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Growers in the Emerald Triangle are Facing a Potential Extinction Event

terry roston

“This is an extinction event,” Johnny Casali, owner of Huckleberry Hill Farms, a cannabis farm in southern Humboldt County, said over the phone. “Things are really, really bad.”

Casali is referring to a recent wholesale price collapse in California’s outdoor-grown cannabis market. 

This time last year, a pound of the best quality sun-grown, light dep weed on the market cost between $1,200 to 1,600, according to Chris Anderson, founder of Humboldt County-based distributor Redwood Roots and a former cannabis farmer himself. Wider wholesale prices settled between $800 to 1,000 per pound.

Now, the same quality cannabis is fetching as low as $400 to 600 a pound and “going downhill,” though some outdoor growers are still getting in the $800-1,000 range, Anderson explained. That is for the best outdoor pot money can buy, “fresh, sun-grown, light dep,” which he said is genuinely limited and harder to find. 

Emerald Triangle
Courtesy of Huckleberry Hill Farms

For contrast, Anderson says that indoor-grown “shitty, low end” flower is fetching around $1,000/pound, up to $3,000/pound for the best “designer, truly AAA, best indoor pot in the industry.” He added that lower quality pot, whether indoor or outdoor grown, exists in nearly “endless” quantities.

Data firms like Leaflink have not yet registered a price drop. A representative for Leaflink said it’s too soon to see definitive or robust data for this summer’s outdoor price drops.

That’s just in the legal market. Elsewhere in the country, pounds of the same pot trades at higher multiples in the illegal market, in some cases reaching upwards of $5,000. Supply and demand still rule the day, Anderson said, followed by quality. Indoor pot always fetches higher prices and outdoor lower, owing to outdoor weed’s relative lack of potency compared with top-shelf indoor, as well as its potentially variable appearance.

The decline in pricing, which began at the beginning of June, is expected to get worse as the cannabis harvest season proliferates and finishes in late October and November.

Emerald Triangle
Courtesy of Huckleberry Hill Farms

Following that, a remaining glut of outdoor-grown cannabis from last year’s and this year’s harvests is expected to keep prices low for “at least the next couple of years,” said Anderson. By that point, industry insiders say, many small farmers could be all but wiped off the legal cannabis cultivation map.

The immediate cause is a lingering market surplus from last year’s grow—a supply that has proved to be too large to be absorbed by the legal market.

In years past, since outdoor cannabis is not harvested during the winter, an autumn harvest will supply the market for several months. Come spring, supply is lower, therefore, prices are typically higher. Late spring and early summer are when the first rounds of harvest—referred to as “light deps” for the cultivation technique employed (which involves light deprivation)—typically begin. From there, prices begin to drop, usually to more reasonable levels. The harvest continues and the cycle begins anew.

This year, farmers are beginning a new harvest with last year’s cannabis still in hand. The expected spring price drop never came, which signaled to small farmers that something was seriously wrong. 

Fast-forward to now, after the first rounds of deps, and farmers are realizing that not only could they not sell last year’s weed, but they will have to sell this year’s crop at a steep loss if they are able to sell it at all. Off the record, many growers commented that this is the weed that ends up on the illegal market.

“This state has an over-production problem,” said Natalynne DeLapp, executive director of the Humboldt County Growers Alliance. She explained that owing to the local control provision of Proposition 64, so many municipalities in California have opted out of allowing sales and distribution within their limits that there simply are not enough places to sell the amount of legal cannabis grown in the state. 

Emerald Triangle
Courtesy of Huckleberry Hill Farms

“Currently, there are 1,775 acres of cannabis licensed by the state, which conservatively produces more than six million pounds of cannabis,” Delapp said. “CDFA [California Department of Food and Agriculture] has estimated in its Standard Regulatory Impact Analysis in 2017 that California likely consumes 2.5 million pounds of cannabis. Not all cannabis consumed in California is purchased at legal retailers, so a very conservative estimate is that we’re producing twice what the legal market can consume, but in reality it’s probably worse than that.”

That 2.5 million number, Delapp explained, is the “only and ‘best’ number we have from the state back in 2017.” She added that the state’s opacity and not releasing data from METRC, the tracking system, that shows what amount of cannabis is legally sold in licensed retail shops is part of the problem.

At the same time, the state and its counties continue to issue cultivation licenses, the fees from which produce revenue for municipalities. As the number of growers increases in size, so does the amount of cannabis being produced, but the pool of would-be legal customers isn’t following in lockstep.

Bigger cultivators pose a very specific problem. In addition to flooding the market with large amounts of cannabis, driving down prices, they are also able to sustain market fluctuations, seeing as they are highly capitalized. 

According to industry insiders, like DeLapp and Genine Coleman of legacy grower advocacy organization Origins Council, larger cultivators weren’t supposed to be able to participate in the legal market until 2023, but the provision that granted small farmers a five-year-long head start in the market was scrapped just as Prop 64 was passed.

“It’s basically systemically dysfunctional,” said Coleman. “As for prices, the lowest I heard was $275. But that was a month ago. The thing to remember is that that farmer is paying a $150-per-pound cultivation tax,” she added, citing a harsh truth that applies to every cultivator regardless of what price per pound their weed ends up being sold for.

Coleman also lays out immediate solutions that she and others in California’s small grower community say would provide meaningful relief.

Emerland Triangle
Courtesy of Huckleberry Hill Farms

“Between COVID, the fires, that reality [of crashing market prices], and the budget process unfolding, there could be some legislation and a trailer bill. There could be temporary actions taken while time is taken to sort out a broader policy issue,” Coleman said, referring to a potential temporary moratorium on issuing cultivation licenses, as well as amending the cultivation tax, which are two fixes many growers say they would gladly welcome.

“From our perspective, the most immediate thing that can happen is some kind of tax restructuring, that at least offers temporary relief from the cultivation tax. Because the rest of the supply chain is better positioned than small farmers, in particular,” Coleman said. She added that these larger operations are also much more equipped to handle compliance as it relates to state regulations, like the California Environmental Quality Act (CEQA), from both a manpower perspective and a monetary one.

“The next order of business is, ‘What can be done for market expansion?’ The lateral growth in the retail sector is unacceptable and can’t carry the production trajectory that we have,” Coleman explained. She said that larger-scale operations continue to come online and everyone in the industry is preparing for an eventual interstate market that doesn’t exist yet while at the same time there has been a contraction of customer access.

For Coleman’s part, she is on the board of the Alliance for Sensible Markets, another advocacy organization that has been in conversation with a number of states to evaluate interstate compacts and prospective trade between legalized states. Nothing has been decided on that front as of yet, but she indicated that news was coming soon.

As for the state, Nicole Elliott, director of the Department of Cannabis Control, shared, “The Administration has always been committed to supporting small and legacy businesses in the cannabis market, as evidenced by a number of the policies and programs that have been pursued and implemented in our 2.5 years in office.”

Elliot points to the creation of a standalone state department, the Department of Cannabis Control, which recently consolidated from three separate state agencies to help simplify the administration of regulated commercial cannabis businesses. She says this includes a “sustained focus on streamlining licensing processes and regulatory requirements. All of this is being done with an eye towards making it easier for businesses, particularly small businesses, to operate within the legal, regulated market.”

Elliott added that the state’s budget, which is enjoying a $75.7 billion surplus this year, allocated $100 million for a Local Jurisdiction Assistance Grant Program. 

“These grants specifically target regions with high numbers of small farmers and was structured in a way that really sought to preserve significant funding locations with legacy small cultivators that often have unique regulatory needs,” Elliott said. She also adds that some legacy operators in the Emerald Triangle are also equity beneficiaries who receive funds from a $35.5 million Local Equity Grant Program and $30 million for fee waivers and deferrals.

Both Coleman and DeLapp said they appreciate this cash injection from the Local Jurisdiction Assistance Grant Program but that the money is already earmarked for other projects. Specifically, DeLapp said that in Humboldt County, they are looking to use it to bulk up water storage systems, which addresses the other looming catastrophe of climate change. Across the board, cultivators and their advocates say the state needs to do more. Halting the cultivation tax and enacting a moratorium on new cultivation licenses appears to be at the top of everyone’s lists.

There are other longer-term measures the state and industry advocates have taken, like the recent ratification of Senate Bill 67, which creates appellations of origin for cannabis grown in specific geographic areas. This is expected to increase tourism and provide an extra layer of education and protection around legacy growing areas that believe their cannabis is unique to where it’s grown. In an age where interstate commerce looms, it should be a huge boon—who from further afield is not going to want to buy California weed? But it’s not expected to meaningfully take effect for at least a couple of years.

Meanwhile, back in the Emerald Triangle, farmers are hurting. DeLapp says this is not only a likely “extinction event” for small legacy farmers but that it’s one of several. Back before Prop 64 passed, there were a number of cultivators who jumped ship, claiming they knew the bloodbath to come. Just after legalization was another when small farms struggled to find the capital and manpower to get and stay licensed. This outdoor price collapse is expected to be another.

Jackie McGowan, who is currently running as a candidate in Governor Newsom’s recall election, told us that she’s running specifically because she knew “at least four” grower friends of hers who died by suicide since the beginning of June 2021, owing to the price collapse. Her despair over the lives of her friends and colleagues, as well as the state of the industry, is what has compelled her to run, she said.

Coleman said that, apart from the injustice done to the small farmers who quite literally began and weathered cannabis cultivation in the United States throughout prohibition and into the legal area by allowing them to fail at this critical juncture, there are other potential losses to consider should small farmers be forced out of business.

“Something I’m always aware of regarding the extinction of small legacy farmers and farming communities is the extinction of a whole bunch of genetics,” Coleman said. “From the broader, more international perspective and especially in the medical realm of cannabis research, that’s a lot of loss in terms of the genetic library that should be researched and preserved. For an annual plant, in particular, it happens really quickly,” she added soberly.

At the end of the day, the growers and their advocates lay the blame both on the state’s failure to properly implement rules and regulations for a healthy legal cannabis market, as well as the large cultivators who are taking advantage of a law that was, frankly, made just for them.

“We were supposed to have this runway to 2023 before the market was overfilled. We didn’t get that,” DeLapp said.

She added, “What is the state going to do to fix this? Is the plan going to be to just let the legacy regions die?”

The post Growers in the Emerald Triangle are Facing a Potential Extinction Event appeared first on High Times.

Underground Dispensary
Author: Jackie Bryant

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Emerald Triangle Legacy Farmers Discuss California Cannabis Industry

terry roston

Ask almost any cannabis cultivator in California’s Emerald Triangle about transitioning from the legacy cannabis industry to the legal and licensed industry, and the one word consistently used is, “difficult.” Many people assume that because cannabis is legal, licensing and launching a start-up is easy, but that’s not the case, especially in California. Many have left the state of California to launch cannabis businesses in states that make it “easier,” like 1st Lady of the West Coast, who relocated to Nevada for the opportunity to get her exclusive genetics in cannabis dispensaries.

Journey to the Emerald Triangle: Insight into Licensing

In a recent visit to California’s Emerald Triangle, I received behind-the-scenes insight to help paint the picture of what it takes to obtain, then sustain, a licensed cannabis farm/cultivation site in California. Emerald Triangle-raised Lelehnia Dubois, the founder of Humboldt Grace who arranged the visit and tour, shared her experience growing up in the legacy market, legality insight, and the burden it places on small farms/cultivations that have been in the cannabis industry since the medical-only days.

When asked about some of the most difficult challenges and hardships for legacy growers and operators in California to transition into the adult-use (we should be saying consumption) market, Lelehnia described it as, “recovering from the trauma the drug war created.”

“Imagine your whole adult life being told what you do is dirty, bad, and illegal,” she said. “Imagine if your whole life you had to hide who you were from the world. Imagine if you could never invest in yourself for fear of being discovered. That creates a lot of trauma.”

When asked about the hardships in obtaining a license, Lelehnia said, “Most people growing cannabis on 10,000 square feet back then (before legalization) were the capitalistic-minded farmers not following the California medical guidelines. [The policy] basically said, ‘Hey all you folks not following California law, now you get to go legal,’ and now all the folks that were following the law are illegal.”

Understanding California’s Cultivation Rules & Regulations

Lelehnia was raised in the cannabis industry through its legacy days. When asked to describe her upbringing, she said:

“My mother relocated us to Trinity County in 1977, took a nursing position, and was also a midwife. By the time I was 13, she was known as Dr. Nik to many and had been a part of hundreds of births throughout the Trinity and Humboldt communities. Age 13 was the first time I witnessed a raid with military armed police officers. I started trimming at age nine to ten and by 19 hated the smell of cannabis because it reminded me of abuse, oppression, and fear. I had seen guns held to heads. I had been raped repeatedly, kidnapped, and had a hideout. The smell of cannabis made me feel all of it. In 1999 everything changed and I realized it was the drug war that caused all my trauma. It was then I became an advocate.”

As an advocate, Lelehnia’s primary focuses are policy, legislation, and regulations. During my visit to the Emerald Triangle, she introduced multiple cultivators who are licensed, and grateful to be, but who described their journey as tough, essentially hurting them more than helping them.

There are many factors — Lelehnia talked about square footage regulations and the multiple agencies that regulate and inspect the industry.

“The current structure gives all the power to distribution,” she said. “The tax structure puts outdoor farmers in bankruptcy within the first year. In Humboldt, we made the grave mistake of starting permits at 10,000 sq ft. That forced people to go big or go home as well as totally disenfranchised the true family, small medical farmer — the 99-plant person following state law.”

Additionally, she said that multiple sets of rules and regulations have caused huge communication issues, “which puts more cost on the applicant.”

“As this is all new law and a new industry, so much is up to interpretation. One agency can interpret one way, even one clerk within an agency can interpret something totally different than another. The applicant ends up spending a lot of time and money having to prove what one person or agency said to another.”

According to Walter Wood of Sol Spirit Farms, there are four key issues facing legacy growers in the Emerald Triangle industry:

“Issue 1 — Barrier to entry into the market (BIPOC/poor)
“Issue 2 — Medical users have to pay a lot more
“Issue 3 — Encourages illegal market (which lowers tax revenue, since most cannabis is staying black market)
“Issue 4 — The taxes all stack. First cultivator tax by state, then cult tax by county, then tax when sold to retailers, then the retailer has to add state excise tax, and county and city tax, plus normal sales tax. In the end, we are paying tax on tax on tax on tax.

“The cultivation tax is paid before the sale of the product if you have your own brand,” Walter said. “We have paid $15k plus in taxes on unsold flower, a lot of which is likely to have to be destroyed soon, due to the ridiculous laws governing cannabis that has already been tested (and taxed) but not sold. “

Meanwhile, Sam De La Paz from RizeWize Growth Agency lambasted the recent California Trailer Bill (a state budget bill).

“It has really been a legislative shit-show affecting licensing and many entities currently in operation, and many more wanting (needing) to enter the legal market,” he said. “This bill is about to cause further barriers to entry here in California. It effectively closes the door on small business, legacy operators, and many social equity applicants!”

Final Thoughts: Possible Solutions & Strategies to Lessen the Burden

There is a passion all over the Emerald Triangle, like the passion that exudes from Sequoyah Hudson of 8 Mile Family Farms and True Humboldt, who works tirelessly to promote the submission of positions letters from farmers so their voices can be heard on the issue of cannabis tax reform.

According to Sam De La Paz, “There are many bills being introduced, so many people don’t even realize it, all in an effort to protect legacy businesses and small businesses, together! We have to either be active in advocacy and policy formation, or thoroughly look into organizations, such as the Origins Council, that are active.”

Genine Coleman, founder of the Origins Council, said “This year Origins Council completed a comprehensive legal and situational analysis to identify the root cause of the serious challenges facing the state’s cannabis licensing system. The problems come down to the state licensing framework in relation to CEQA – the California Environmental Quality Act.

“Essentially, the state licensing framework takes an anomalous approach to CEQA and local land use regulation, resulting in exponential barriers to entry for modestly resourced small farmers, and the overwhelming of rural jurisdictional agencies working to satisfy the state’s environmental review and local permitting requirements for state licensing.

“Our analysis led us to develop a comprehensive set of policy recommendations to address these issues. This work, the OC CEQA Report, can be found on our website.”

Underground Dispensary
Author: Veronica Castillo

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