Honey Price Slump Shows No Quick Let Up
Beekeepers hoping for increases in the honey prices offered up by buyers in the coming season were given little hope during a meeting between producers and packers/exporters in Canterbury recently. Words like “uncertainty”, “lumpy”, “headwinds”, and that often-heard phrase of the past four years “oversupply”, painted a picture of the honey market which beekeepers met with the reply, “unsustainable”.
The gathering, on the evening of Tuesday September 20 at Dunsandel Community Centre, was organised by the Canterbury Hub of Apiculture New Zealand (ApiNZ). Hub committee member Nick Taylor emceed the honey markets discussion where Sean Goodwin (CEO The Mānuka Collective), Doug McIntyre (general manager Midlands Apiaries), John Smart (general manager sales Airborne Honey) and John Hartnell (director Hartnell & Associates) spoke to the current state of the honey market both domestically and globally, what they expect in both short and long term, and advice they could offer honey producers. Those gathered, which included ApiNZ chief executive Karin Kos and Board chair Nathan Guy, as well as approximately 40 beekeepers, also had the opportunity to question the honey buyers.
While economic challenges look certain to continue for many Kiwi honey producers in the short-term, the honey buyers spoke confidently about the value of New Zealand honey longer-term. Smart said that Airborne Honey’s new ownership group is committed to investing in markets and research, Goodwin spoke of “huge opportunity” in the global market place, while McIntyre said honey’s long-term future is “very promising” in that it hit the “sweet spot” by being in the natural wellbeing market, and from ethical and sustainable production.
How We Got Here
ApiNZ’s quarterly market analysis, released to members that day, was used to set the scene. Export figures show a reduction in honey leaving New Zealand in recent months and Goodwin explained that a range of factors influenced this, with uncertainty the only constant.
“There is no evidence yet that honey exports have stopped falling. We are still in a declining market. Bulk honey across the board is down in every category. All of multifloral mānuka is down,” Goodwin said.
“In the last six months, compared to last year, China is off 20 percent, the UK is off 25 percent. Just when you thought we were getting going again, we are stalling.”
Influences such as war in the Ukraine, high inflation in the UK and Europe markets and the weakening Japanese yen are all causing uncertainty.
Covid “has a lot to answer for” in the honey market, according to McIntyre. The Midlands GM explained that, as the world moves “from pandemic to endemic”, both retailers’ and consumers’ buying behaviours are changing.
“During the pandemic there was a ‘just in case’ inventory management, so everyone stock piled product because they had no certainty around what was going to happen with the supply chain. Now that things are transitioning back to some semblance of normality, people are moving back to ‘just in time’ inventory management. Consumers are using some of their discretionary income on other products, rather than health and wellbeing. In the short-term the buying will be lumpy, feast or famine, with not a lot of consistency in demand,” McIntyre said.
The Global Market Place and our Space on the Shelf
The four honey exporters present did not believe that drought and war in Europe were leading to increased demand for New Zealand honey, which makes up a very small part of the global trade. With inflation hitting many countries, consumers are less inclined to dig deep into their pockets for honey, Hartnell said.
“The cash to purchase a premium honey is struggling to be there at the moment. Let’s be really clear, New Zealand has one of the highest, if not the highest, reputations for quality honey in the world. So, we are really well respected. That is important to us, but it doesn’t always pay the bills. It does allow us to stay in the market place, but sometimes we have to shed some margin on price to stay there,” Hartnell said.
The message of maintaining retail shelf space for honey – which has been earned back in recent years after soaring honey prices in the 2010s made New Zealand honey uncompetitive – was one Hartnell was keen to impress.
“When we are successful in a market, we need to protect that market to the best of our ability. Sometimes that means not always receiving the top dollar, but ensuring the product retains its opportunity in the market on an extended and long-term basis. White clover is a good example. We have never been able to re-establish it as an export product like we had it historically, some 10 years or more ago. They took it off the shelf because we wouldn’t supply it at a price where it remained competitive. To relist that product and get it back on the shelf is a huge ask. It took two years to get to a position where they put honey dew back on the shelf with New Zealand on the label. You don’t want to lose it if you can help it.”
There was some disagreement over the future of mānuka honey internationally, with Goodwin, a high-end honey exporter, “taking confidence that the consumer trend is still there,” while Smart warned that the Chinese consumer may be growing weary of lower-end mānuka honey’s benefits.
“As an industry we need to bring it back to some pretty solid foundations and demonstrate the real benefits that mānuka honey can deliver, then build as an industry off those foundations. That is not news you probably want to hear, but it is certainly coming up in the surveys done by New Zealand Trade and Enterprise and the likes,” Smart said.
The Domestic Market
On the domestic market-front, honey is suffering from a “relevance issue” Smart said and, while beekeepers might be crying out for a higher honey price to make their businesses more sustainable, demand is highly price-sensitive.
“When the prices started to correct, after the heights of the mānuka boom years, we were hopeful sales volumes would come back to where they once were, but they have not,” Smart said of Airborne’s recent experiences on the local supermarket shelves.
“It’s a very elastic market, where price is essentially the determinant of who stays on the shelf.”
While the domestic market is “up a fraction”, that is likely due to increased population growth. As an industry we should be concerned that honey is falling out of relevance and coming under pressure from other spreads, such as peanut butter, the Airborne honey buyer warned.
“Most of our customers are 50 years or older and have been consuming honey since they were kids. The younger generation’s opportunity to intersect with honey through a breakfast or afterschool events have gone now, with the way younger people are,” Smart explained.
As far as the local trade in more tourist-facing channels, McIntyre said Midlands have only seen a “slight uptick” in the “dormant” market since the country’s borders reopened and that it will likely take “into next year and beyond” to return those sales to pre-Covid levels.
While New Zealand’s beehive population might be falling back fast (with talk at the meeting that the registered hive number at next report could be as low as 600,000 – back from a high of 918,000 in 2019), this is likely to do little in the short to mid-term to improve a supply-demand imbalance of mānuka honey that is depressing prices offered to the beekeeper. This is largely due to a bumper crop in 2020 where the national honey harvest was predicted at 27,000 tonnes, well above the rolling 10-year average of 19,000.
“We have been through the honey dew, we’ve moved a lot of white honey, but the current issue is mānuka – purely from 2020, a massive, massive oversupply,” Goodwin said.
“Consumer demand is still there, look at Google or Amazon’s statistics, people are still searching for it and there is growth in people enquiring. I would love to grow the pie and take it to more people who don’t know about mānuka honey.”
The Manuka Collective CEO explained that 97% of mānuka honey sales came in just 15 international markets though, and that international sellers are all chasing those same consumers. Therefore, any upward movement in mānuka honey prices will be slow to come, Goodwin believes, and beekeepers should plan accordingly.
“It’s going to be another three years before we get any correction in the supply and demand dynamics on mānuka honey, because we know what is in the sheds. A bad season might take a year out of that, but it won’t turn things around immediately.
“What you harvest this year, you might not sell for two years. Do you really want to have another crop, do you have other options? We would like to have more demand, but I don’t see a miracle demand situation, like Covid presented, coming along.”
Any upward tick in prices are likely to present themselves in the high end of the market first, simply because there is less of that honey about, Goodwin said.
“If you are producing multifloral or low-monos of (UMF) 5+ or 8+, then I would prepare for a longer-term period of low prices and difficulty selling honey. There is a lot of it. Where you are seeing demand for multifloral mānuka, it is so companies can blend down excessive levels of 15+ and above. It’s being used to help get rid of other stockpiles.
“I would be careful about any mānuka which is a few seasons old. I think you should think about blending and freshening it up.”
McIntyre also warned beekeepers to “be cautious about what they produce” in terms of mānuka honey, reinforcing that while there is “some demand” there is “plentiful supply”.
Clover Honey & Honey Dew
Being located in Canterbury, the discussion moved to locally produced honeys, clover and honey dew. Again, Hartnell reinforced the susceptibility of these international markets to price rises.
“I have a standing order of 200-300 tonnes a year of honey dew, but it is price sensitive,” the experienced exporter said.
“It took a long time to re-establish New Zealand honey dew back into the European market, we will not be given another chance. If we don’t get the support, it will go, and it will go forever. We will not get a third lick at it. Be aware of that.”
As for clover honey, domestic demand is dropping and Smart explained “customers are not prepared to pay for quality creamed clover”.
“To pay the beekeeper what they want, the customers are just not supporting it at that level,” Smart said.
Both Airborne and Midlands will be buyers in the clover market as usual and McIntyre said that Midlands priority will be to buy off beekeepers who they struck up supply agreements with last season or before.
“Cut Costs at All Costs”
With the buyers saying the money in the market place is not there, and many beekeepers not able to produce honey at a low enough cost to meet the prices offered, the topic of production expenses inevitably arose.
“I know it’s hard, but you are going to have to manage your costs like demons. You are going to have to take costs out where you think you can. Take costs out at all costs,” Smart implored.
Goodwin decried the substantial over capitalisation of the New Zealand honey industry, such as too many honey houses and packing facilities, which are the “platform” driving costs.
“The platform is on fire, there needs to be consolidation … Ideally we need to find a way to work together and come through it all, but to do that there will need to be change. We can’t go on producing the way we are. The costs are only going up – fuel, electricity, compliance costs, environmental requirements, the cost to play internationally,” he said.
One area where beekeepers could look to cut costs are on apiary site rentals, Hartnell advised.
“Some of the land user agreements look pretty ugly in the current environment. I don’t believe the partners in those agreements understand the situation. They have been watching Country Calendar and think we are making a bloody fortune. They don’t have a grasp on what is happening. It is hard to control the cost of diesel, but you can look at land user agreements and have free and frank discussions,” Hartnell said.
The Supply-Demand Imbalance
The four honey buyers present were typically optimistic about the value of New Zealand honey long term, despite a significant supply and demand imbalance currently.
Goodwin estimates that each year New Zealand is selling around 15,000 tonnes of honey all up, between domestic and export markets, against 19,000 tonnes of average annual production.
“We had been building a surplus of 3000 to 5000 tonnes a year and then you get a surplus of about 12,000 in 2020. That is the equivalent of something like three to four years surplus at once. That is phenomenal,” he said.
“Less hives doesn’t mean less honey. With less hives there is less competition and the remaining hives have an opportunity to produce more,” warned Hartnell.
“It is seasonal changes that have, at times, the greatest influence on honey available in the market place.”
When questioned if, as domestic buyers and exporters, the honey traders present were concerned that the current pricing could see New Zealand’s honey production dry up longer-term, McIntyre fielded the question.
“Ultimately we need to make a sustainable industry for everyone. We don’t have a business without a raw material supply. We don’t have a business without a consumer who wants to buy product at the end. We have to work in tandem to get the best outcome for everyone,” the Midlands Apiaries GM answered.
It was pointed out that as an industry it has been proven that “we can go from 600,000 to 900,000 hives quite quickly if the price is right,” by Hartnell.
The meeting offered no silver bullet solutions to the dilemmas faced by honey producers, simply the advice to “cut costs” – which will obviously be extremely difficult in the high inflation operating environment. The mantra of communicating with potential honey buyers prior to the production season was stressed though.
“Get to know your packers. Deal with more than one, get to know what products they are selling in the market and where those products are ending up and what is happening in terms of the growth of those products and markets,” Smart said.
Goodwin took that thinking even further.
“Some people are passionate, saying ‘this is a great site’, but if we don’t need the honey, what’s the point in having a great site? If you are sitting on honey and you don’t have a really good idea where you are going to be selling the next season’s crop to, I would be thinking twice about producing it,” he said, adding “at the end of the day, we are fools if we keep producing more and more product we don’t have a home for”.