000/kg. At the peak, hives sold for $1000 (stocked) off a low of $160/hive.
Manuka honey is widely believed to have anti-bacterial properties and can be manufactured into a range of health-enhancing products, eg salves, ointments and dressings. These anti-bacterial properties come from an organic compound in the honey called methylglyoxal (MGO) which is the result of converting, during the honey-making process, a sugar found in the manuka nectar called dihydroxyacetone (DHA) to MGO.
Four years ago overseas customers began to challenge the purity and anti-bacterial capacity of NZ manuka honey, claiming that much of the NZ product had less than ideal bacterial properties because it had average to poor levels of actual manuka honey.
Some NZ producers were mixing low-quality honey with manuka honey and in other cases the honey was from a mix of species.
NZ’s MPI then stepped in and took three years to develop a set of protocols designed to raise the standards and transparency of the NZ-exported manuka honey product.
From 2016 the result has been a catastrophic collapse in the price of all honeys, except for high UMF honey which is now protected by regulation and has regained customers’ trust. All honeys which do not reach the MPI definition for high quality have dropped 45-65% in price. One producer suggested non-high UMF honey may not be worth as much as $4/kg.
World-wide, honey has increased in production, including in Ukraine and Turkey (the biggest producer) and we are also seeing cheaper Chinese honey in NZ markets.
A large amount of multi-floral (non-high UMF) honey is stored unsold in producers’ sheds, perhaps two years’ production. The retail price of non-manuka honey, still $9-$11/kg, has not fallen much, although there is now a profit in it for the traders. For the high-UMF honey, the big players are also suspected of storing a large amount, creating a tight supply, and may be holding the price up.
So the industry, at least the multi-floral part, is apparently on the cusp of a significant consolidation and rationalisation. Beekeepers who have expanded rapidly and are highly geared will need to sell their stockpiles and possibly exit the industry. Others, who have been in the industry a long time, may have been preparing for this downturn and have paid down debt and improved their efficiency. Branding, particularly care with packaging, has been highlighted as very important.
Pastoral farmers have been doing well from honey royalties, especially those with manuka blocks. In the cropping areas beehives are also used for pollinating crops, providing the beekeeper with a rental, and often no honey.
The economics of running a beehive vary, with annual honey production generally between 10 and 30kg. Apparently, the costs are $300/hive. The rapid industry expansion has brought a lot of inexperienced beekeeping causing potential health issues like American Foul Brood (AFB).
Varroa is costly to manage and regarded by some as a worse threat than AFB; $50/hive/year to manage and tough on time. Increased numbers of hives have in some cases caused “overlaying” where the stocking rate of bees has increased, causing difficulty in maintaining hive production and therefor profitability.
Ideally, manuka honey production needs large blocks of manuka if high UMF honey is to be produced, although the effect of surrounding clover pasture can be reduced through astute grazing management and timing of bee introduction and removal.
From those companies required to issue publicly available annual accounts we can get an idea of what is happening in the industry:
In December 2015, Ngai Tahu Holdings bought a half share in premier honey producer Watson and Son for a reported $40m. The Ngai Tahu subsidiary, after three years of losses, (culminating in a $6.3m operating loss in the year to June 30, 2019), has booked a $57.1m write down to what appears to be a nil value. These losses were blamed on undisclosed failures to manage business risks compounded by three poor seasons. The business reportedly owns 40,000 hives.
Similarly, Comvita, the publicly listed manuka honey company with gross income of $170 million, announced a nett loss after tax (NLAT) of $28m (including $22m write-downs) for the year to June 30, 2019 (2018 nett profit after tax $11m). This was caused by difficulties of market access in China, increased NZ Government regulations, a third consecutive very poor NZ season and overstocking of hives. The share price has fallen from a high of $9.15 in January 2018 to $3.20 January 2020.
At the same time, Myfarm, the primary industry syndicating firm, has announced the intention to raise $8m for the equity financing of Waimarie Manuka Limited Partnership. Two North Island hill country properties totalling 1791ha have been bought with the intention to establish large blocks of high-quality manuka where the bees have no option but to feed on manuka. This venture will be share-farmed with Comvita and to date about $7m has been raised.
Correction to January 2020 article:
The weighted average sale dates (WASD) of 7 Feb and 23 March are shown back to front. The low growth rate lambs should show a WASD of 23 March, and the high growth rate lambs a WASD of 7 Feb.
- Tom Ward is an Ashburton-based farm consultant
