California’s cannabis industry has been experiencing many challenges over the last few years between licensing and land permit issues, high taxes, testing and cultivation costs, and now, an overabundance of weed.
Croptober, the annual fall harvest of outdoor cannabis grows in the Emerald Triangle, is set to bring in more flower than the farmers know what to do with. This year, wholesale prices are expected to drop by as much as 50%. This drastic number has many smaller North Coast growers worrying about their future, with many likely not being able to make it.
The North Coast grows some of the most expensive cannabis in the world thanks to its nearly perfect environment for the crop. Farmers in Mendocino, Humboldt, and Trinity counties are anticipating severe economic impacts that may put them out of business.
According to the state Department of Tax and Feed Administration, in June, California generated over $2.5 billion in cannabis sales through dispensaries, with more than $52 million coming directly from Sonoma County, known for testing, concentrating, and manufacturing cannabis products.
In the Emerald Triangle region, a pound of cannabis has sold for as much as $2,000 in the past. This year though, the same weed might only be worth $600-$700 during harvest season this fall.
Simply put, California has too much weed. The cause of the pricing crash is thanks to supply and demand, especially as large Big Cannabis growers move into the area and flood the markets with their weed.
Typically, in the spring, prices rise when there is no fresh bud to buy on the market, though this spring, that didn’t happen. The weed that comes right before the fall harvest usually determines what to expect for the rest of the year. This year, many farmers used a light-dep harvest technique that created a ton of extra flower right before the harvest, which is why prices are tanking— because of the overabundance of weed.
Many small growers still had cannabis saved from the 2020 harvest that they can’t get rid of anymore. With fresh bud on the market, the demand for older products disappears. To make things even more difficult, California’s black market cannabis is still thriving, creating more revenue than the legal market by 2-3 times.
As cannabis growers continue to be let down by the aftermath of Proposition 64, wholesale prices have been steadily dropping. There were warnings that this would happen, including the critical moment in 2017 when the Department of Food and Agriculture went against the proposal to place a 1-acre max on cannabis farms and issues regulations that made it possible for large-scale cultivation to overtake the small premium grower.
Since local governments have the final say about how much can be grown, some places have become huge cannabis producers, while others, like Napa County, have fought hard against significant farms. Lake County, for example, allows farmers to work more than 100 acres and process over 40,000 plants.
Taxes also play a role. Running a cannabis grow is expensive and comes with lots of additional charges, like processing, testing, packaging, and the like. However, taxes are also charged when the cannabis eventually lands in the retail market. In the past, the tax was 10% of the revenue. However, as the prices decrease, that percentage is set to skyrocket.
With that in mind, many advocates and farmers are asking for a suspension of cultivation taxes this year to help small farmers survive the crash. However, the reduction would affect state revenues in a way that might not even be sufficient enough to save them.
While everything seems like a dead end right now, Nicole Elliott, director of the California Department of Cannabis Control, said in a statement that a newly formed agency has allocated over $100 million in grants to small growers who “often have unique regulatory needs.”
Right now, the best we can do is hope that legalization passes. We’re the closest we’ve ever been to full legalization of cannabis, with bills on the ballot for removing federal prohibitions of marijuana. Another bill has also been passed in the house that would stop federal bank regulators from penalizing banks that work with cannabis businesses. Each of these would make accessing money for loans and the like much easier for these small farms.
Further, the ability for small farmers to sell their premium crops across state lines or even directly to consumers would mean substantially more sustainable business in the future.
In the meantime, we can only hope that small, premium cannabis farmers will survive this season. Legalization isn’t a question of if anymore, but when. That said, we’re keeping our fingers crossed that the small farmers who grow the best cannabis in California can hang tight and make it through.