girls pink timberland boots Humboldt County officials discuss how much marijuana the legal market can bear
Editor note: This is the second article in a two part series. Part one can be found in the Dec. 16 edition.
When California legal marijuana market opens in January, customers may find there won be enough legal cannabis to meet demand or nowhere to legally buy it from, according to industry officials and regulators. But as more marijuana businesses become licensed by the state, the scenario may shift to one where there is significantly more cannabis being produced than the legal market can handle.
Humboldt State University economics professor and Humboldt Institute for Interdisciplinary Marijuana Research co director Erick Eschker said the early days of the legalized market will be like a roller coaster in terms of supply and price.
experience of the states that have legalized adult use cannabis is that, in the short run, there are often some supply bottlenecks where people show up to purchase cannabis and it just not there yet, Eschker said. has to be cultivated and make its way through the pipeline. You could see price spikes, prices plummeting. To be a legal, a cannabis business has to get a permit from their local government before they can apply for a state license.
While cannabis cultivators have reported prices dropping to as low as $500 per pound because of overproduction this year, Eschker and others in the industry said prices are likely to start spiking in the early days of the legal market because supply will be limited to the few businesses that were able to get licenses.
Ladybug Herbal Sanctuary Co op owner and Humboldt Growers Alliance board member Nathan Whittington of outer Ferndale said he expects there will be a bottleneck in the state ability to process licenses around mid 2018 and plans to take advantage of the opportunity.
really when I going to crank my prices and try and offset my permitting costs to the tune of what it really takes to produce a product, he said.
Too much cannabis?
Prices are expected to drop as more product enters the market, Eschker said. With the state not limiting the number of cultivation licenses a person or entity can own, some in the industry have questioned whether the legal market will produce more cannabis than can be consumed.
Mark Lovelace is a former Humboldt County supervisor turned cannabis policy advisor for HdL Companies, consulting with local governments working to set up their own cannabis regulations.
Lovelace said the number of people seeking to open cannabis businesses in the regions he worked in would likely produce significantly more product than studies have shown the legal market could consume.
limited size of California legal cannabis market should be considered the primary limiting factor for anyone seeking a cultivation license, Lovelace said. and overproduction will likely lead to falling prices and a high failure rate among cannabis entrepreneurs.
The state analysis estimates California cannabis farmers produce 13.5 million pounds of cannabis each year. The North Coast produces the most of any region at nearly 4.2 million pounds per year, according to the state analysis. The state notes that these estimates are conservative.
The big question with legalization is how much of this cannabis will actually make it to the legalized market, Eschker said; most of the cannabis produced in California is currently shipped out of the state. In Humboldt County, there are an estimated 15,000 grows, according to the county sheriff office,
with only 2,000 cannabis business applications having been submitted to the county so far.
you have cultivators and they right now sell a lot and ship a lot out of state, they keep doing that, Eschker said. others might be encouraged to do that because of the cost of regulatory compliance. Things may not change all that much in Humboldt County.
Gone are the days where a grower can package their own product and drive their product straight to a dispensary. Now, legal cannabis will be tracked from seed to sale and must pass through a system of licensed processors, manufacturers, distributors, testing labs and transporters before it reaches retailers.
California rules still allow for someone to get as many license types as they want, meaning a business could take on every link of the supply chain, from cultivation all the way through retail sales if they have local permission and enough money.
But Humboldt County Growers Alliance Executive Director Terra Carver said most smaller farmers will likely not be able to afford to run their own distribution, which entails ensuring taxes are paid to the state, product testing, and setting up accounts with retailers.
Based on her own research, Carver said it appears there will not be enough distributor businesses operating by early January to meet demand in Humboldt County, let alone other areas of the state.
a lack of distributors and a lack of capital to vertically integrate it puts us once again at a disadvantage, she said. will have to rely on agricultural co op models and our bigger local brands to get us to market.
But the county Planning and Building Director John Ford said they are working to prioritize distribution, manufacturing and testing businesses to ensure growers are able to get their product to market.
Where there is demand, there is opportunity.
Pacific Expediters is a cannabis distribution company based in Santa Rosa that is looking to build a new location in Eureka.
probably as self evident as it is to you as it is to me, the company Chief Strategic Officer Nick Caston said with a laugh when asked why he chose Humboldt County as his point of expansion over other regions. is the lifeblood of the industry both culturally and with the emerging legal market. . It has the highest concentration of businesses that are being prepared to be licensed in the state. agrees that there will be an initial shortage of distributors, but also for manufacturers and most importantly, testing facilities.