This report is designed to help beekeepers understand agricultural valuation by their Texas county appraisal district and to provide good information to the appraisal districts for creating fair land valuation.
Agricultural Valuation for Beekeepers in Texas
In 2012, beekeeping became available for agricultural land valuation in Texas. This type of ag valuation requires a 5 year history and at least 5 acres and not more than 20 acres to qualify. The goal of this report is to help beekeepers who are attempting to qualify, better understand the appraisal calculation so they can provide better information to their appraisal districts.
Agricultural Productivity Valuation
There are several classifications of land used by appraisal districts and mentioned in Texas law. Each has different appraisal values. Generally speaking, native pasture has the lowest agricultural value and lowest tax. Often, Orchards are close to the highest value and highest tax. County appraisal districts have a good deal of autonomy in determining the agricultural value of the land (called productivity value).
The appraisal district is attempting to determine productivity value for each of the classifications. Beekeeping is now one of those classifications.
Productivity value is different from market value. Market value is the approximate price that land would sell for, given a willing seller and willing buyer. Market value is not used in agricultural appraisal.
Productivity value is usually determined by considering lease rates that farmers pay to land owners for an acre of land in that county. There is almost no historical data for Texas beekeepers paying for land leases for their apiaries. Even today, according to Blake Shook who is a very successful Texas commercial beekeeper and past president of the Texas Beekeeping Association, commercial beekeepers in Texas rarely pay a lease fee for land. Often beekeepers will give a land owner 2 to 5 pounds of honey each year for a bee yard.
The Manual for the Appraisal of Agricultural Land (passed into law) has an alternative method to calculate value when lease rates are not available. It is called “Estimating Lease Terms From Owner-Operator Budgets” found on page 47 of the manual. The manual is available as a pdf online if you want to read it. Beekeeping land is valued using this alternative method.
How Productivity Value is Determined for Beekeepers
“Estimating Lease Terms From Owner-Operator Budgets” uses three inputs to determine productivity value.
The first input is the value of honey before it is broken down into smaller quantities (bottled). In beekeeping terms, this is called the value of “bulk honey”. The second input is the average pounds of honey extracted per hive per year. The third input is the average total expense for each hive per year.
Bulk Honey Price
This is probably the most important piece of information in this report. If you can help your CAD to understand this one point, it may change your property value significantly. Appraisal for agriculture only considers “production” of honey. When honey is bottled, it is no longer part of production appraisal. It is “processed”. Some appraisal districts are using “wholesale” price of jars of honey (processed honey) which creates a significantly higher land value for beekeepers. “Bulk” price for honey is the appropriate value to be used instead of “wholesale” price.
USDA publishes bulk honey prices each March and can be found here: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1191. The latest price for Texas honey as of this writing is $2.10 per pound, but the appraisal districts use an average for several years so the actual input figure might be around $1.95.
There is no requirement for income or profit for (1-d-1) beekeeping agricultural valuation. There is a requirement for production.
Average Pounds of Honey Extracted per Hive
This is important because some appraisal districts are using 74 pounds per hive per year which is the Texas commercial beekeepers average. For smaller beekeepers, the input number should probably be somewhere below 35 pounds.
Large scale beekeepers attempt to place bees in the most lucrative forage locations. As a definition of ‘large scale’, according to Mark Hedley, former vice president of the Texas Beekeeping Association and board member of the American Beekeeping Federation, it takes around 750 colonies of bees to be financially viable as a beekeeper… in other words, be able to quit your day job and live off your beekeeping. Blake Shook, mentioned earlier, says honey production relies on “location, location, location”. Large scale commercial beekeepers also move bees to pollinate almonds and other crops that are blooming. They are in effect “chasing the honey flow”. For small scale beekeepers seeking ag valuation, their bees are often not in the most lucrative forage location. Moving beehives is not economically viable for less than several hundred hives.
USDA reports that smaller beekeepers (less than 5 colonies) extracted 31.9 pounds of honey per colony in their 2017 report. The report can be found here: http://usda.mannlib.cornell.edu/usda/current/Hone/Hone-03-22-2017.pdf
In 2017, a survey was sent to Texas beekeepers through local beekeeping associations. 229 beekeepers responded representing 1986 total colonies. Including all beekeepers who responded… (some did not extract any honey) in 2016, the average extracted honey was 19.56 pounds per hive. If we only include beekeepers who extracted honey, the average was 31.19 pounds per hive.
Most counties require at least 3 colonies and usually a maximum of 12 colonies to qualify for ag. So, from this survey, 115 beekeepers responded who had between 3 and 12 colonies representing 659 total colonies. Including all of these beekeepers who responded… (some did not extract any honey) in 2016, the average extracted honey was 25.08 pounds per hive. If we only include beekeepers in this subgroup who extracted honey, the average was 33.15 pounds per hive.
Average Expense per Hive per Year
This is relevant because some appraisal districts are using $60 as an expense per hive per year. This is a difficult average expense number to determine.
The Manual for the Appraisal of Agricultural Land says this: “In general, expenses include such things as feed, seed, fertilizer, harvesting and labor costs, fuel and property taxes assessed on agricultural land. In some areas of the state, water depletion may constitute a legitimate deduction. Appraisers should allow for depreciation of agricultural equipment and appurtenances using accepted appraisal practices. They should not use accelerated depreciation figures shown on income tax returns. Appraisers should estimate and deduct an amount for management expenses. Typically, this expense is shown as a percentage of the gross income. Appraisers should base the exact percentage on the typical conditions in the area.”
How does “feed, seed, fertilizer, harvesting and labor costs, fuel and property taxes” apply to beekeepers?
Feed would include sugar and pollen substitutes and any supplements and feed stimulants you use to feed your bees.
The term seed is used broadly here. A farmer would buy seed to plant a field, but a rancher buys (seed) calves to replace cows and a poultry farm buys (seed) baby chicks to replace its chickens. Seed for beekeepers would include buying colonies and replacing colonies lost to CCD (colony collapse disorder) or Varroa destructor mites or any other causes. There is no question that these are appropriate expenses toward agricultural production.
The Bee Informed Partnership has been surveying beekeepers about colony loss for the past 11 years. Their latest report covered the 2016-2017 season. In this survey “4,963 beekeepers in the United States provided validated survey responses. Collectively, these beekeepers managed 363,987 colonies”. The results show “Beekeepers lost 33.2% of their colonies between April 2016 and March 2017”. This is the second lowest rate of annual colony loss recorded over the last seven years. (https://beeinformed.org/2017/05/25/2016-2017-loss-results-thank-you-to-all-survey-participants/) The previous year the loss was approximately 40%. Most small scale beekeepers buy 4 or 5 frame nucleus colony (nucs) when they initially buy or replace colonies. A nuc does not sufficiently replace a full producing 10 frame box of bees lost to CCD or mites. As an example, BeeWeaver is one of the best known Texas honeybee suppliers. Their retail price for a nuc in 2018 is $345.
Since the statistical average risk of losing a colony is 33.2% and the cost per nuc is $345, an overall average risk cost can easily be calculated. There is an expected “risk of loss” expense of $114.54 per colony per year (if we replace a full 10 frame box with a 5 frame nuc). Since some counties are using $60 per year as a total expense, this one expense alone is almost twice $60.
Another relevant expense for beekeepers is miticides and any pest control expenses.
Unlike income tax expenses, your labor and any hired labor is an expense item for this calculation. Why? First, because the appraisal district’s ag manual says so, but it goes to land lease value. Consider a rancher who leases land to raise cattle. If, because of the topography of the land, he can work his herd easier and faster, the land lease expense will be higher than land that would be harder to work and require more time.
Your time would include hive checks, any preparation for the hive checks, any syrup or feed preparation time, any mite treatment time, any time adding or pulling supers for extraction, any time preparing to extract, driving to borrow an extractor, cleaning the extractor, extracting the honey and any time spent before you bottle the honey. It does not include any time spent bottling or any marketing or sales of honey. According to The Manual for the Appraisal of Agricultural Land, production ends “when primary agricultural products are broken into smaller parts or combined with other products.” Do not count time or expenses after you extract. Time and expense for education also might not be allowed, but is arguable.
The US Bureau of Labor Statistics publishes farm worker average hourly rates. The average would be approximately $11.50 per hour. Your time might be worth more, but at least $11.50 per hour.
Weather certainly affects beekeeping expenses. Late freezes and drought destroy forage for bees.
Agricultural Valuation Summary
In summary, the inputs for productivity value of beekeeping land are price per pound of around $1.95, the average pounds of honey collected per hive per year, which probably should be less than 35 pounds, and the average expense per colony per year which should be near or above $100. If an appraisal district uses something close to even two out of three of these amounts, beekeeping land value will probably be fair. We want beekeeping agricultural valuation to be fair to beekeepers, but also to be fair to the appraisal districts and to be fair as compared to other agricultural valuation categories. Fair valuation is, in fact, the job of the appraisal office in each Texas county.
The Agricultural Importance of Beekeeping
It is said that one out of every three bites of food we take are made possible by bees. The monetary value of honey bees alone as commercial pollinators in the United States is estimated at about $15 billion annually with honey bees doing almost 80% of all crop pollination. Honeybees are the only economically viable managed pollinator.
The Threats to Bees
Varroa Destructor mites are a serious threat to bees because of the virus load they spread. Colony Collapse Disorder is not completely understood and is still a problem. Approximately 85% of all commercially available bee colonies are used in almond pollination each year. This is a major source, if not the major source of income for large scale beekeepers in the US. There are two key threats in this. If a disease destroys the almond orchards, many large many large beekeeper businesses will be seriously hurt. If on the other hand, in this intensely populated environment, a lethal disease or pest spreads through the bee population, it would decimate the industry. Either threat would cause a reduction of agricultural pollinators.
Agricultural Special Valuation is a Solution
By passing agricultural valuation into law, Texas has an inexpensive ‘insurance policy’ for these threats. Small, non-migratory beekeepers keep colonies out of high density disease areas.
Small scale beekeepers are not immune to risks of loss, but giving tax advantages to another beekeeping segment provides Texas and our nation a reduced risk. Agricultural valuation is an incentive to maintaining an important pollinator.