APIS Volume 2, Number 9, September, 1984
In this issue
- Financial Management for the Beekeeper
- The Acarine Mite Arrives
FINANCIAL MANAGEMENT FOR THE BEEKEEPER
From the feedback I received concerning a presentation on financial management recently, those going into the beekeeping business and many old timers are more concerned with production problems than managing the financial part of the business. That's understandible, the allure of producing a product by means of managing a complex insect society is far more exciting than the mundane activity of manipulating numbers on paper. More than a few times I heard the comment, "I'm afraid to calculate how much it cost me to be in the beekeeping business. If I knew, I might have to think about doing something else, and I don't want to stop keeping bees." Perhaps, but it becomes more and more evident each day that it is only by means of a sharper and sharper pencil that the beekeeper will be able to continue to enjoy a profitable association with the honey bee.
The question that many financial managers are asking these days, "What business am I really in?" appeared to strike many beekeepers attending as something of an absurdity. But it is perhaps more relevant today than ever before. With the honey market in a shambles, can beekeepers ignore the fact that they must first and foremost be honey marketers and promoters, not simply producers? A classic example of this kind of "tunnel vision" can be found in a best-selling book sometime back, which analyzed the current conditions of the railroads. As super highways were constructed and more and more transportation was being done by truck and aircraft, the railroaders failed to ask themselves what business they were in. So, instead of stepping back and diversifying their real business, transportation, they continued to roll down their steel tracks, railroading themselves into some difficult times and leading a few into bankruptcy.
Some who had experience in other branches of agriculture, considered discussions about the troubles of beekeeping industry more than just intriguing. They'd heard much of it before in poultry, hog and other livestock producer meetings. It is a too familiar song, rooted in the fact that no longer is agriculture a favored son in an increasingly urban oriented society.
Just how important is financial record keeping becoming for agriculture in this decade? Some statistics, as reported in the July issue of the Farm Finance Newsletter, published by the Florida Cooperative Extension Service, might provide a clue:
"Not many farms are making money today. It is those farms grossing between $40,000 and $200,000 annually that face severe financial problems. They are often too big to get a meaningful off farm income and too small to obtain the economies of scale that the super farms enjoy. The recent low commodity prices, plus servicing debts based on an over optimistic assessment of the future, makes this group particularly vulnerable."
Most, if not all, large sideliner and full-time beekeepers fit the above description. Perhaps more revealing are the ratios below:
Production Expenses Prod. Expenses per Cash Receipts per
Year per $1 Cash Receipts $1 Net Farm Income $1 Net Farm Income
1975 0.65 1.61 2.47
1978 0.64 1.60 2.49
1979 0.69 1.82 2.64
1980 0.73 2.08 2.87
1981 0.71 2.13 2.98
1982 0.75 2.28 3.05Again, the Newsletter states:
"All the ratios show a gradually worsening trend for Florida farmers. Some $.75 in every dollar of cash receipts now go in production expenses, compared with $.64 in 1978. And for every dollar of net farm income, $2.28 must be spent on production or $.68 more than in 1978. Finally, it takes more cash receipts to produce a dollar of net farm income. Every $2.49 in sales provided a dollar of net farm income in 1978 compared with $3.05 today."
The profit margin in agriculture is steadily declining. The line between a gain and a loss becomes ever sharper and less and less room for error exists. This is especially true for those actively borrowing funds or contemplating going to the bank. Truly the agriculturalist, as one pundit put it, must, "Squeeze the eagle on a dollar bill until it grins." This is only possible through financial management.
A first step in managing finances is to develop a monthly cash flow statement. This is nothing more than a listing of sources of cash income and outgo. If there's more income than outgo, cash flow is said to be positive, a profit it made. If there's more outgo than income cash flow is negative, a loss is realized. This is routinely done by most folks at the end of the year, but is recommended on a monthly basis to financially fine tune an operation. Some larger concerns may even do this on a weekly or daily basis. Remember, this tracks the flow of cash and only cash transactions should be recorded. Even if a business has a great many assets, they often cannot easily be converted into cash, the necessary fuel needed to run a business on a day to day basis. If cash is short, it can be borrowed short-term to aid during times when income is short.
Agriculture is a prime example of an operation requiring cash flow analysis because it is seasonal in nature. Setting the cash flow statement down on paper is of utmost importance; it cannot be effectively done otherwise. Optimistic feelings about the business or intuition that things are going well can be extremely deceptive. The Florida Cooperative Extension Service publishes Circular 448, Cash Flow Analysis. Contact your County Agent for Availability of this publication and others dealing with financial analysis.
There are several major ways to juggle finances, including: reducing costs, increasing income and restructuring debt. The following are common sense ideas beekeepers might take advantage of in each category:
REDUCING COSTS:
BUY CAREFULLY:
- SHOP AROUND--but don't spend ten dollars to save a penny
- BUY AT DISCOUNTS--plan so you can buy in bulk
- JOIN GROUP PURCHASING PLANS--pool orders to obtain bigger discounts
INCREASE LABOR OUTPUT:
- USE IN SERVICE TRAINING--pay a living wage
- ORGANIZE WORK EFFECTIVELY--plan ahead using time management principles
- DON'T HIRE MORE LABOR THAN NECESSARY--delegate more authority
SAVE ENERGY:
- KEEP ENGINES TUNED--use less fuel
- INSULATE--stabilize heating and cooling
- INVESTIGATE SOLAR ENERGY--heat and cool naturally
BUDGET LIVING COSTS--write it down and stick to it
DELAY NEW INVESTMENTS:
- OVERHAUL EQUIPMENT--rebuild, don't replace
- DO ROUTINE PREVENTATIVE MAINTENANCE--make it last
- LOOK FOR VALUES IN USED EQUIPMENT--find gold in another's garbage
- EXPLORE LEASING OR RENTING--retain tax benefits
- OPTIMIZE YIELD--intensify management to increase profit per unit
INCREASING INCOME:
EVALUATE YOUR MARKETING STRATEGY:
- LOOK FOR NEW MARKETS--realize that most profit is made "beyond the farm gate"
- ANALYZE STORAGE COSTS--seek out hidden costs
. IMPROVE EFFICIENCY:
- CULL OUT WEAK COLONIES--take losses early
- INVESTIGATE LOCATIONS CLOSER TO HOME--reduce yard size
- ELIMINATE INVENTORY NOT BEING USED--sell it for cash
LONG-RANGE MARKETING STRATEGY:
- DEVELOP RAPPORT WITH CUSTOMERS--cultivate repeat business
- EXPLORE A MARKETING/BUYING COOPERATIVE--use resourcse more efficiently
RESTRUCTURING DEBT:
- EXPLORE LONG-TERM DEBT SITUATION--increase cash flow
- BALANCE LONG, INTERMEDIATE AND SHORT TERM DEBT--even out credit
- SHOP FOR INTEREST RATES--take advantage of changing rules
- CONCENTRATE CREDIT FROM FEW SOURCES--increase control
Where can you get help in managing your finances. It is readily available from several sources. Explore the Small Business Administration's programs near you. It sponsors a group of retired executives (SCORE) who volunteer their time to help small businesses. Lending associations and banks are prime sources of aid. The Production Credit Association (PCA) nearest you might be willing to help. Small Business Development Centers (SBDC) exist around Florida; they provide free counseling, seminars and computer time for the asking. And don't forget the Chamber of Commerce and/or Cooperative Extension Office in your county or city.
THE ACARINE MITE ARRIVES
Like a maelstrom, the acarine (Acarapis woodi) mite population seemed to bide its time in Mexico, gather strength and then hurl itself into the U.S. months before expected. The find in Texas at Chandler Apiaries and subsequent detections in the Houston area and panhandle have given rise to a number of actions. The Animal Plant Health Inspection Service (APHIS) has quarantined several counties in south Texas and is attempting to eradicate the incipient invasion, so far traced as far as Louisiana.
The state of Georgia has taken measures to protect its beekeepers and large package bee and queen industry. On August 6, 1984 the Georgia Commisioner of Agriculture placed an emergency embargo into effect. It prohibits any movement of colonies of honey bees, nuclei, queens or combless packages either into or through the state. The embargo will be in effect until October 31. This has already affected many Florida beekeepers attempting to bring bees back from the midwest; most have done an end run through Alabama. The situation seems to change daily, but as of now a beekeeper must have in hand a mite certificate from an originating state to enter Georgia or be ready to wait at the border until the Georgia apiary inspection service tests samples. It is extremely advisable, therefore, to contact Mr. Jim Harron, Georgia Chief Apiarist, before trucking bees toward the Georgia line.
[This article is for historical purposes only--Much has happened since then]
Sincerely,
Malcolm T. Sanford
Bldg 970, Box 110620
University of Florida
Gainesville, FL 32611-0620
Phone (352) 392-1801, Ext. 143 FAX: (352)-392-0190
http://www.ifas.ufl.edu/~entweb/apis/apis.htm
INTERNET Address: MTS@GNV.IFAS.UFL.EDU
©1984 M.T. Sanford "All Rights Reserved
