What is a good honey contract?

Introduction

Landowners on the East Coast are offered agreements with honey companies and beekeepers interested in putting hives on the land over the summer season. This guide is designed to provide some basic guidance for landowners considering entering into contracts with honey companies. It’s not gospel, it’s not legally binding (but contracts are) and it’s just a few things to think about – if you want advice about a specific contract or offer then contact us or use a lawyer.

Landowners may want to prioritise local beekeepers so we’re building a database of beekeepers who live and work on the East Coast looking for more hive locations. We’re also looking at workforce development plans for the honey industry and how we can quickly train more highly skilled beekeepers and support roles like hive building, bioactive analytics, etc.

Landowners may also be interested in joining a cooperative venture with other landowners such as Ngati Porou Miere Limited Partnership that aims to increase local control of the industry, create more local jobs and increase returns to landowners.

New technologies are allowing landowners and beekeepers to increase transparency. ApiTrack is a company based in the Eastern Bay of Plenty currently developing a new microchip system for tracing honey from hives to shop shelves, you can download the brochure here.

 

What do honey companies want?

The more Mānuka close to the hive locations, the better for honey production and prices. Kānuka is also increasingly sought as a honey crop but the price is generally lower than Mānuka because of the premium paid for high MG/NPA/DHA honey.

Beekeepers will also be interested in ‘shoulder’ crops that provide flowers and food for bees in the Spring and Autumn as this allows them to keep the bees on site longer, reducing disruption and need for transporting and feeding sugar to bees, keeping the honey flowing longer.

Honey companies want good access to sites, if they can drive close to large stands of Mānuka/Kānuka this is usually the most cost effective option but helicopters are also used to transport hives in and out of remote locations.

Most honey companies will be interested in long-term access arrangements for the best sites to assist them with consistency of supply and high quality products over a number of years. They also want exclusive access to the nectar sources because if other beekeepers bees are accessing the same plants there will be less food for bees and less honey in their hives.

A new beekeeper may manage 300 hives and an experienced beekeeper can have up to 500 hives.

 

What are the factors influencing production and value?

A number of variables influence the value of a crop so that the hives in same location may produce quite different results from one year to the next depending on:

  • weather conditions including air temperature, rain and wind
  • flowering rate
  • competition from other bees
  • soil conditions
  • timing of when hives are placed and harvested
  • health of the hive
  • market rates for honey – consumer confidence, global demand levels and levels of production can affect the price paid dramatically

 

What are the risks of entering into a contract?

Contracts are legally binding, this includes verbal agreements which can be upheld by the court if there is a dispute about the arrangement. It pays to get someone who knows contracts to review the conditions of any new contract before signing. Tairāwhiti Bee Club has people who can help with this. Good beekeepers may also provide Health & Safety documentation.

It is difficult for landowners to verify the data provided by beekeepers and honey companies for what they take off the property. This is an area that needs more attention from the industry and landowners but until there are systems to independently account for the volume and quality of product derived from each hive, the landowner can only trust the beekeeper is reporting accurately – extraction facilities will usually produce a report for each batch that should be included with payment and this can be a condition of any agreement. If possible try to be present when the hives are removed, count them and ask to check random hives to get a sense of the crop.

 

Should we keep the honey instead of taking the money?  

Taking a share of the Mānuka honey instead of being paid for it can be beneficial for increasing the return to landowners but it comes with some fishhooks.

Storing Mānuka honey can increase its UMF levels significantly over 12 months leading to a five-fold increase in the value of the honey.

Storing Mānuka honey requires a temperature controlled storage facility, careful management of the resource to not leave it longer than ideal and carries the risk of the honey deteriorating through fermenting (which can lead to exploding barrels!) or other damage to the product. It also requires the landowners to have channels to market to sell the product when it reaches a premium quality level.

Kānuka honey doesn’t increase in value through storage in the same way Mānuka does so there is little point in retaining it unless the landowner has access to buyers who will pay more than the market rate beekeepers are selling to (assuming the contract is for a share of the sale price).

 

What are the ways contracts can be structured?

There are three main ways agreements can be organised:

  1. VALUE SHARE NET VALUE: This is a percentage share of the net value of honey when it is sold by the beekeeper, sometimes these deals include a fixed amount per hive (usually $30-40/hive) regardless of the amount of honey produced or the amount it sells for. Often the % will increase if UMF is higher.
  2. PERCENTAGE SHARE GROSS VALUE: Percentage share of the gross value of the honey when it is sold by the beekeeper, these deals usually include a fixed deduction for beekeeper costs of over $300 per hive.
  3. HONEY SHARE: A percentage of the honey crop. This is where the landowner is given a share – usually 20-25% of the actual honey from their hives. This is the arrangement that Ngati Porou Miere has with the beekeepers utilising the landblocks in the Limited Partnership.

 

Option Advantages Disadvantages
1 –  no other costs

–  guaranteed return

–  lower payment on good crop
2 –  opportunity to have greater share of sale price –  lower payment on poor crop and you could end up paying the beekeeper with no/little return to landowners
3 –  mānuka honey will increase in value over time

–  opportunity to participate further along value chain by selling direct to business or consumer customers

–  landowner takes increased risk and needs to manage storage and eventual sale

 

What should we include in a contract?

Ensure that the contract includes:

  1. Total hive numbers.
  2. Total apiary sites and the names of the apiary sites (GPS the apiary site and if you can take a photo of the hives, even better get a drone to do it).
  3. Total yield (kg’s from the hives), yield per apiary site (important as you will know which apiary site has performed best)
  4. Quality – based on the DHA (Dihydroxyacetone), Methylglyoxal (MGO) and UMF (Unique manuka factor). Now DHA/MGO = growth potential (eg: 2500 DHA divided by 349 MGO = 7:1 ratio, therefore it’s going to grow if stored at 21 degrees for 9 months). If you have honey coming off your land that has these ratios take the honey. If you want the money, ensure the beekeeper pays you the “growth” of that honey as it could go from a UMF 13 to a UMF 20 ($50-$100 per kg).

Remember: YIELD + QUALITY = PRICE.

Important: You need to get the quality per apiary site as each site is different

 

What do current deals look like?

HEL is starting to document the range of contracts being offered to landowners on the East Coast. You can send us your information to add anonymously to the table as we try to increase transparency and accountability in the sector.

Company Option  Value % $/hive paid in $/hive fee out Duration (years)
A 1 15 $20-40 1-5
B 1 30 1
C 2 25 $310 1
D 1 15-25 1
E 1 20 1
F ?
G ?
H ?
I ?

 

Where can I get help to understand a contract before signing?

Tairāwhiti Bee Club has people who can help landowners understand the offer and hopefully negotiate the best deal. Contact us for details of the next Bee Club hui.

 

Have we missed something or got it wrong above? Got an offer or contract you want feedback on? Send us your feedback in the form below.

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