cannabis cultivation

The Triumph of Illicit Cannabis Cultivation and Retailing In California and the Liquidation of the Artisanal Growers

Across much of the United States, legal cannabis firms are failing, and large sums of money are being lost. As noted in a recent Investopedia article, “Retail investors who once looked to cannabis to make them rich would now in many cases settle for getting their money back.” The collapse is most severe in the agricultural sector. Plummeting wholesale prices are driving most small-scale cannabis farms into bankruptcy. According to the same Investopedia article:

In California, … the wholesale price has wilted to less than $700 per pound. Some 60% of the pot farms in the Emerald Triangle, the traditional heartland of cannabis cultivation in northern California, have reportedly gone out of business since California legalized recreational use six years ago.

If anything, this article underplays the dire situation in the Emerald Triangle, a region usually defined as encompassing Mendocino, Humboldt, and Trinity counties in northwestern California. I know several artisanal cannabis farmers in the region who would be happy to receive $500 a pound, which is near their break-even point. Some cannot get more than $300, resulting in a substantial loss with each sale. A few years ago, they were receiving around $1200 a pound.

 

As might be expected, the wholesale price collapse is the result of oversupply, which stems from two main reasons. First, the state has awarded a sizeable number of cultivation permits to large, well-capitalized corporate farms, which have flooded the legal market. Second, illegal cultivation continues unabated in many areas. Illicit growers do not pay fees or taxes, nor do they fulfill the many onerous obligations faced by legal growers to remain in compliance. As a result, illegal operations often outcompete above-board farms, driving them out of business.

A downward spiral has thus emerged, with both county governments and the state losing the licensing fees and other revenues that they have been counting on. California now faces a lose-lose-lose situation, one in which scofflaws succeed while those who have gone to herculean efforts to become legal find that it has all been for naught. (I know retirement-age growers who had no computer experience whatsoever, as they had moved to the woods in part to get away from modern technological society. But to gain legal status they have had to master the intricacies of California’s online track-and-trace Metrc system, in which even leaves destined for the compost heap must be weighed and reported to the state. It has not been easy.)

The burdens placed on legal growers can be overwhelming, as will be explored in later posst. For now, a quote from an article by Kevin Rector, originally published in the Los Angeles Times, will suffice:

In place of handcuffs and prison sentences to deter cannabis cultivation, the state has established a vast system of taxes, fees and regulations to control it. The taxes are steeper and the rules more onerous than those in other agricultural sectors. … “Are all the small farmers destined to fail? That’s our biggest fear,” Casali said one recent morning at his farm. “It’s the War on Drugs Part II.”

But this a very different “War on Drugs” from the one that preceded it, as it focuses on those inside the law, while largely ignoring those outside of it. California’s political leadership feels guilty, for good reason, about the harms imposed on marginal members of society by the anti-marijuana campaigns of the 1960s, 70s, and 80s. As a result, illegal growers are now largely tolerated. Small-business owners, however, are regarded differently, and are given much less consideration.

A recent Fox News article outlines many of the problems generated by illicit cultivation. It begins by describing a massive illegal grow in  Riverside County, which is also California’s new center of corporate cultivation. As the author writes:

“The illegal industry is competing with the legal industry and essentially putting them out of business,” says Sgt. James Roy, head of the Riverside County Sheriff’s Department’s 12-person marijuana eradication team. “This place is no different than thousands of others we hit this year confiscating about a half-million plants in Riverside County alone,” Roy said…. Along with these growers, these illegal growers, comes a fair amount of violence and a lot of weaponry,” says Roy. “We serve warrants on operations like this every day. And in 80% of the locations, we are finding weapons, high-powered weapons, assault rifles, things like that.”

The same article tersely explains why legal growers cannot compete: “By requiring licenses to grow and transport pot, permits to sell it retail, and taxes to buy it, the state effectively imposed a 70% tax on legally purchased marijuana.”

One might expect the legal risks incurred by illegal cultivation to impose a stiff penalty of its own, thereby leveling the playing field. But that’s not how it works in California, where large-scale illicit growers, despite the violence, uncertain product quality, and environmental degradation associated with their operations, have little to worry about. No one in California is facing prison or even county jail for illegal cannabis operations, and the modest fines that are occasionally levied are just considered a part of doing business, if not just ignored.

It is not just cannabis farmers who are facing devastating competition from illegal operations, but also dispensaries. Particularly in the Los Angeles area, unlicensed and unregulated “trap shop” dispensaries have become widespread, and now significantly outnumber above-board operations. These illegal businesses are typically set up in conventional retail space and have the appearance of legitimate dispensaries. As a result, customers often have no idea that they are engaging in an illicit transaction. A recent article in cannabis.net outlines the problem:

Recently, an audit revealed that California’s 900 licensed cannabis operators have about 2,800 illegal competitors, more than three times the number of total legal sellers, which could be higher today. These unregulated stores, most of the time, have untested stock products that are not up to state-issued production standards, nor do they follow the state’s regulations for cannabis operations. Patronizing an unlicensed store is more or less the same as buying from a dealer around the block. You only get promises that you’re purchasing the best product in the area, whereas it’s basically junk.

Unlicensed dispensaries are so widely tolerated that Yelp has a page listing the “best illegal cannabis dispensaries near me.” (I cannot say, however, whether the dispensaries listed here are truly illegal.) For several years, the important cannabis website Weedmaps also listed unlicensed dispensaries, although that is no longer the case. If one wants to avoid patronizing illicit operations, the maps provided by Weedmaps are a good place to turn.

With these stories in mind, it seems that the root problem of the California cannabis crisis is a perverse set of attitudes on the part of the state’s political leadership. To put it simply,  California, and particularly its large cities, are tough on small legal businesses and lax on illegal ones. Under such a regime, it becomes extremely difficult – and often simply impossible – for the legitimate sector to compete with the underground one. As a result, the entire legalization experiment in California is failing. The expected revenues are not filling state and local coffers, and the myriad pathologies of the illicit market remain firmly ensconced.

The “soft-on-crime, hard-on-small-business” attitude is on its surface rooted in a left-wing political philosophy, one based on compassion for those who have supposedly been forced by circumstances beyond their control to engage in illegal activities. But, as will be explored later, what is actually encountered here is a form of pseudo-leftism, a perverse political philosophy that favors the corporate sector and is hostile to minuscule family farms and tiny retail firms.

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NPR’s Incomplete Story on “Trimmigants” in the California Marijuana Industry

Emerald Triangle MapOn December 4, 2014, National Public Radio (NPR) ran an interesting story on a severely underreported matter: international seasonal labor migration to the “Golden Triangle” of marijuana cultivation in northwestern California. This report—“With Harvest Season, ‘Trimmigrants’ Flock To California’s Pot Capital”*—captured many of the more intriguing and important aspects of the phenomenon. But it also missed some significant things and made a few doubtful assertions. This post seeks to provide a more comprehensive picture.

Before proceeding, it is necessary to outline my own sources of information. Although the evidence in most GeoCurrents posts derives from a variety of published materials and on-line sources, this one relies entirely on oral interviews. Since my earliest years, I have spent a considerable amount of time recreating in Mendocino County, arguably California’s cannabis core (neighboring Humboldt County, however, would contest that claim). After a close friend moved to the county, I began to meet his neighbors and attend local events. I have been to road-association meetings, informal community gatherings, and even assemblies devoted to dealing with troublesome neighbors. The last-mentioned gathering led to a particularly riveting experience: an afternoon in a Mendocino County courtroom considering requests for restraining orders. As the case that I was interested in came last, I got to witness six compelling micro-dramas, several of which involved marijuana cultivation in one way or another. The tragedy, pathos, and unintended comedy of the proceedings surpassed anything that I have seen on film or in television shows.

I have devoted time to exploring Mendocino County because I find it an environmentally gorgeous and culturally captivating place. Eventually, although probably not until retirement, I plan to write a historical geography of the county, focusing on the history of land-use. I have not yet dipped into the local archives, but I have been informally gathering oral histories from talkative residents for some time.

After listening to the NPR story mentioned above, I arranged to meet first with a few marijuana growers and then with a group of itinerant workers to discuss the issues faced by “trimmigrants.” The growers interviewed all run small-scale operations that are as legal as possible. They cultivate under medical license, remain within the county’s 25-plant limit, and sell their product to official medical dispensaries. All of them found the NPR report to be insightful but incomplete and somewhat exaggerated. But my sample of growers, it is necessary to note, is both highly limited and confined to one small area. As a result, this post should not necessarily be taken as representative of the larger enterprise.

According to the NPR story, European trimmers are favored by most growers over American youths, who are often disparaged as “hippie kids.” The reporter interviewed a young man named Fermin who had been unsuccessfully seeking work for a month and was forced to “dumpster dive” for food. My sources were not surprised by Fermin’s plight, but they nonetheless expressed doubt that American trimmers per se face discrimination. In their operations, local youths are the first to be hired and the last to be let off. Partly this is due to basic community ties, but it is also a matter of these youngsters’ deep experience with a demanding job. One local girl joked about “being born with a pair of scissors in my hand,” and others told of not being allowed to watch television or listen to music as children until their daily allotments had been trimmed. But people like Fermin, scruffy outsiders with Pit Bull Terriers, would only be hired in a case of desperation.

Fermin’s problems extend beyond his appearance, choice of pet, and lack of local contacts to encompass his gender. Men, everyone agreed, are disfavored when it comes to the delicate job of trimming. Although they agreed that they were being “politically incorrect,” the growers insisted that women have, on average, much better fine-motor skills than men, as well as more patience with a grindingly monotonous task that often goes on for more than twelve hours a day. Trimmers are usually paid by the pound, as noted by NPR, and as a result the slower-working men make much less money than the generally faster women. But quality also factors in, as buds must be carefully manicured but not trimmed down so much as to cut into the weight, and workers must remain vigilant in searching for mold, the growers’ worst nightmare. Relatively few men, I was informed, can pass the test of the more demanding artisanal cannabis cultivators. When young men do find work, it is more often in harvesting, hanging buds, and covering unharvested plants with plastic sheeting before rain events. There is much less demand, however, for this kind of labor than there is for trimming.

Of the seasonal workers I interviewed, four were locals (three female, one male) and four were Spaniards (all female). Three of the Spaniards came from the same part of Spain, an area well known for both its high-end tourism and countercultural flair. Some of them have been coming to the Emerald Triangle for years, but one was on her first trip, having been tearfully forced to leave a 14-year-old daughter at home. They all talked about the difficulty of finding employment in Spain, and all maintained that a two-month stint in California could allow them to subsist for the rest of the year back home. Getting work for the full two months, however, did not always prove easy, as small-scale growers only hire trimming crews for a week or two. As a result, they had all traveled back and forth among different “grows” in Humboldt, Trinity, and Mendocino counties. In finding such work, all were indebted to another person hailing from the same region of Spain. This woman’s outsized personality and immense knowledge of cannabis processing, gained in Morocco and India as well as in Spain and the United States, allows her to serve as a kind of informal, international go-between. When issues arose among the workers and between the workers and their employers, she would be called, in Spain, for consultation.

Other aspects of the NPR story generated skepticism among the growers. They scoffed at the assertion of one cultivator who claims to harvest eight pounds per plant, and then laughed when he said that the plants in question are of the OG Kush variety. Eight-pound plants are legendary: everyone has heard of them, but no one has actually seen one. And while OG Kush is indeed the cultivar of the year, in hot demand by the metropolitan cognoscenti, but it is a notoriously poor producer, usually yielding fewer than two pounds per plant. In the end, my sources could not decide whether the grower interviewed by NPR was greatly exaggerating the yield of his plants, or whether they themselves needed to do something to improve their own cultivation.

The NPR story ended, as these things often do, on a doleful note:

But as laws around the country change — making marijuana legal — analysts say the pay scale is bound to go down, making trimming more like any other low-paid farmwork. And, like farmwork across the country, marijuana production is already becoming mechanized — gradually making trimmigrants a thing of the past.

California-top-cash-crops-1024x638These assertions, not surprisingly, generated much discussion. The first elicited general agreement: the prospect of full legalization makes growers nervous. The idea that mechanization is replacing manual trimming, however, evoked only scoffing. Attempts have been made, they told me, but all have failed. One grower even purchased a $14,000 automatic trimmer a few years ago, a machine designed to process hops (Humulus [hops] and Cannabis are very closely related plants). But the buds had to be pre-trimmed before going into the mechanism, as it cannot handle large stems, and then post-trimmed after coming out, as medical-marijuana dispensaries are exacting customers. More problematic, the machine had to be shut down and cleaned several times an hour, as the resinous buds would quickly gum-up the cutting blades. After a few days of operation, the machine was put into storage and has remained there ever since.

But as alluded to above, threats to marijuana cultivation across the Emerald Triangle are very real. Prices are steadily dropping, and some growers are now having a difficult time making ends meet. The real problem is that of competition from indoor cultivation, which is coming to dominate the market. Indoor buds are more uniform than those grown under the sun, generally have less mold, and are usually more potent as well. As a result, they command a steep price premium, and many medical dispensaries are no longer even willing to sell outdoor pot.

The growers that I interviewed are both dumbfounded and heartbroken by this development, as indoor cannabis cultivation is one of the most environmentally destructive forms of agriculture imaginable, whereas their own “sun grown” product is environmentally benign. They cannot understand why the marijuana market, of all things, would disdain organic farming and instead embrace a hyper-technological, eco-hostile form of production. Regional and generational antipathies also come into play. My interviewees are mostly in their 50s and 60s, and they strongly identify with the neo-rural cultural values of the Emerald Triangle; their indoor competitors, in contrast, are mostly in their 20s and 30s, and are largely based in major metropolitan areas. “We invented this business in the 1970s,” my sources argued, “and we did so under extraordinarily adverse conditions, and now these environmentally unconscionable kids, these corporate wannabe LA pot-snobs, are undermining our livelihoods! How can that be?”

Farmers, in my experience, almost always complain, about both the weather and their agricultural markets, whether they grow wheat, corn, or cannabis. But as we shall see in subsequent posts coming next week, the environmental arguments made by Mendocino County pot growers are difficult to deny.

*The text version of this article at the NPR website is abbreviated; listen to the audio version for the full story.

Note that the location for the story has been keyed to Mendocino’s county seat, Ukiah, rather than to the actual places of cultivation and processing alluded to in the post.

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Tabulating the Underground Economy, and the DEA’s Pathetic Attempt to Map the Marijuana Trade

When lecturing on world economic geography, I always stress the incomplete nature of the standard data, emphasizing the size of the unrecorded, underground economy, or “black market,” that constitutes up to twenty percent* of global production. Obtaining decent information on such matters is difficult, and as a result I am always on the lookout for maps, tables, and graphs that portray aspects of illicit exchange. I recommend Havocscope to my students, a website devoted to “global blackmarket information” that pegs the total value of its subject at $1.79 trillion. If you are curious about the price of a contract killing of a police chief in Mexico, Havocscope has an oddly precise answer: $20,832. The reliability of the data is open to question, but to the extent that it is accurate, I am staggered by the price discrepancies. A seller of a human kidney (for transplant) in Kenya supposedly receives $650, whereas one in Ukraine can get $200,000. One would expect substantial differences between these two countries, but not by this margin. Perhaps the sample size is a little too small.

According to the Havocscope website, the top five illicit markets worldwide are counterfeit prescription drugs ($200 billion), prostitution ($187 billion), counterfeit electronics ($169 billion), marijuana ($142 billion), and illegal gambling ($140 billion). I find the global marijuana industry of particular interest due to its extensive long-distance trade. Whereas prostitution and illegal gambling are relatively ubiquitous, cannabis production and consumption zones tend to be more localized. Unfortunately, Havocscope provides little geographical information. It does, however, give price differences by country, reporting that a gram of marijuana costs $110 dollars in the United Arab Emirates and eight cents in India. Such figures do not account for quality, and it is suspicious that the same table gives the price in the United States at “$20-$1,800 per ounce” (one ounce = 28.3 grams). A crowd-sourced website with more precise figures based on more robust sample sizes, “The Price of Weed,” claims that high-quality cannabis in California sells for $250 an ounce, whereas low-quality product goes for $194. Oddly the same table puts medium-quality cannabis at $193.62 an ounce. In Minnesota, the site tells us, high-quality marijuana fetches $373.92 an ounce, whereas low quality “weed” can be purchased for $184.39. Such figures would suggest marked regional difference in the definition of “quality”; they also demonstrate a lack of market clearing, as would be expected in regard to a mostly illegal product. (Under California state law, “medical marijuana” is legal and the threshold for medical use is low; Washington and Colorado are transitioning to fully legal cannabis markets.)

cannabis use mapIn regard to worldwide cannabis consumption, the Wikipedia provides a somewhat useful map and table, based on the World Drug Report 2011 published by the United Nations Office on Drugs and Crime (UNODC). As can be seen, Papua New Guinea ranks at the top, with 29.5 percent of its population (ages 15-64) using the drug annually. In the table, which unfortunately does not match the map, the United States also ranks extremely high, at 21.4 percent. Other leaders include Ghana (21.5%), the Czech Republic (15.2%), and Italy (14.6%). Countries at the bottom of the chart include Japan (0.1%), Libya (0.05%), and Singapore (0.004%). I am suspicious of these figures, however, as they would have us believe that people in the United States are twice as likely as those of Canada and almost five times more likely than those of the Netherlands to use cannabis on an annual basis.

cannabis seizures mapVastly more reliable figures are available in regard to seizures by law-enforcement officials. As can be seen on the UNODC maps posted here, “cannabis herb” seizures are concentrated in the Western Hemisphere, with Mexico, the US, Bolivia, Colombia, and Paraguay figuring prominently. In the Eastern Hemisphere, Nigeria, Morocco, Indonesia, and South Africa occupy the top positions. In regard to hashish, or highly processed cannabis resin, seizures are concentrated in Europe, the main consumption zone, and in Afghanistan, Pakistan, Iran and Morocco, the main production areas.

cannabis resin seizures mapNeither consumption levels nor quantities seized provide information on how much cannabis is produced, as production can be geared toward export and as seizures are linked to police priorities. Comprehensive production figures are difficult to locate. In 2008, Paraguay and Mexico were widely cited as the top producers, whereas a 2010 UN report put Afghanistan in the top position. But again, quality issues as well as the difference between herb and resin can skew the reporting. But it does seem clear that Paraguay, Morocco, and Afghanistan are major producers but relatively modest consumers (with official prevalence rates of 1.6, 4.2, and 4.3 percent respectively). As a result, all three countries export massive amounts of cannabis.

Cannabis trade mapMaps of the global cannabis trade are also lacking. The US Drug Enforcement Administration Museum and Visitor’s Center in Arlington, Virginia, however, does present one such map. It is, unfortunately, of dismal quality, as is the website that accompanies it. The problems begin with the webpage title, “Cannabis, Coca & Poppy: Nature’s Addictive Plants.” This statement is misleading at several levels. “Poppy,” to begin with, is not “an addictive plant,” although the resin from the opium poppy certainly is. More important is the fact that cannabis is less addictive drug dependency chartthan coffee and tea (caffeine) and vastly less so than tobacco (nicotine), plants ignored by the website. The map, moreover, appears to be little more than a vague attempt to link exporting and importing countries with lines of various thickness. It makes it appear as if the cannabis flow from Cambodia and the Philippines to Japan is much larger than that from Paraguay to Brazil and Argentina, which is patently untrue. A literal reading of the map would lead one to imagine a major flow of marijuana from Colombia to the virtually uninhabited boreal forests of northern Canada, and a somewhat smaller flow from the frigid shores of Hudson Bay to New England. The mapmaker is also apparently unaware that Newfoundland, Nova Scotia, Baffin Island, and Vancouver Island are parts of Canada.

Cannabis cultivation mapThe same website includes a map of “Outdoor Cannabis Cultivation” in the United States. If anything, it is a greater cartographic catastrophe. The counties marked as cultivation zones seem to have been selected almost at random. The cartographer places the Sierra National Forest in the middle of the agricultural San Joaquin Valley and the San Bernardino National Forest in the Mojave Desert. Overall, the website is an embarrassing compendium of undue simplification, misleading information, and outright fabrications.

In one regard, however, the DEA’s portrayal of the domestic cannabis industry in the United States is largely on target: environmental degradation—the subject of the next GeoCurrents post.

* As estimated by Misha Glenny in his invaluable book, McMafia: A Journey Through the Global Criminal Underworld

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