The High Price of Cheap Cannabis

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Stett Holbrook is editor of the Bohemian, an alternative weekly in Santa Rosa, California. Originally published at Grist, in collaboration with the Food & Environment Reporting Network

The drive to Casey and Amber O’Neill’s HappyDay Farms winds up a dirt track off Highway 101, three hours north of San Francisco. The road climbs to 3,000 feet along a ridge with stunning views of pine-covered mountains and the blue band of the Pacific Ocean, 25 miles to the west.

As I turn down the O’Neill’s pitched driveway, a barking Great Dane–Catahoula named Emma rushes me, hackles raised. Casey and Amber insist she’s friendly, but it be would difficult to approach the O’Neill homestead undetected. And that’s by design.

The O’Neills grow cannabis in northwestern California’s infamous Emerald Triangle, a densely forested region of labyrinthine back roads, secret valleys, and perennial creeks. For more than 40 years, it’s been a great place to hide out and grow a prohibited but highly desired product — not just for the O’Neills, but for scores of other off-the-books growers, many of whom have been farming here for generations.

Casey O’Neill was born 35 years ago on this hilly, 20-acre spread. One acre of his property is flat enough to produce vegetables and strawberries, which he sells to nearby restaurants and members of a CSA. But it’s the rows of cannabis that bring in most of his income. His brother and father grow the same lucrative product on adjacent properties: a well-known hybrid strain called The Great Success, which took 11th place out of more than 650 entries at last year’s Emerald Cup, the state’s premier pot competition.

Grist / Google Earth

The Emerald Triangle is the Napa Valley of cannabis. Blanketing more than 10,000 square miles in Trinity, Humboldt, and Mendocino Counties, the region produces about 60 percent of the nation’s pot, most of which heads out of state on the black market.

And just as winegrowing and tourism dominate Napa County’s economy, so does cannabis dominate here, helping to fill the void created by the collapse of the once-robust fishing and timber industries. In Humboldt County, the region’s heart, researchers estimate that cannabis provides a third of private-industry revenue; in the triangle at large, the California Growers Association, a cannabis trade group, says every dollar spent on the cannabis industry leads to at least two dollars spent elsewhere.

But change is coming, thanks to voters’ passage last year of Prop 64. Starting in 2018, Californians will be able to legally grow and possess recreational cannabis. That’s in addition to medical weed, which the state legalized in 1996.

From an environmental standpoint, ending prohibition should be a boon. Illegal cultivation creates a raft of environmental problems — erosion, clear-cutting, garbage dumping, poisoned watersheds, and water diversions from creeks that support imperiled salmon and steelhead trout. The state will also begin collecting fees and taxes from growers who go legit; about $1 billion is expected next year, of which 20 percent will go toward watershed protection and remediation of state lands that were damaged by growers.

But for the O’Neills and other small-scale growers in the Emerald Triangle, legalization looks a lot less appealing. Many are either unable or unwilling to pay state or county fees, and even for those who can, legalization will increase competition from large-scale, cut-rate growers.

Fred Krissman, a Humboldt State University anthropologist conducting field studies of cannabis growers in the region, predicts “massive increases in unemployment, poverty, child hunger — a disaster.” The transformation might also offer a cautionary tale to other states embarking down the path of legalization.

* * *

In 2016, California’s legal medical cannabis industry — which fills the shelves of regulated dispensaries throughout the state — generated $1.8 billion in revenue. Meanwhile, the illicit markets pulled in $5.1 billion, according to the Arcview Group, a cannabis investment and research firm in Oakland.

Once legal recreational cannabis hits the market, Arcview forecasts its value will hit $5.8 billion in the next four years.

But how much of that pot will come from the Emerald Triangle? So far, only about 3,000 of the region’s operators, out of roughly 50,000 farms or “grows,” have applied for permits and licenses, but that number is growing as more growers come forward. For some operators, the cost of legalization – tens of thousands of dollars for even a modest-size operation, not including attorney and consultant fees — is simply too high.

Compounding the financial hit is competition from the south, where well-capitalized operators are planting cannabis in giant Salinas and Central Valley greenhouses and urban industrial parks. Economies of scale, plus easy access to labor and highways near lucrative markets, lower those operators’ price point to about $1,300 a pound. Just a few years ago, Emerald Triangle growers could get more than triple that.

As if that weren’t bad enough, the Emerald Triangle’s growers who have chosen to go legit, including the O’Neills, face further competition close to home. With lower overhead and no sales tax or permit fees, growers who choose to stay illegal can easily undercut legal operators’ prices.

As the industry emerges from the underground economy and blinks in the bright light of regulation, no one is quite sure what success will look like. The cannabis industry has existed outside the law for decades, but also well outside of mainstream agriculture. That has allowed small-scale growers to maintain financially and environmentally sound family-owned plots — a rarity in the rest of the ag industry, which has grown dependent on chemical companies and squeezed by low crop prices.

Casey and Amber O’Neill stand on a hillside at HappyDay Farms. Stett Holbrook

“We’ve seen how 20th century agriculture can be really bad for community, and really hard on the land, hard on workers and families,” Casey O’Neill says. “If we don’t build a different 21st century agriculture, we’re fucked.”

Done right, he adds, cannabis legalization offers a way to keep small, diversified pot-and-produce farms like his afloat. “It’s much bigger than growing some weed. We’re trying to put a face on small farms and communicate what we do, and why it’s valuable to society.”

* * *

When I first met Humboldt State’s Fred Krissman at a California Bureau of Medical Cannabis Regulation meeting in Santa Rosa last year, I thought he was a grower. He looked the part, sitting in the back of the room wearing a beanie pulled low and a cannabis farm T-shirt.

As an anthropologist studying cannabis growers, he cultivates the look to better mix with his research subjects, with whom he lives for days at a time.

Krissman works at Humboldt’s five-year-old Institute for Interdisciplinary Marijuana Research, the first academic research group to focus on cannabis — the role it plays in the regional economy and its impacts on community relations, the environment, and human health.

He hopes a majority of cannabis farmers can find the environmental and economic balance that Casey O’Neill exemplifies, but as an academic, Krissman is skeptical.

The industry’s shift into the legal sphere, he says, may pressure all cannabis growers — legal and illegal — to operate more like modern agriculture, with its “get big or get out” ethos of debt, larger investments in equipment, labor and facilities, and offsite corporate ownership.

In 2014, after Colorado legalized recreational and medical cannabis, prices plummeted as scores of new growers flooded the market, many of them large-scale operations that hold licenses for cultivation, distribution, sales, and other business activities.

According to Cannabase, a Colorado-based online retail site, the wholesale price for a pound of recreational pot dropped 38 percent in 2016, while medical marijuana fell by 24 percent. A similar phenomenon is happening in Washington State, which legalized recreational cannabis in 2012.

As an example of how industrial pot could affect California growers, Krissman points to Harborside, an Oakland-based cannabis dispensary that’s developing a 47-acre farm with 360,000 square feet of greenhouses in the Salinas Valley. Jeff Brothers, that company’s chief executive officer, told a reporter this past April: “If we want cannabis to be widely accepted, we need it to be cheap.”

That’s an imperative with which Krissman vehemently disagrees.

“If we force the cannabis industry into the capitalist mode of agribusiness,” he says, “this is the logical transition that’s going to occur — the one that our politicians and many people say they don’t want.”

To help protect Northern California’s traditional growers, Krissman suggests limiting farms to one acre, as well as imposing a government-subsidized floor price of $1,000 per pound at the farm gate — a proposal he realizes has little chance of passing muster in the current regulatory climate.

The growing glut of cannabis is already pushing prices to that floor, with no sign it will hold. But if public policy makers really do want rural communities to thrive, Krissman says, then they have to enact laws protecting them.

State lawmakers have created a tiered-fee structure, based on the number of plants and size of operation, to help cottage-scale growers survive in the post-legalization landscape. But even that, many say, isn’t enough to help Emerald Triangle growers match the economies of scale enjoyed by larger operations to the south.

* * *

Susan and Paul, partners in a small medical cannabis company called Lovingly and Legally Grown, are among those who fear the legalization juggernaut. They asked that their last names not be used because of ongoing raids in their region by authorities, even on legal growers.

They belie the cliché that all pot growers are raking in the money. Last year, they grossed $35,000, producing and distributing a line of tinctures, oils, and balms, working with doctors to create custom blends of cannabinoid (CBD) — a non-psychoactive compound that treats anxiety, epilepsy, arthritis, and other ailments.

Under the new regulatory framework, they estimate their annual fees and permits will top $30,000 next year.

“This is what is presenting us with this terrible quandary right now,” says Susan over a table filled with her homemade cheese, almonds, and gluten-free crackers. “We don’t know if we can continue.”

She and Paul now travel the state, attending hearings on cannabis regulation and explaining how legalization threatens to annihilate those who choose to stay small.

“Everybody wants to get their beak wet,” Paul adds. “All they know is this is a billion-dollar industry, and they want their piece of the pie.”

Indeed, 250 miles south of the Emerald Triangle, in California’s Salinas Valley, a 21st century cannabis industry is rising amid the region’s traditional crops of lettuce, strawberries, artichokes, broccoli, and wine grapes.

To protect Salinas Valley’s existing $5 billion agricultural industry, Monterey County officials have restricted cannabis cultivation to existing greenhouses, a land-use decision that has kicked off a real estate frenzy for tumbledown buildings that used to grow cut flowers until NAFTA opened the door to cheaper Colombian imports in the 1990s.

“Greenhouses are the most efficient way to grow,” says Omar Bitar, co-founder of Grupo Flor, a Salinas-based cannabis business consortium. “We have the ag infrastructure and, most importantly, we have the labor pool.”

Today, Grupo Flor leases or owns about 2.6 million square feet of greenhouse and indoor growing space in Monterey County. Eight-foot-tall chain-link fences, topped with razor wire, encircle the properties, which are dotted with security cameras and large “no trespassing” signs.

Inside the greenhouses, computer programs manipulate light exposure, spurring plants to flower early and produce multiple crops a year, instead of the single crop that outdoor growers, reliant on the sun, raise.

At Grupo Flor’s Salinas office, a whiteboard lists revenue projections for each of the company’s five business ventures: real estate, cultivation, manufacturing, investment, and retail. This year, the company will gross $5 million from its leases, says Gavin Kogan, a Grupo Flor cofounder. Next year, if all goes well, he projects gross earnings, from all Grupo Flor ventures, of $30 million and more than $80 million in 2019.

A former cannabis business attorney who favors checkered Van’s skateboard shoes, Kogan claims not to be motivated by riches. Instead, he touts the ability of cannabis to create economic opportunity for the majority-Latino population in an area riven by crime and lack of economic opportunity. Salinas has the highest youth homicide rate in the state and a total gun murder rate more than seven times the national average.

“The goal is to make the Salinas Valley the central plumbing for the California cannabis industry and generate jobs and completely reconstitute the economic infrastructure of this valley,” Kogan says.

And what of the Emerald Triangle growers? Kogan says he understands their plight and doesn’t want to take their business.

“I’ve faced open hostility from North Coast folks with what we’re doing here,” he admits. “But we’ve got multi-generation growers down here as well, and we’re doing what’s available to us.”

What’s available to northern growers, he adds, is appellations: identifying and marketing products with distinct geographical place names — a strategy employed by winemakers around the globe. (The California Growers Association is already pursuing this avenue.)

Emerald Triangle growers could also distinguish their product as sun-grown buds, distinct from anything cultivated under a roof in Monterey County.

But there’s another hitch: flower power may be on the decline. To appeal to new consumers, Kogan says the industry is moving away from smokable bud toward salves and candies made with cannabis oil — a commodity in the making. That’s where much of Grupo Flor’s business lies. It remains to be seen if customers will continue to seek out Emerald Triangle flower over more versatile oil.

* * *

Can big pot and little pot coexist, as Kogan imagines? Alicia Rose consulted for the Napa Valley wine industry before she opened a virtual cannabis dispensary called HerbaBuena, which specializes in sun-grown, biodynamic cannabis from heritage Emerald County growers.

She sees an opportunity for branded “farm-to-table” cannabis that comes with a story – for example, flowers grown outdoors by organic farmers on a small family plot in an ocean-cooled valley in Mendocino County — as the best hope for Northern California’s cottage growers.

For the Napa Valley of pot to survive, in other words, it might have to learn and adopt the marketing lessons of the actual Napa Valley.

“It gives me a little glimmer of hope we’ll be able to stay above the fray,” she says. Her hesitation? Backwoods growers who have long operated under the radar lack a certain business savvy. After all, they’ve succeeded in large part thanks to their ability to lay low. And that doesn’t usually translate into Napa-like promotional and sales skills.

Casey O’Neill, however, may have the adaptive qualities to make it in California’s new cannabis economy. Over the decades, he has played many roles: black market grower, plant breeder, cannabis consumer, and felon (he spent two months in the Mendocino County jail for cultivation). Now he’s a tax-paying cannabis farmer and policy activist.

Through it all, he has argued for the value of cannabis as a medicine, and for the benefits of small-scale, environmentally sound cultivation. Today, laminated cultivation permits hang on posts at the entrance to his farm. He relishes the security, predictability, and peace of mind that comes from running an above-board business.

Serving on the board of directors for the California Growers Association, O’Neill has become a strong advocate for small-scale cannabis cultivation. Perhaps hedging his bets, he also recently accepted a position in business and policy development at Flow Kana, a cannabis distributor building a 85,000 square-foot “cannabis campus” in nearby Redwood Valley.

The facility, which also houses a retreat center, will process, test, and distribute co-branded cannabis from some 80 boutique Mendocino and Humboldt county growers, operations not unlike the O’Neills’ HappyDay Farms.

So far, Emerald County growers don’t consider the San Francisco–based Flow Kana a threat. Rather, it’s a lifeline that, if all goes well, will help them stay afloat. Casey and Amber trust that the co-op will help them reach “discerning customers” — people who will seek Mendocino County sun-grown weed the way wine drinkers seek biodynamic-certified Napa cabernet.

“The strength of the story is what we’re counting on to keep us in the game against bigger, more capitalized operations,” O’Neill says. “Grown in a greenhouse has only so much story to it.”

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55 comments

    1. MyLessThanPrimeBeef

      And to spread the gospel worldwide.

      If that’s good, and as such we must legalize it, statewide, and then nationwide, eventually we must make sure the world is as progressive as we are…first emancipation, then suffrage, then human rights, open trade*, etc,, and then this.

      *Black ships to demand ports in Japan be open to trade, because trade was good. The British making sure the same in China, etc.

      Will it be that one day, like the empire, whose sun never sets, needing to sell opium to make up for losses elsewhere (say, America), another empire, whose currency is no longer accepted everywhere, comes to rely on marijuana exporting as the only way to sustain itself, and demands regressive countries to open their ports to marijuana? And future history students busy themselves studying the First Marijuana War, the Second Marijuana War, etc?

  1. Dave

    Oh no! Panic for buggy whip makers! Maybe the crack dealers, prison guards, gun runners, street pot dealers, pharma firms, politicians and other miscreants should bad together now to stop change!!! Oh the carnage! The economic dislocation! The horror of change!

    1. bronco

      He’s mad , he won’t get to keep all the money. He might like going legit if he thinks about it. I know a guy who grew weed in California who got murdered because some losers assumed he had a lot of cash in his house.

      Can’t really call the cops if people steal your drugs , which if you think about it creates a lot of violent crime because then you have to , or maybe just really need to if they belong to someone higher up the food chain , take matters into your own hands.

      1. TenzigNorgay

        Your opinion seems to be heavily influenced by TV. “I know a guy”…..not likely.

        The Cali weed scene is as close to an unmolested market as you can get. Freedom, in other words.

  2. bronco

    It’s legal to grow plants here in Mass now and I swear if you go for a walk down any street in the suburbs you can smell it from 100 feet away . There is a huge amount of planting going on in backyards and 6 or 12 plants can produce pounds of weed if you know what you are doing so things are going to get interesting.

    Suddenly now its become a security issue because there have been people cutting down the plants in the dead of night and running off with them. It’s a sad state of affairs that some people are stealing weed when its legal to grow it in their own yard, but most potheads I know are pretty lazy so not exactly surprising.

    I guess its good for the economy though if someone steals your plants , because you will have to grow more , kinda like the whole broken window thing these idiot economists are always rambling about .

    1. cnchal

      . . . because you will have to grow more . . .

      Growing it is as close to free as you can get. The land it’s grown on, that’s another story. Back yards or apartment balconies represent an unused resource in that regard. Can mass production, taxation and regulation beat that price? I would bet no, but it will be cheap enough for most, considering the instant gratification everyone is used to.

    2. RabidGandhi

      Most potheads… are pretty lazy…” so they’re waking up at night, seeking out growers and “cutting down the plants in the dead of night and running off with them

      Those are some pretty enterprising lazy people.

    3. Joel

      My aunt grows sunflowers in her front yard, and every year random strangers pick some of them. One guy actually did it right in front of her with her shouting at them to stop.

      Of course people will steal cannabis.

      A significant % of people are just really, really selfish.

  3. ambrit

    The eight hundred pound pink elephant in this room is what the Feds decide to do about pot in general. Cannabis is still a prohibited substance by Federal law. The last time I looked, the Feds claim to have a right to preempt State laws. One can be “legal” in the eyes of the State, and “illegal” in the eyes of the Federal government. As Sessions has demonstrated, all it takes is a small coterie of fervent antis to mess up the game.
    Read: http://www.safeaccessnow.org/federal_marijuana_law

    1. Larry

      Totally agree here. Obama didn’t back it and Sessions has been openly hostile to legalized marijuana. While Sessions is probably distracted by other issues ongoing at the federal level, it seems like Trump could use some big anti-marijuana move in a “liberal” state like CO or CA to score some political points. It certainly makes the legal marijuana game not for the faint of heart.

      1. oh

        When he and the Dims could’ve Obama did not remove marijuana from the controlled substances list. According to his biography (event though a puff piece in most respects) the hypocrite smoked quite a lot of it growing up and did several “lines” of coke with his buddies. And people still look up to him!

        1. Tony Wright

          And Dubya was a pisshead who left him Two $10billion a week wars and a major financial crisis to deal with. And people still vote republican and defend the right to own assault rifles and kill more US citizens a year than 9/11 did once. Try opening the other eye my friend.

      2. a different chris

        The question is: political points with who? Maybe the over-65 crowd? Trump is back to the “our voters are loyal but they keep dying off” politics.

      3. Louis Fyne

        Yes, there’s Sessions, but my feeling is that Trump is agnostic about pot (ymmv).

        And given the opioid epidemic (among other things), even conservative attitudes to pot is changing.

        Don’t be surprised on a slow news day if Trump tweets ambigious support for non-enforcement of federal law re. US grown pot. not necessarily legalization of imported pot.

      4. Propertius

        Trump could use some big anti-marijuana move in a “liberal” state like CO or CA to score some political points

        Colorado’s a purple state – neither red nor blue. Boulder, Denver, Pueblo, and places like Aspen skew left. Colorado Springs and most of the rural areas lean pretty hard right. The Senatorial delegation is split. 4 of the 7 Congressional districts are Republican. The Governor is a Democrat, but we tend to switch that around every couple of terms. The State Senate is Republican, the State House is Democratic.

        Regardless, legalized marijuana seems to have been quite a success here and a Federal crackdown would be wildly unpopular with both Republicans and Democrats.

    2. TimmyB

      Congress has already passed a law prohibiting the federal government from spending any money whatsoever on prosecuting those who distribute and sell marijuana in compliance with state law. The Ninth Circuit has ruled, in a case where the DEA arrested and the US Attorney prosecuted a medical marijuana seller in California who had complied with all relevant California pot laws, that Congress had prohibited federal prosecution of the individual and the charges were required to be dismissed.

      The Ninth Circuit ruling is controlling law in the Circuit. However, there is no reason to believe different circuits will rule differently. The Obama administration did not appeal to the Supreme Court most likely because it would have lost. The US Constitution is very clear that Congress controls the purse strings.

      Simply put, until Congress amends the current law, there is nothing Sessions or Trump can do in California or Oregon to stop pot grown and sold in compliance with state law. They most likely will not prosecute anyone outside of the Ninth Circuit because those circuits would rule the same way.

  4. Jim Haygood

    To help protect Northern California’s traditional growers, Krissman suggests limiting farms to one acre, as well as imposing a government-subsidized floor price of $1,000 per pound at the farm gate.

    Sovietized agriculture with floor prices and price support loans — the USDA is from the government, and they’re here to help:

    https://www.fsa.usda.gov/programs-and-services/price-support/Index

    The cost of legalization – tens of thousands of dollars for even a modest-size operation …

    What was once forbidden is now mandatory … and costly.

    Central planning, comrades: a robust indica-sativa hybrid will help in thinking big.

  5. lyman alpha blob

    “If we want cannabis to be widely accepted, we need it to be cheap.”

    Exactly the wrong approach as the next paragraph points out. And exactly how cheap does it need to be? It’s already on par with or cheaper than the cheapest beer you can find.

    Small scale operations are the way to go and plenty of money to be made off them.

    Twenty years ago an acquaintance was lamenting the fact that some teenagers had stolen his entire crop which he’d been growing in his garage. IIRC, the number he threw out was in the low tens of thousands of dollars he figures he’d lost and I believe he was selling wholesale to another dealer, not dealing it himself.

      1. lyman alpha blob

        Yes very true.

        My state recently legalized it and now there is a bunch of hand wringing from various authorities about how to go about letting people buy it legally, with the obligatory nonsense about “the children”, who presumably will be irreparably harmed by legal weed but not by all the convenience stores pushing booze on every street corner already.

        My local city council with its majority of square old ladies has been doing similar hand wringing, wondering how to deal with the “new” industry that’s coming to town. I’ve tried to tell them that it’s already here, has been for some time, and it’s not going away whether they allow sales in the city or not. The only difference is now the city can get some benefit from it.

        1. Auntienene

          I was at a country fair in NY state recently. One vendor was selling glass pipes. You know who most of the customers were? Old ladies.

          1. Mike Mc

            Right on the bubble of FRA (Full Retirement Age) and living next door to Colorado. Lots and lots of my cohort have discovered the pain relieving properties of cannabis because they are 1) too broke to pay for endless bottles of pain pills and 2) terrified of becoming opioid addicts… despite being all over the political spectrum.

            Pain knows no party and plenty of cookie baking church ladies have friends and relatives bringing them some ‘product’ back from the Rocky Mountain State to keep those old joints – the human body kind – moving and perhaps even grooving a little.

  6. oh

    These new policies to tax weed and make it harder for small entrepreneurs to participate is designed to pave the way for Big Pharma who will run a loss leader to get others out of the business and later (after bribing the politicians) jack up prices. I don’t see why weed should be regulated at all.

    1. lyman alpha blob

      Big pharma may want to try to dominate the industry but I’m not so sure they’ll be able to do so.

      It’s just too easy for people to grow themselves.

    2. Henry

      Sure you do. Just think about it for another second or two. Consumable drug plant that’s smoked or eaten or applied topically: if it’s legal in a capitalist system, it must be comprehensively regulated. Consider the alternative for another second or two…and you’re on board.

      Hopefully now this long article about the contradictions and discontents of legalization makes more sense. There are no good answers; many people around the country who operated as a cottage industry are being harmed financially. Yet some people, animals, and habitat were already being harmed by plenty of unethical actors who sprang up under prohibition. Moonshine, speed and, yes, cannabis: all ugly stories of exploitation and harm produced by prohibition, as with all drugs.

      The bottom line is that legalization will reduce harm, even as it reproduces the ugly relations and wealth concentration of capitalism. We can bellyache all we like, saying things don’t have to be this way. And we’re right. Yet here we are rolling around in a system that turns everything to shit.

  7. Wukchumni

    There are perhaps 50 indoor grow houses where I live, it’s been going on since the 70’s, and it represents the last middle class income for people w/o college educations and/or employment otherwise. You won’t see any outdoor grows here, aside from the Mexican DTO’s hidden away in the back of beyond, off-trail. The yield on an outdoor grow is about 6x that of an indoor grow, but the quality is often along the lines of say, ditch weed. The first illegal cartel grow in Sequoia NP was discovered around the turn of the century, and LE from the NP’s has been busting them ever since. I went to a talk in town given by somebody from Sequoia NP, and she described how much stuff they’d pulled out of of busted gardens in a decade since the first one was discovered, and it staggered me…

    She said in cleaning up the sites, they had removed over 5,000 one pound propane canisters, and over 12,000 pounds of fertilizer (the soil up there isn’t worth a dam) and tons of other trash and chemicals, etc.

    These chancy gardeners cook over an open flame for the 4 month period it takes to bring in a crop, and if a fire ever broke out 2 miles off-trail, it’d be nearly impossible to fight. I’m hoping legalization simply makes it undesirable for them to continue doing their green thumb ways, it’s just a matter of time before fuego lays waste to the forest for the trees, on account of them.

    I can buy a 35 pound box of oranges for $10 here, and 35 pounds of marijuana is worth $100k. All of the farmers here are cognizant of the slight discrepancy in value, and a good many are eager to go with plan C instead, as cannabis looks like a proverbial pot of gold in comparison.

    The quality and potency of marijuana has only improved over the course of my lifetime, which is in sharp contrast to the quality of booze in the midst of the prohibition (Last Call-by Okrent, is a heck of a read on that era) when people settled for ‘bathtub gin’ or went blind drinking industrial alcohol, etc.

    I think not only prices will be driven down greatly with legalization, but also the quality will suffer along the same lines, if we have a Great Leap Forward like gig, where everybody and their brother is growing it.

    1. divadab

      “35 pounds of marijuana is worth $100k” – this equates to $2,857 a Lb. or $179 an ounce which is a small quantity retail price. At current wholesale price of about $1,100 a Lb. 35 lbs would be more like $38k – and even then the inherent cost of production is much higher than for oranges. A better comparison would be to a labor-intensive specialty crop like flowers – which “marijuana” is – hemp flowers, trimmed by hand.

      The current wholesale price seems to me to be something of a floor – no one is getting rich in WA or CO but you can still make a living without the black market risk premium. Yes commercial production of industrial hemp flowers for processing into solvent-extracted oil will eat into this – oil prices are falling in WA and CO and may continue to fall if legal growers plant out hundred-acre blocks of weed purely for feeding into processing by solvent extraction.

      Cheap weed is good but growing your own is better. The weed will teach you much. For the healing of the nations……

      1. Wukchumni

        Despite prices falling, law enforcement has dramatically raised the value of plants seized/destroyed in raids in recent years, an odd sort of inflation, but why should anybody be surprised that they’d do it?

        Yes, the $100k figure for 35 pounds is the final retail buyer price, but then again, why not use it?

        And comparing mj to oranges isn’t fair of course, as the golden orbs just do their own thing pretty much and you pick them and that’s that. There’s a ton more activity that goes into producing the finished product that is marijuana, i’ll accede to the point.

      2. lyman alpha blob

        The prices quoted are a little confusing. I’m not at all sure that the $1300/lb given in the article is correct. I’m guessing that’s supposed to be a wholesale price that growers would charge to a distributor. That comes out to just a little over $20 per 1/4ounce wholesale, and even that seems low. Either that or retailers are charging a huge markup because street price for 1/4 ounce is in the neighborhood of $80 give or take $20 or so from what I hear.

        35 lbs for $100K sounds about right to me as far as current wholesale rates go and how that woiuld translate to current street prices.

        What I’d like to know to make sense of the economics here is how much does legal weed cost in WA state and CO at a dispensary. Anybody know the price they charge for 1/4 oz? And how much of the price is for state taxes?

        The reason the price has been so high (although still lower on a per dose basis than alcohol – for those not familiar, a pound of weed goes a loooooong way) is because of the illegality and they risk that growers and sellers take. I read an article recently talking about how much growers pay to harvesters to come in when the crop is ready and it’s a hell of a lot more than tomato pickers make. One would assume that the labor costs would go down significantly for small scale growers too once it becomes legal everywhere.

        The trick for municipalities is going to be to charge an appropriate amount of tax so that the price including taxes is still lower than what is currently available illegally. If the price actually increases for legal weed due to state regulations while production costs for growers go down, then sales will stay on the black market. No one is going to go out of their way to pay Uncle Sugar or big pharma a premium when a legal product can be purchased cheaply elsewhere or grown on one’s own.

        Maine is trying to impose at least a 20% tax at the state level and I believe municipalities would be able to add on fees of their own, either as an added tax to end users or as a fee charged to retailers for licensing. I’m still not sure if that would be workable or not without knowing the going rate for legal weed in other states.

        If anyone has firsthand info on legal purchases, I’d love to hear the info. I’d much rather my town increase tax revenue through marijuana sales than by constantly rezoning it in order to give developers a free-for-all, ostensibly to ‘increase the tax base’, as they do now.

          1. lyman alpha blob

            Thanks for that – so about $50 per 1/4 oz including taxes which seems pretty reasonable and now I’m more confident about that $1300 figure for a wholesale price in a state where it’s legal.

            The other thing to know is the production cost. I really have no idea what that might be but I’d be willing to bet that growers could still turn a decent profit at well under $1300 per pound, even if it were grown indoors with the added expenses of lights and growing equipment. I mean, it can’t cost that much more to grow weed than it does tomatoes. Once the legal risks are taken away there really is no reason to keep charging as much as before.

        1. pat

          lyman :”What I’d like to know to make sense of the economics here is how much does legal weed cost in WA state and CO at a dispensary. Anybody know the price they charge for 1/4 oz? And how much of the price is for state taxes?” All dispensaries have websites in WA. And the tax structure info is at a Wa state website. Easy to find. Heres one: https://seattle-menu.fweedom.com/

  8. Steve in SoCal

    For work tomorrow I have to staff a literature table for my state agency at workshop sponsored by the California Bureau of Cannabis Control for businesses that want to be able to start selling pot in January of 2018.

  9. MyLessThanPrimeBeef

    “Cannabis campus”

    Interesting word choice.

    Campus – that’s where degrees are issued, information drilled, dogmas memorized, etc.

    You relate to others through IQ, the mind.

    Why not ‘cannabis heaven?’ Here, you relate to others through the soul.

    Or ‘cannabis camp’ or ‘cannabis home?’ Maybe ‘cannabis sanctuary.’

    But ‘campus’ seems the fashionably reflexive choice.

      1. MyLessThanPrimeBeef

        The one I went to, I climbed all the time.

        And it keep me in good shape. It was another 20 years later, and lots of exercise and eating right, that I was able to wear the same old jeans again.

  10. Greg Taylor

    After the Feds deregulated tobacco farming, prices halved and many small growers in hilly regions couldn’t compete or make a living. Growing rights (pounds) were purchased and that cushioned the blow for some owners but not labor. Sounds like similarly situated small marijuana growers will be even worse off.

  11. TimmyB

    Illegal pot and other drug prices are high simply because they are illegal. Once pot was legal, it was inevitable that prices would drop. I wouldn’t recommend that anyone enter the legal marijuana growing business because I think the market will be flooded with cheap pot. Many people are going to go broke.

    1. Wukchumni

      I was kind of shocked when a friend I was with in Colorado told me the prices in a mj store there were almost double what she paid in California for the same, and then there’s the 18% or so tax on top of it.

      Maybe they didn’t get the memo that prices would fall with abundance?

  12. Lee

    Can big pot and little pot coexist, as Kogan imagines?

    We and a good number of our friends and acquaintances represent teeniny pot. We grow our own. Its not that difficult and capital requirements are negligible. We have neighbors who can see our plants from their windows. They wave and smile when they see us tending our plants. Cops never bother us and our two dogs, Lady and Sir Barksalot, warn off fence jumpers.

  13. Ben James

    The price of cannabis is definitely dropping here in California. I would never pay more than 100 announce these days for high-grade cannabis. That being said many Growers are still exporting to neighboring states that are stupid enough to continue the LIE of cannabis prohibition. As long as they are are locations where the black market still rules cannabis sales, the price will stay up but the risk is also an issue. Outside of the State of California Cannabis is still drawing up to 3000 a pound and over 300 dollars an ounce. It’s hard to ignore that kind of money from a plant that can be easily grown indoors or Outdoors. Legalization throughout the United States will settle this whole thing down and cannabis will move into the Realms of normal agriculture. At that point I would expect we’ll see prices come down to around $20 an ounce.

  14. Stanley Dundee

    A somewhat ore radical view of the same topic from The Baffler may be found at Smoked Out:

    The social relationships that currently exist around illegal marijuana production and distribution are more consonant with the values of mutual aid, cooperation, reciprocity, self-management, re-distribution of wealth, and other nominal goals of the left than anything you’ll find within the new legal marijuana sector.

    1. Watt4Bob

      +1!

      Reminds me of the cost to civilization of allowing ‘witches’ to be driven out of health care.

      You could say we never really recovered from that strategic blunder.

  15. Watt4Bob

    Meanwhile in Minneapolis;

    From September 29 to October 8, Hennepin County EMS crews have responded to at least 125 cases where someone has overdosed on K2

    Yesterday, a public radio piece on the problem explained;

    K2 was initially created in research labs to mimic the active ingredients in marijuana. The idea was that these research chemicals would become drugs to treat wasting syndrome from HIV and cancer, and treat nausea and vomiting associated with chemotherapy,

    So while lobbying to keep cannabis, which is known to work wonders for cancer and HIV patients, away from those folks, Big Pharma was all the while working on a synthetic version so they could make money off the need.

    Now this situation has come back to bite us in the *ss because the phony synthetic is capable of harm via overdose, which by the way is unheard of with real weed.

    This week’s overdose victims came into HCMC aggressive and agitated, but Cole said a different recipe can produce completely different symptoms. One batch might cause heart attacks, while another induces comas.

    And back at the ranch, Big Pharma is helping write our health care law, and boy oh boy, Cheetoh says it’s going to be great. /snk

  16. Kevskos

    Lots of the Emerald Triangle growers opposed legislation so I really don’t feel much pity for them. They were willing to let mostly urban dealers rot in prison so they could continue to make more money. Maybe they should have been at the table and helped drive legislation so they would of had a better chance to get a good deal.

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