Growing Pains Part 1: Nipped in the Bud 

Small farmers had hoped to usher in California's new legal cannabis market, but the state's high taxes and fees and a loophole in its regulatory scheme are allowing Big Weed to take over.

click to enlarge PHOTO BY LANCE YAMAMOTO
  • Photo by Lance Yamamoto

Agatha Brooks frequently works 10- to 12-hour days, tending her small cannabis farm in Northern California's storied Emerald Triangle. She said a typical day at her 10,000-square-foot cultivation site involves "transporting pots, watering, deleafing, trellising. And then there's harvest time. It's like any farm, you have to work around the plants' schedule. When they are ready, you can't delay."

But caring for her pot plants is only part of her job in California's new regulated cannabis marketplace. She said she also has to work "on the business itself, figuring out track and trace, testing, packaging, labeling, marketing, and getting your product to a distributor."

Brooks, who asked to use a pseudonym because she does not want run afoul of county bureaucrats or federal authorities, has been growing cannabis for 10 years. She has invested tens of thousands of dollars in her small business, and she said she's grateful she has received both a local permit and state license to grow cannabis. But her challenges are far from over.

It'll be years before she recoups her investment and begins to make a profit. And the state's new weed market is especially tough on small farmers, who are facing unexpected competition from large cannabis companies.

Many small growers had expected to have five years to grow their businesses before big farms entered the marketplace. But a loophole in the state's new regulatory regime has opened the door to mega-farming.

"There's a large cultivator growing on seven acres just down the road from us," Brooks said. "That's exactly what we thought we would not be competing against."

Longtime Humboldt County weed grower Michael Hadley has also made the transition from working in the county's legendary black market to becoming a permitted, licensed, and code-compliant cultivator. But he's also unsure his farm will ever be profitable with the heavy regulations, fees, taxes, and competition from large corporations.

He's also concerned about dramatic changes to Humboldt County's cannabis culture, which had an almost pagan worship of a plant that created an alternative lifestyle in the misty hills north of the "Redwood Curtain." Owner of Humboldt Homegrown Cannabis, Hadley is a working-class guy who has taken great pride in the quality of the various strains he's developed over the years. And during the Proposition 64 campaign in 2016 to legalize cannabis, he was excited by the promised protections for small, craft farmers — a concept based on the Napa Valley wine industry that was promoted heavily by proponents of Prop. 64.

"I developed a kick-ass logo, and I was putting together a website, but I put an end to that," Hadley said. "The old idea of sun grown and farm fresh is a thing of the past. Now, your product is sold under another company's name or ground up into elements — THC, CBD, terpenes... You get no recognition for the quality, and no one knows your company's name."

While Brooks and Hadley's farms are facing uncertain futures, they regard themselves as lucky. All around California, thousands of small cannabis businesses have been effectively shut out of the new legal weed market. According to a recent report by the California Growers Association (CGA), the California Department of Food and Agriculture has issued cultivation permits to fewer than 1 percent of the state's estimated 68,000 small cultivation businesses — and that doesn't include small manufacturers of edibles, tinctures, and various cannabis-infused products that were operating prior to the start of legalized adult use on Jan. 1.

The dramatic restructuring of the cannabis market will mean that in the months ahead, consumers will not be able to find many of their favorite products on the shelves, and their choices will be greatly slashed. There may be a price drop later this year, but many brands favored by consumers are disappearing. "There are craft farmers who have been operating in California for 20 years and their products, which folks know and love, can no longer be found on dispensary shelves," said Hezekiah Allen, executive director of the California Growers Association (CGA). "And as the market is consolidated by corporations, the prices will creep back up. It will be the same model as we see in other corporate dominated markets such as big box hardware stores and Walmart-type stores."

What's happening to the legions of small cultivators is nearly impossible to track. According to cannabis activists, some farmers, particularly those who were comparatively new to the industry, have given up and moved on to other endeavors. Others have uprooted and moved to friendlier states. Some longtime farmers, daunted by the regulated market's heavy expenses, taxes, and low-profit predictions, have shrugged and gone back to the black market where they can continue to grow as they always have: illegally but free of hassle from the state's new pot bureaucrats armed with pocket protectors and clipboards.

As a result, just four months into California's regulated cannabis market, there is tremendous unrest among small cultivators who have been complaining loudly at local city council meetings, county boards, and in courtrooms. The CGA has filed a lawsuit alleging that the state has violated the intent of Prop. 64 by allowing large companies to begin operation before what was supposed to be a five-year ban on their entry to the marketplace.

"The regulated market was intended to be built by small- and mid-size businesses — the same businesses that have taken all the risks, paid taxes, and created jobs over the past 20 years," Allen said.

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