The
2022 cannabis farming season is in full swing. Mountain horizons are
now lined with greenhouse plastic, a white shimmering in the distance
that warms my heart and makes me feel at home. Desolate mountain
roads have come alive and motorists share pathways with roaming deer,
turkey, and other wildlife.
Locally the landscape has changed. Many farms have already closed their doors and scores of others are up for sale. Revenue is way down for ancillary support businesses and the mood among remaining Humboldt County cultivators is mixed. Some are playing it safe, opting for one or two runs of light dep production instead of two or three. Others are opting to plant their greenhouses while leaving their full-term plots fallow. Some farmers are fearful, while others are cautiously optimistic and going all in. Many farms are cutting costs, and scaling back labor and inputs, while others invest aggressively in infrastructure, automation, and year-round production capacity.
Prices and sales velocity have firmed for high-end mixed light and greenhouse flower while prices for indoor are coming in substantially amid exploding production. Outdoor prices remain depressed and sales have slowed after a brief uptick in March and April.
On the policy front, several developments look to support small farmers and the California cannabis community overall.
Interstate Commerce
Legislation has been introduced that would allow California to enter into cannabis trade agreements with other states. This would presumably provide new opportunities for distribution and help California move some of its vast oversupply of flower. This will be an interesting development to watch. I obviously support this move but am uncertain as to who it will benefit the most.
Will it benefit small operators, larger operators, or both? Will it create more of a market for organic, sun-grown flower, or will it be much of the same – high demand for indoor and mixed-light, with sun-grown primarily purchased as biomass for value-added products like extracts, edibles, and topicals? Quickly on the topic of extracts - congrats to Mattole Valley Organics and Bear Humboldt’s URSA who just brought home some serious brass from the Emerald Cup with a first-place win for live rez carts – I’ve said they’re my favorite and this shows why!
My baseline assumption is that interstate commerce won’t be the solution for many family farms. The same issues that hamper sales in California still apply. A perceived lack of quality, issues with consistency and predictability of final product, the inefficiencies and logistical challenges in dealing with more, rather than fewer producers, and limited brand recognition namely.
If organic cannabis is like organic food, which accounts for just ten percent of the overall food market, we have a situation where many, many producers are competing for the same prize. Sadly, not all will win.
Event Sales
Another proposal is being crafted to directly support small family farmers – direct-to-consumer sales at events. To me, this is no-brainer legislation that should pass immediately. All farms regardless of size should be able to showcase their products and create direct relationships with consumers. The ability to share one’s craft and tell one’s story directly to potential buyers should be allowed to happen now.
While I love this concept in theory, I again question how many producers will benefit from this, and to what extent. From what I’ve heard from distributors, product sales at events are relatively lackluster. While the profitability per unit sold would be much better, paying travel expenses to set up a booth to sell a few ounces makes little financial sense. In addition, with potentially hundreds of booths to tour at a given event, making sure you stand out from the crowd won’t be easy. I assume a small handful of producers with undeniably unique or touching stories or undisputed quality will benefit from this move. Most will not.
Nonetheless, the ability to create relationships with consumers and share work openly and directly will be a welcomed opportunity for family farms that will help some immensely.
Cultivation Taxes
A proposal is also circling in Cali about cultivation taxes, the most universally despised aspect of our state’s cannabis industry. At current prices, cultivation taxes are an enormous burden that erodes profitability and hampers business success. The proposal would eliminate taxes on July 1, just as many farmers in Humboldt are coming to market with their first harvest.
This again seems like a very sensible proposal. Cannabis taxes were supposed to be set at levels sufficient to fund the statewide regulatory regime, prevent minors from using cannabis, and to curb illicit market activity.
The opposite has happened.
With high tax rates and compliance costs in the regulated market, the underground has remained firm and exploded in the SoCal desert and other regions. Kids can get street weed cheap, and unfortunately, poison their bodies by combusting harmful pesticide and fungicide residuals.
Significant tax reform is a must or California’s leadership position in cannabis production will be lost to other states, or ultimately to nations like Colombia, Mexico, Thailand, and others.
By suspending the approximately $160 per pound cultivation tax, there will be greater profitability up and down the supply chain. I expect cultivators will recoup some portion of this, while processing, distribution, and retail will soak up the rest. I do not expect to see prices per pound immediately increase by the amount of the tax forgiven. There’s no free lunch in economics and I assume these increased revenues will be shared along the supply chain, then quickly competed away with new entrants to market.
National and Global Developments
To pretend one knows how the future of cannabis, namely cannabis cultivation, will play out is a fool’s game. What we know with certainty is that more and more cannabis will be consumed, and produced over time. With increasing social, political, and medicinal acceptance, cannabis consumption will continue to rise globally.
How, and where the cannabis will be produced is up for grabs. A recent piece in Forbes argued that greenhouse production is likely to be the winner. With superior product because of a controlled environment and with a significantly smaller environmental footprint than indoor, I agree that greenhouse production is likely to win the sellable flower game. With lower production costs and product consistency and beauty comparable to indoor, this seems like a logical outcome.
Where the product will ultimately be produced is up in the air. I assume Mexico, Colombia, and other areas outside the United States. Will central or southern California remain in the game? Will southern Oregon or our beloved Humboldt County? Will Trinity, Mendo, Sonoma, and other NorCal regions find a lasting foothold, or will international conglomerates price us out as they do in most areas of commercial agriculture?
Like in finance, trying to predict prices or market outcomes is challenging to say the least. What I know for sure is that markets surprise. In cannabis we weren’t talking about Adelanto or Oklahoma a few years ago – we are now. Soon there will be massive production hubs that are currently being planned in corporate boardrooms and among government officials. National legalization will bring a tidal wave of capital and consolidation that will likely reshape the industry forever. Who remains in the game is hard to say, but in all likelihood, the vast majority of companies will fail and a few strong ones will remain and mop up most of the market.
Regardless of the ultimate outcome, perform like this season is your last. Push your body and your mind to the limit. Honor your team, honor your distribution partners, and above all, honor consumers and the plant herself with your everyday efforts. Make friends in the right places, thrown down true fire on the table, and create a name for yourself and your company. Branding is real and yours must be on point. Large corporate cultivators have dramatically improved their craft as recent performance at the Emerald Cup clearly shows. It’s time to grind and the future is in your hands, no one else’s.
There will always be a home for passionate, skilled cultivators who can lead teams, engage owners and investors, and produce consistently exceptional results. With increased automation and reliance on data-driven outcomes, mastering technology and newer age cultivation and fertigation systems is key for those who want to continue in this business.
In closing, I note that capitalism is tumultuous, unforgiving, and is itself, the ultimate disruptor. The pursuit of profits is carnal and creates a perpetual cycle of birth and death.
A multidecade era where growing a single plant garnered many thousands of dollars is over. Growing is simply too widespread and too replicable. While there is undoubtedly an artisanal component to farming, growing ganja is no longer a secret.
Very competent and high-level information is a click away and in very short order, one can become a highly skilled cultivator – especially in a controlled environment. Information about water needs, lighting requirements, airflow, organic or synthetic nutrient programs, plant training techniques, harvesting, drying, and curing specifics, integrated pest management, and anything else you care to learn about weed farming indoor, outdoor, or in greenhouses is now available for free. We live in the information age and the secret’s out.
That said, this industry is in its infancy and still offers a lasting home for those willing to grow, adapt, scale, or perhaps even work for others or in collaboration with larger corporate entities.
Much love as always,
Jesse
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Jesse Duncan is a lifelong Humboldt County resident, a father of six, a retired financial advisor, and a full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a no-cost platform that helps small farmers improve their cultivation, business, and financial skills. Please check out his blog at, his Instagram at jesse_duncann, and connect with him on Linkedin.
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