The Roles of Risk and Honey Bee Colony Strength in Determining Almond Pollination Contract Provisions

Managed honey bee colonies provide pollination services, which are an essential input in the production of many crops in the United States. Over the last decade, the supply of U.S. honey bee colonies has become volatile as a result of multiple factors inhibiting colony health. This paper investigates the impact that colony supply uncertainty has on the California almond pollination market, the largest user of managed pollinators in the world. I develop a theoretical model and show that almond growers can reduce moral hazard in pollination agreements by paying beekeepers according to delivered colony strength. I utilize two unique datasets to identify determinants of almond pollination fees and test the predictions of the theoretical model. Using the California State Beekeeper's Association pollination fee survey for years 2008-2015, I find that providing low strength colonies for almond pollination results in lower fees collected by the beekeeper. I pair the beekeeper-reported data analysis with an empirical study of an almond grower pollination contract survey that I conducted at the 2015 Almond Conference. The results of the almond grower data analysis suggest that growers whose pollination contracts specify minimum colony strength requirements of at least the industry standard pay higher pollination fees than those who have lower or no colony strength requirements. The empirical results support the theoretical model finding that almond growers use colony strength requirements to elicit beekeeper effort. Since almond pollination represents only part of a commercial beekeeper's yearly income from honey production and pollination services, this paper highlights the need for additional research on the total economic impact of volatility of U.S. honey bee colony populations to effectively implement policies that promote managed pollinator health.