The 2022 cannabis growing season is in full swing. The mountainous horizons are now lined with greenhouse plastic, a shimmering white in the distance that warms my heart and makes me feel at home. Desolate mountain roads have come to life and motorists share trails with roaming deer, turkeys and other wildlife.
Locally, the landscape has changed. Many farms have already closed and dozens more are for sale. Revenues are down for ancillary support businesses and the mood among remaining Humboldt County growers is mixed. Some are playing it safe, opting for one or two light production runs instead of two or three. Others choose to plant their greenhouses while leaving their plots fallow in the long term. Some farmers are fearful, while others are cautiously optimistic and doing their best. Many operations are cutting costs and reducing labor and inputs, while others are aggressively investing in infrastructure, automation and year-round production capacity.
Prices and sales velocity have firmed up for high-end mixed light and greenhouse flowers, while indoor prices are rising significantly amid the production boom. External prices remain depressed and sales have slowed after a brief increase in March and April.
On the policy side, there are several developments aimed at supporting small farmers and the California cannabis community as a whole.
Legislation has been introduced that would allow California to enter into cannabis trade agreements with other states. This would presumably provide new distribution opportunities and help California move some of its vast flower surplus. This will be an interesting development to watch. I obviously support this decision, but I don’t know who it will benefit the most.
Will it benefit small operators, large operators, or both? Will this create more of a market for organic sun-grown flowers, or will it be about the same – strong demand for indoor and mixed light, with sun-grown flowers mostly purchased as biomass for value-added products such as extracts, edibles, and hot topics? Quickly on the subject of snippets – congratulations to Mattole Valley Organics and Bear Humboldt’s URSA who just brought home some serious Emerald Cup brass with a top spot for live rez carts – I have says they are my favorite and it shows why!
My basic assumption is that interstate commerce will not be the solution for many family farms. The same issues that hamper sales in California still apply. A perceived lack of quality, issues with the consistency and predictability of the final product, the inefficiencies and logistical challenges of dealing with more producers rather than fewer, and limited brand recognition, among others.
If organic cannabis is like organic food, which is only ten percent of the overall food market, we have a situation where many, many growers are competing for the same price. Unfortunately, not everyone will be a winner.
Another proposal is being developed to directly support small family farmers – direct sales to consumers at events. To me, this is obvious legislation that should be passed immediately. All farms, whatever their size, must be able to present their products and create direct relationships with consumers. The ability to share your craft and tell your story directly to potential buyers should be allowed now.
While I like this concept in theory, I again wonder how many growers will benefit from it 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 sense financially. Plus, with potentially hundreds of booths to visit at any given event, it won’t be easy to stand out from the crowd. My guess is that a small handful of producers with undeniably unique or touching stories or unquestioned quality will benefit from this decision. Most won’t.
Nonetheless, the ability to build relationships with consumers and share work openly and directly will be a welcome opportunity for family farms that will help some people immensely.
A proposal is also circulating in Cali regarding cultivation taxes, the most universally despised aspect of our state’s cannabis industry. At current prices, culture taxes represent a huge burden that erodes profitability and hampers business success. The proposal would eliminate taxes on July 1, just as many Humboldt farmers come to market with their first harvest.
This again seems like a very sensible proposition. Cannabis taxes were supposed to be set at levels sufficient to fund the statewide regulatory regime, prevent minors from consuming cannabis, and curb illicit market activity.
The opposite happened.
With high tax rates and compliance costs in the regulated market, the basement has held firm and boomed in the SoCal wilderness and other regions. Children can get cheap street weed and, unfortunately, poison their bodies by burning off harmful pesticide and fungicide residues.
Significant tax reform is essential, or California’s leadership position in cannabis production will be lost to other states, or ultimately to countries like Colombia, Mexico, Thailand, and others.
By suspending the cultivation tax of around $160 per pound, there will be greater profitability throughout the supply chain. I expect growers to pick up some of that, while processing, distribution and retail will take the rest. I don’t expect to see prices per pound immediately increase by the amount of the tax exemption. There are no free lunches in the economy and I suspect that this increased revenue will be shared throughout the supply chain and then quickly competed by new market entrants.
National and global developments
To pretend that we know how the future of cannabis, namely the cultivation of cannabis, will unfold is a fool’s game. What we know for sure is that more and more cannabis will be consumed and produced over time. With growing social, political and medical acceptance, cannabis use will continue to increase globally.
How and where cannabis will be produced is up for grabs. A recent Forbes article argued that greenhouse production would likely be the winner. With a superior product due to a controlled environment and with a significantly lower environmental footprint than indoors, I agree that greenhouse production is likely to win the salable flower game. With lower production costs and product consistency and beauty comparable to indoors, this seems like a logical outcome.
Where the product will ultimately be made is up in the air. I guess Mexico, Colombia and other areas outside of the United States. Will Central or Southern California stay in the game? Is southern Oregon or our beloved Humboldt County? Will Trinity, Mendo, Sonoma and other areas of NorCal find a sustainable niche, or will international conglomerates price us as they do in most areas of commercial agriculture?
As in finance, trying to predict prices or market outcomes is difficult to say the least. What I know for sure is that the 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 planned in boardrooms and among government officials. National legalization will bring a tidal wave of capital and consolidation that will likely reshape the industry forever. It’s hard to say who will stay in the game, but in all likelihood the vast majority of companies will fail and a few strong ones will stay and mop up most of the market.
Whatever the end result, play as if this season was the last. Push your body and mind to the limit. Honor your team, honor your channel partners, and above all, honor consumers and the factory itself with your daily efforts. Make friends in the right places, start a real fire on the table and create a name for yourself and your business. Branding is real and yours should be relevant. Big company cultivators have improved their craft considerably, as their recent performance at the Emerald Cup clearly shows. It’s time to grind and the future is in your hands, no one else.
There will always be a home for passionate, skilled growers who can lead teams, engage owners and investors, and produce consistently outstanding results. With increased automation and reliance on data-driven results, proficiency in newer cultivation and fertigation technology and systems is essential for those wishing to continue in this industry.
In closing, I note that capitalism is tumultuous, ruthless and itself the ultimate disruptor. The pursuit of profit is carnal and creates a perpetual cycle of birth and death.
Gone are the decades-long era of growing a single plant bringing in thousands of dollars. The culture is simply too widespread and too reproducible. While there is undoubtedly an artisanal component to farming, growing ganja is no longer a secret.
Highly competent, high level information is just a click away and in a very short time one can become a highly skilled grower – especially in a controlled environment. Information on water needs, lighting requirements, airflow, organic or synthetic nutrient schedules, plant training techniques, harvesting, curing and curing specifics, integrated pest management and everything you want to know about growing weeds indoors, outdoors or in greenhouses are now available for free. We live in the information age and the secret is out.
That said, this industry is still in its infancy and still provides a lasting home for those who wish to grow, adapt, evolve, or perhaps even work for others or in collaboration with larger companies.
Much love as always,
Jesse Duncan is a permanent resident of Humboldt County, father of six, retired financial advisor, and full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a free platform that helps small farmers improve their growing, business and financial skills. Please check out his blog at, his Instagram at jesse_duncann and connect with him on Linkedin.