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American Bee Journal Extra

June 21, 2013

International Honey Market

President, CPNA International Ltd.1
Committee for the Promotion of Honey and Health

The current international market situation is one of short and delayed crops, tight supplies, rising prices and burgeoning international demand.  This situation prevails for all colors from White to Amber.  The era of bumper honey crops of 100,000 metric tons or more in both Argentina and the USA are over and unlikely to return. As the middle classes in both India and China expand to levels where each exceeds the entire populations of the USA, dietary traditions change to a base of more meat and poultry.  This in turn is leading to an insatiable appetite for soybeans and other grains as animal feed to serve the changing dietary habits in India and China.  As consumption of meat and poultry increases in Asia, pasture lands and U.S. federal lands devoted to alfalfa and clover decrease.  This relentless pattern leads to increased honey prices.  With higher production costs, more expensive and difficult efforts to protect bees, lower yields per hive and significantly lower total production, in order to stay solvent beekeepers in Argentina and the USA need considerably higher per pound prices for their honey.
Through the impact of 1) various major legal actions, including both the deferred prosecution of Groeb and Honey Solutions and the two major class action suits filed to recover the losses suffered by all those negatively affected by customs fraud, transshipment and circumvention, and 2) the market place, including relations with suppliers, customers, insurance companies and financial institutions, the March to Monopoly has lost its momentum and a serious retreat and reduction in market share appears to have commenced.  The punishment for circumvention from the marketplace itself may be as, or even more, severe than that from pending and ongoing actions by the judicial system.
The Argentine honey crop has largely been sold as of mid June 2013.  From January to May, 35,800 metric tons were exported with another 7,200 metric tons in June.  Argentine exporters have sold 15,000 metric tons for delivery during the second half of 2013.  That means that as of the end of the first half of 2013 there is a mere 7-10,000 metric tons still in the hands of beekeepers from a total crop of 65-68,000 metric tons.  Prices have reached historic highs and with only small quantities unsold to deliver during the second half of 2012, beekeepers fully expect further spikes in prices.  Only modest quantities of Argentina’s prized White and ELA honey will be available for the second half of 2013 and early 2014.  This means availability and prices for white honey will largely depend upon the crops in the USA and Canada.
Argentine Honey Exports from January to May 2013

As of mid June, exporters have largely refused to make new offers for the very modest remaining quantities in beekeepers' hands.
In June, demand from Europe for Argentine, Mexican and Brazilian honey surged sharply.  The strengthening of the Euro to around $1.34/EU1.00 is a secondary factor as are the delays and expected shortages of honey crops from eastern European producers.  There has been a surge of demand even for honey with high moisture and HMF levels.
The northeast of Brazil, a major producer of organic Light Amber and some ELA honey, suffered an extensive drought that persisted for several months.  Only in the second half of April did modest rains arrive.  But the production fell drastically compared to prior years.  The 85% decline in exports from two major export ports is illustrated as follows:

Since Brazil is the world’s major exporter of authentic organic honey, these declines represent significant concerns for the growing organic honey market.  The fact that the overall Brazilian economy has slowed and its currency, the Real, has consequently weakened, has kept prices for Brazilian honey lower than may have been expected.  Nonetheless, the increasing competition for Brazil’s weather-induced reduced production has stimulated upward pressure on prices.  Prices to Europe for Brazilian honey have increased as June begins.

In the southeast and southern regions of Brazil the eucalyptus crop ended by mid June and was significantly reduced due to unexpected and abnormally heavy rains at blossom time, which both reduced and darkened the crop.  July and August are periods of very minimal honey production.  In September a flow of white honey, including orange blossom and Cipo-Uva, commences in Sao Paulo.  In October/November white honey production begins in South Brazil near Uruguay and Argentina.  Since Brazil has a large population and the world’s sixth largest economy, there is demand from both the domestic and international markets.
Even though the protracted drought in the northeast resulted in large losses of bees, the African bees in Brazil are prolific swarmers, so bee populations tend to rapidly recover.
Because of the factors mentioned in earlier reports, no one expects a bumper US honey crop. Not only have there been significant bee losses and reduction of flowers, but weather patterns in the USA have been both severe and volatile.  In important producing areas, spring was very late and cold, delaying planting.  Terrible tornadoes, floods and wild forest fires induced by drought have plagued various regions.  Because of the late, cold and rainy spring, beekeepers in the Dakotas were feeding their bees late into June.  The fields, like in Argentina in their spring 2012, are green but not rich in clover, due to the preceding year’s severe drought.  American beekeepers are unlikely to enter into large speculative contracts, as some Argentine honey exporters did in late 2012 when their fields were green.
In 2013, carbon dioxide levels in the atmosphere, as measured at the NOAA research laboratory at Mauna Loa, Hawaii, where the world’s most powerful astronomical observatories are located at about 14,000 feet elevation and isolated from industrialized population centers, have reached their highest levels in millions of years.  Since global warming is a self-feeding process likely to release powerful heat-trapping methane gases, the prospects of continuing greater climatic volatility are high.
The loss of the use of federal CRS lands, the legacy of the 2012 USA drought and conversion of dairy and cattle farms to corn, soybean and biofuel production, diminished prospects in the Dakotas as the summer clover production season approached.  This is a recurrent theme, but one not easily reversible in the absence of a confluence of timely miracles, miracles the honey industry would welcome.
Clover honey from the 2012 crop has sold at $2.25/lb. FOB beekeeper.  Orange has sold at the same levels, but remains terribly short.  Tupelo has sold at $3.10 per pound.  These are historic price levels.
There is an ongoing conflict regarding the use of pesticides and neonicotinoids on plants due to their harmful effects on bees.  This is a modern version of the historic conflict between ranchers and farmers as American settlements and pioneers moved west.  Protecting plants vs. protecting animals, in this case bees, has come into conflict, a conflict that has resulted in a legal suit by the beekeepers against the EPA.
The American Honey Producers Association’s 2nd quarter 2013 newsletter discusses the important work of the National Pollinator Defense Fund (NPDF).  The NPDF is working with beekeepers to report bee losses related to misuse of pesticides on crops.
In the coming months it will be interesting to observe how the convergence of market forces affect price movements.
The Vietnamese honey crops of coffee, cashew, litchi and rubber honeys ended by June.  This year’s Vietnamese honey crop is better than last year's in respect to both quantity and quality.  The final major honey crop is Acacia mangium from the hot, dry Central Highlands.  There are 2 types of acacia that grow in the wild forest of Vietnam, big and small leaf.  The color and flavor vary according to the type of subspecies and the climate at the time of production, rainy or dry.  The color at time of production can vary from 50mm to 70-80mm.
The detailed chemical profiles and the variables which affect these profiles are being studied through collaborative efforts of the Vietnamese Beekeepers' Association, European commercial laboratories and Vietnamese scientists.  This study may serve as a model for a study based upon scientifically gathered samples from the field.  Other studies have often depended upon “hearsay” reports, and a very large percentage of samples submitted by Chinese laboratories.
Vietnam’s global honey exports have included its initial exports to Europe, beginning in May, 2013.  Since Europe has explicit and high tolerance levels for certain residues, the European market may become more attractive to Vietnam.
There are reports from Europe of serious problems in alleged adulteration with rice syrups in Chinese “honey” and customs fraud regarding country of origin.  The mixing of Chinese honey and/or rice syrups in honey ostensibly shipped from third countries to Europe is of concern.  The cause of these problems was not circumvention of antidumping duties, as in the USA, but providing cheap prices to retailers in Europe’s stressed economic environment of national debt and high levels of unemployment.
Months earlier various importers in Europe were bragging how they could buy unlimited quantities of Chinese honey for $600-700/metric ton, the price of rice syrups.  It is expected that a major scandal is about to erupt in Europe regarding adulteration and/or international Customs fraud. 
Vietnamese honey exporters, who began exporting to the EU in May, report that EU buyers complain that Vietnamese honey is 30% more expensive than Chinese. Such competition, due to rice syrup adulteration and Chinese high moisture extraction methods, is devastating to Vietnamese beekeepers whose lives are very hard and living standards modest.  The Vietnamese beekeepers are shocked at the low prices obtained for honey produced in China, where labor costs are much higher than in Vietnam.
The possibility of a major scandal in the European market has significantly increased demand, exacerbated supply and strengthened prices for legitimate honey from Argentina, Mexico, Brazil and Vietnam.  Exporters in these honey-exporting nations have been shocked by the sudden demand that emanated from the European Union in June.
Those willing to commit international Customs fraud are very nimble and clever in constructing very convoluted channels of shipping Chinese ultra-filtered (colorless and flavorless) honey and rice syrups to other countries for blending, pollen infusions, etc., from which the pseudo and doctored honey is shipped as product of the country at the tail end of the circumvention path.  But “the best laid schemes of mice and men” come to their bitter ends.
Science and Honey
There are three important areas of independent scientific research that require further attention.  They are:
1) establishing a global data base of authenticated scientifically gathered samples of the growing diversity of global commercial honeys,
2) establishing scientifically and statistically justifiable tolerance and testing levels for residues in honey which a) conform to those for other foods and b) take into account Average Daily Intake (ADI levels) and
3) honey and human health. 
These three arenas are, of course, in additional to the vital scientific efforts to protect bees.  Since the protection of the health of bees is crucial to agricultural production of key anti-oxidant and phytochemically rich foods, such as almonds, oranges, blueberries, cranberries, apples, sunflowers, pumpkins, etc.  The issues of health both include and extend beyond the health value of honey in contrast to other sweeteners.
As mentioned, the Vietnamese beekeeping industry is engaging this summer in a collaborative scientific study of one important and unique species of plant important to honey production.  That study may extend to other Vietnamese flora sources.  Efforts are being made to comply with the preliminary collection protocol outlined by Drs. Michael McLaughlin and Samuel Page, FDA scientists and mathematicians.  The goal of the FDA protocol is as follows:

Since the number of honey-producing and exporting countries has grown since this research protocol was formulated for the U.S. Department of Agriculture, the scope of the investigation must be expanded.  This work is vital to avoid both false positives and false negatives.  National obligations to the World Trade Organization mandate that we avoid erecting protectionist non-tariff trade barriers.  As the world becomes increasingly economically integrated and interdependent, it is vital that both tariff and non-tariff trade barriers are reduced and removed, level playing fields are established and scientific authenticity is achieved.
The honey industry cannot sustain the mythology that honey is absolutely without traces of residues.  That myth could be sustainable if, but only if, both plants and bees were invulnerable to all diseases and pests, which neither is.  Honey is also typically a multi-flora product which is chemically both dynamic and quite heterogeneous.  These factors create serious scientific and statistical problems in both drawing and analyzing samples and getting consistent and legally tenable results.
Other food products have long established both reasonable tolerance levels and realistic testing limits.  Just as assertion of legitimate health benefits requires assessment of Average Daily Intake (ADI levels), so does assessment of genuine health risks.  The flow of honey needed to bridge the large gap between domestic consumption and production necessitates working with regulatory agencies and Congress, perhaps through lobbying efforts, to establish, as other food industries have, reasonable and realistic tolerance and testing limits and parameters based on ADI levels.
At a meeting of the Western States Honey Packers & Dealers Association in May, Dr. Cord Luellmann of the QSI laboratory was asked to speak about a proposal to develop standards for antibiotic testing in honey for presentation to the FDA using existing levels for milk, juice and fruit.  To provide adequate and safe procurement of honey, honey needs tolerance levels like those granted for milk, juice and fruit whose Acceptable Daily Intakes (ADI’s) are vastly greater than honey’s ADI.
It is worth noting that honey from Russia, India and Turkey was found by the FDA in 2013 to contain unacceptable levels of antibiotics and/or chloramphenicol.   Chloramphenicol is considered to be a sign of Chinese honey.  Several exporters are on automatic detention.
The third arena for increased scientific research is further advancing the study of the health benefits of honey as a pure and natural sweetener in contrast to other artificial sweeteners linked to obesity and various chronic human diseases.  This work can progress by using good science, as the almond, wine, tea and even chocolate industries have done, as an effective marketing tool.
The American honey industry, including beekeepers and packers, and the international honey industry will benefit from each of these three arenas of scientific research.  It is a simple premise:  “Science first, standards second.”  Ignoring or dismissing this principle allows for the miscarriage of justice through either false positives or false negatives.
Legal Case Updates
There are several serious legal cases that have followed the Deferred Prosecution Agreements announced earlier this year by the U.S. Department of Justice against two major honey packers.  The major class action lawsuits on behalf of the American beekeepers continue to gain momentum and evidence.  That evidence may lead to a broadening of the scope of defendants.  Ken Bell, former Supreme Court Justice of the State of Florida, who filed the class action case on behalf of Richard Adee and Bill Rhodes, indicates that it is not merely a question of evidence that the owners and board of Groeb Farms knew that the company was engaged in honey circumvention. 
Mr. Bell pointed out that Groeb had two lawsuits, one against Alfred Wolff Co. and one against China Industrial Manufacturing that implicitly concern and/or involve questions of circumvention of honey.  There was also a contract between Groeb and China Industrial for 9,000,000 pounds valued at $9,000,000 of inexpensive “Indonesian” honey.  Furthermore there has been massive publicity about circumvention and numerous legal actions, indictments and convictions centered on circumvention.  There was also testimony before the Senate Finance Committee regarding circumvention of Chinese honey.  Attorney Bell indicates that there is clear evidence that the ownership and board of Groeb, who are responsible to supervise the activities of the company, both knew and should have known about the illegal activities that led to the deferred prosecution and the two class action suits that are before the Illinois Department of Justice.  Mr. Bell stated that he was told by Florida beekeepers that the Groeb Farms honey processing plant in Florida has been closed.  Beekeepers in Florida report that the Groeb Farms plant in Florida had been processing up to 25,000,000 pounds of honey.
On May 8, 2013, the government’s fraud case against two importers from Taiwan and China came to an end when the judge threw out evidence that the product was honey that was provided by the Customs and Border Patrol.  The judge charged that the CBP’s honey tests were unscientific and depended only upon the percentage of pollen in the product.  The US attorney insisted that the defendants may still be guilty of consumer fraud by misbranding the 309 containers of honey, although they were exonerated from the charges of duty evasion.  The two importers were released. 
In the absence of a global data base of scientifically drawn and authenticated primary honey samples, identification of honey vs. other sweeteners and honey by country of origin will to continue to be problematic.  As Prof. Bryant said in June, 2013, “what we need is a good published data base that is based upon reliable information (a broad range of scientifically authenticated samples).”
In June, Hanover Insurance Co. issued a lawsuit against Groeb Farms denying insurance coverage for expenses related to the class action lawsuits related to the antidumping duty evasion schemes.  As reported in Law360, they claim that “Groeb Farms and Groeb executives knew or reasonably should have known that there was a substantial probability of a loss… in connection with the events… admitted to in the deferred prosecution agreement.”  The policy includes an exclusion for criminal activity and acts prior to 2007.  “Hanover therefore has no duty to defend or indemnify Groeb Farms or the Groeb executives,” the company stated.
It is worth noting that the fall of the large German conglomerate Alfred Wolff was precipitated by the loss of its insurance coverage.  The punishment extracted by the marketplace often follows, complements and re-inforces that extracted by the justice system.  The assertion by Groeb’s management that the class action lawsuits were “frivolous” and “covered by insurance” rings hollow.
Groeb’s lawsuit against its supplier China Industrial Manufacturing Group for failure to deliver a large quantity of “Indonesian white honey” was withdrawn before going to trial in May, as scheduled.  There are intriguing theories as to why this trial was cancelled.
Honey and Value
We all certainly face a complex international honey market.  The health of bees, climate change, circumvention, shifts in global agricultural production patterns, currency changes, legal actions represent a confluence of variables which are leading to both shortages and rising prices.
These developments will require both a more informed and responsive marketplace and better marketing.  When prices are low and supply plentiful, companies tend to compete on price.  But when prices rise and supplies tighten, marketing must become more creative as the wine, almond, tea, coffee and bottled water industries have learned.  Marketing experts have long noted that when prices are too low, consumers fail to perceive value or to discern and demand quality.  Higher prices, as long as they remain reasonable, confer a sense of value.  Honey, as “the soul of a field of flowers” and a natural, pure, diverse, delicious, historic and healthy product, deserves to be perceived accordingly.

1  CPNA International, Ltd.
    1043 Oyster Bay Road
    East Norwich, NY 11732
    Tel:  (516) 935-3880
    Fax:  (516) 628-3959
    Report distributed June, 2013

Mr. Phipps is president and founder of CPNA International, Ltd. and is currently on the National Honey Board. He is an importer of honey, natural foods and tea from various international producers. Ron is also the former personal research assistant to the president of the American Philosophy Association. He is a recipient of the National Science Foundation fellowship for philosophy of theoretical physics. Mr. Phipps is a founding member of the Tea & Health Committee, which organized three major scientific symposiums on tea and health and the role of antioxidants in the prevention of disease.  He has worked with FDA to develop a research protocol for the global diversity of honey. Currently, Mr. Phipps is president of the Chamber Players International.



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