The California cannabis industry has faced many challenges over the past few years between licensing and land permit issues, high taxes, testing and cultivation costs, and now, an overabundance of weed.
Croptober, the annual fall outdoor cannabis crop that grows in the Emerald Triangle, is expected to yield more flowers than farmers know what to do with. This year, wholesale prices are expected to fall by up to 50%. This drastic number has many small North Coast growers worried about their future, and many are unlikely to be able to make it.
The North Coast grows some of the most expensive cannabis in the world thanks to its near-perfect environment for cultivation. Farmers in Mendocino, Humboldt and Trinity counties expect severe economic repercussions that could put them out of business.
According to the State Department of Tax and Food Administration, in June California generated more than $2.5 billion in cannabis sales through dispensaries, including more than $52 million directly from the Sonoma County, known for testing, concentrating and manufacturing cannabis products.
In the Emerald Triangle region, a pound of cannabis has sold for up to $2,000 in the past. This year though, the same weed might only be worth $600 to $700 during harvest season this fall.
Simply put, California has too much weed. The cause of the price drop is supply and demand, especially as major cannabis producers move into the area and flood the markets with their weed.
Typically, in the spring, prices rise when there are no fresh buds to buy on the market, although this spring that has not happened. The weed that comes just before the fall harvest usually determines what to expect for the rest of the year. This year, many farmers used a shallow harvesting technique that created a ton of extra blooms just before harvest, which is why prices are plummeting due to the overabundance of weeds.
Many small growers still had cannabis saved from the 2020 harvest that they can no longer get rid of. With fresh buds on the market, the demand for older products disappears. To make matters even more difficult, the black cannabis market in California is still booming, generating more revenue than the legal market by 2-3 times.
As cannabis producers continue to be disillusioned with the consequences of Proposition 64, wholesale prices have steadily fallen. There were warnings that this would happen, including the critical moment in 2017 when the Ministry of Food and Agriculture opposed the proposal to place a maximum of one acre on cannabis farms and issued regulations that enabled wide-scale use. cultivation to overtake the small premium producer.
Since local governments have the final say on how much can be grown, some places have become huge cannabis producers, while others, like Napa County, have fought hard against major farms. Lake County, for example, allows farmers to work over 100 acres and process over 40,000 plants.
Taxes also play a role. Growing a cannabis crop is expensive and comes with many additional costs, such as processing, testing, packaging, etc. However, taxes are also charged when the cannabis eventually hits the retail market. In the past, the tax was 10% of income. However, as prices fall, this percentage is expected to skyrocket.
With that in mind, many advocates and farmers are calling for a suspension of crop 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 enough to save them.
While everything seems to be at an impasse right now, Nicole Elliott, director of the California Department of Cannabis Control, said in a statement that a newly created agency has awarded more than $100 million in grants to small growers who “have often 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 cannabis legalization, with bills on the ballot to remove federal marijuana bans. another bill also passed in the House that would prevent federal banking regulators from penalizing banks that work with cannabis businesses. Each of these elements would facilitate access to money for loans and the like for these small operations.
Also, the ability for small farmers to sell their premium crops across state lines or even directly to consumers would mean much more sustainable businesses in the future.
In the meantime, we can only hope that small premium cannabis growers will survive this season. Legalization is no longer a question of if, but of when. That said, we’re crossing our fingers that the small farmers who grow California’s finest cannabis can hang in there and pull through.
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