On the illicit market, “You can get pounds in the streets, $2500 to $3000, all day,” he said. “And it’s fire, fire weed. And then you can sell it over in Florida for $4,000, $5,000 on the streets.”
Long Beach, CA – MAR 06 : Outdoor marijuana cannabis flowering plants, June 7, 2019 in Long Beach . [+] California. (Photo by Bob Riha, Jr./Getty Images)
Most cities in the state still don’t allow retail adult-use sales. Many of those that do cap the number of dispensaries allowed within city limits. And almost everyone running a retail storefront says that high taxes and an abundance of cheap, illicit-market weed is killing them. It’s not a good way to make money!
That’s roughly consistent with the amount of cannabis on which the state Department of Tax and Fee Administration reported collecting cultivation taxes between July 2020 and July 2021, according to the most recent data available.
And what they’ve done, according to interviews with industry experts, is grow entirely too much cannabis. Exact figures are not known, but according to one rough estimate, California’s legal cultivators grow more than three times as much cannabis as is sold in legal dispensaries.
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And they can’t compete with massive greenhouses producing lower-quality but higher-margin cannabis in valleys in Salinas and Santa Barbara.
Flood of Flowers: A crash in the price of wholesale flower is likely to hit this harvest season and . [+] squeeze many smaller growers out of business.
Justin Sullivan/Getty Images.
If you want to get into the cannabis industry in California—where more than $5 billion worth of legal, adult-use cannabis is on pace to be sold this year, according to tax figures—and you want to do it quickly, don’t bother with selling adult-use cannabis. Instead, you want to grow it.
That estimate comes from tallying up the total acreage of permitted grows registered with the state Department of Cannabis Control. When the total acreage of indoor grows, outdoor grows, and mixed-use grows is tallied up, the permitted, legal cultivation capacity in the state tops 6 million pounds.
No one but state regulators and law-enforcement (and whomever is moving the stuff) can say for certain, but the conventional wisdom is that it’s either being sold off-books within state lines for half the price of heavily taxed legal cannabis—or it’s appearing in New York, Florida, and other states where California cannabis fetches a premium.
“The black market is still coming here,” he said, noting that the greenhouse-grown cannabis produced in the massive farms that are killing the small growers just isn’t as good. It’s not cured right. The nutrient mixes are wrong. It’s grown at scale, and it’s just not as good as the traditional growers’ product.
“The legal market is still one-quarter what the illicit cannabis market is,” said Mark Ponticelli, the founder and owner of the People’s Remedy, a dispensary in Modesto, California, in the state’s agricultural Central Valley—where the illicit, underground market cannabis is both cheaper and better.
Too much cannabis. The wrong cannabis. Cannabis that’s too expensive. And cannabis that’s not profitable.
But in mid-2021, the state may be producing up to three times as much cannabis as the state can consume, according to Natalynne DeLapp, executive director of the Humboldt County Growers Alliance.
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There’s no one factor that led to this particular situation. There are loosened regulations after legalization that allowed for massive grows. There are environmental quality regulations that favor big producers. And there’s also the natural cycles of the market, which may seesaw between too much and too little before settling into some groove resembling equilibrium.
According to the most recent public estimate—published in 2017—the state’s appetite for cannabis is about 2.3 million pounds. That includes medical and adult-use consumption.
But on top of threatening small businesses still trying to grab a foothold in an emerging industry, this surfeit of cannabis also threatens the integrity of marijuana legalization itself.
But if that’s true, and if there’s too much weed grown in the state—where is the California cannabis going?
According to other industry insiders, despite too much cannabis already in California, higher quality cannabis grown in Oregon—where production costs are cheaper—is supposedly crossing state lines and appearing in California dispensaries. If true, that would violate all kinds of laws: state, federal, you name it.
“And that’s real back of the napkin math,” said DeLapp, who advocates for small farmers up in the forested hills and mountains, the state’s traditional “cannabis basket.”
“It’s gonna be a bloodbath,” said one industry insider, who works in wholesale sales and distribution, speaking on condition of anonymity in order to speak freely.
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Whatever the exact figure, the common belief is that it’s so much cannabis that the market is flooded, prices are crashing, and legal growers—in the red this year—may finally be forced out of business.
Exactly how much cannabis is grown within the state of California is still a state secret, known only to state regulators and select elected officials. But using available data, you can hit at some estimates.
So the reward for the more than 2,500 Humboldt County farmers who pursued state licenses in 2016, even before adult-use cannabis was legalized? With the price of an outdoor pound of cannabis dipping under $1,000, and last year’s harvest returned, unsold, “They’re selling their farms and selling their businesses,” she said.
The quickest way to get into the cannabis business, then, is to get a cultivation permit and start growing massive amounts of cannabis. That’s what big companies in the Salinas Valley and Santa Barbara County did.
But that’s not where California is right now. And after an imbalance, comes an inevitable correction. And with the state busy with COVID-19 and a recall election, it appears the market will be left to itself to figure out what to do with all this extra weed—and whether the people who grew it can stay in business.
But, as we frequently say around the office, the plants never stop growing. The workload is heavy and unlikely to light up anytime soon as the market-demand for marijuana continues to grow. Fortunately.
8 states (and Washington D.C.) have now legalized marijuana for recreational use, and more than 20 other states have medical marijuana laws in place. While support has been strong for marijuana, almost half of the country still lives under prohibition. It is my belief that every American deserves to have access to the medicinal benefits of marijuana, and that no government should be allowed to interfere with a citizen’s right to grow and harvest a plant on their own property for their own usage.
Growers have been operating within the shifting gray areas of the law for decades around Northern California. With the passage of Prop 64, the business becomes increasingly legal, legitimate, safe, and regulated. The people that have operated at the outskirts of the law– the rogue entrepreneurs, botanists, shamans, and outlaws who dared to grow a forbidden plant (it sounds so ridiculous now, doesn’t it?)–have a year to get square with Sacramento.
Over the course of the next few years, I worked with a variety of outdoor growers in the famous “Emerald Triangle” of pot-growing counties in Northern California. I acquired some good knowledge and made some extra cash, but struggled to find a role beyond seasonal work.
(Flashy cars, sneakers, and dab-rigs excluded).
The work is hard.
“I ride to work every day on a bus that’s got a smoothie bar, foosball table, and vaping lounge” one of my techie chums tells me, “But I can’t imagine the amenities your workplace must have!”
Imagine a workplace in which every single one of your coworkers has a deep and passionate love for the product. They use the product every day. It is deeply connected to their mental, physical, emotional, financial, and spiritual well-being. It has been more central to their identity than their race, religion, music, or favorite sports team.
I am proud to tell people what I do for work and eager to talk about the state of the business. With the groundswell of support the nation showed for marijuana in November, the conversation about cannabis has been brought into the public light more than ever. However, I’ve noticed a few recurring misconceptions which seem to come up whenever I talk about the cannabis business with outsiders.
And maybe one day the tides will turn so for as long as I can, I am going to keep trying to grow the absolute best weed that I can.
As I entered my thirties, my career was moving along nicely but I didn’t feel any fireworks for the job. While I was making good money in a respectable position, I didn’t feel any enthusiasm for my work. Slowly, I became one of those jabronis who dreads going to work every day for a measly paycheck. In truth, the best part of my work day was the fat joint I would smoke every night on my way home.
Now, I’m a cultivator and a veteran member of the team with an increasingly significant role to play. I’ve worked hard and learned on the job. I’ve thrived with the company and, while it hasn’t always been easy, I’ve loved every second of it.
2017 will be my second year in the business, and the last before fully legalized marijuana becomes the law of the land in the Bear-Flag state. Our federal government has fought a war on cannabis for decades and the good guys are finally winning but the fight is far from done.
As prosperity arrives for a select few of us, we must not forget our brothers and sisters who are still incarcerated as a result of the Drug War. According to DrugPolicy.Org, more than a half-million Americans were arrested for simple possession in 2015. I’m buying weed cooked into macaroons from a fancy boutique and 10,000 people are suffering the indignities of incarceration for having a bag? It’s not right.
The modern pot biz, I have frequently noticed, is easily confused with that other California boom industry: tech. And while there is a lot of cross-over between the cannabis and tech industries (such as app’s and web-based delivery systems; an ever-more-perfect product line from PAX; and constantly advancing grow technology) their respective corporate atmospheres couldn’t be any more different. While tech is famed for opulent facilities and lavish spending, the pot business is lean and spartan. A good grow-op will have everything you need to grow a huge amount of great weed, and nothing else. We pride ourselves on efficiency and we measure success in inches, seconds, and cents. A successful pot operation devotes maximum resources to the plants while creating as little extra cost as possible.
We love what we do.
Knowledge is flowing more freely than ever and the young mavericks of our craft are increasingly free to explore the rich depths of the industry. What’s truly remarkable are the possibilities we haven’t even imagined yet.
So until that’s the law of the land, I’m going to keep making noise about it in City Hall and on Facebook (and with some of the resources listed below).
Then there are the secondary industries that will blossom in the shadow of the industry, from technology to tourism. A renaissance is beginning. Cultivators are coming together to share generations of knowledge and ground-breaking technology. Communities of cannabis-enthusiasts are forming on-line and IRL.
“I’m hoping to work my way up to Head Guy Sitting In A Lawn Chair In The Woods ,” I tell them. And while that description may look a bit like me in that old picture a few lines up (trading the shotgun for a ukelele), it doesn’t look much like the modern grow facilities that now dominate the marketplace.
No one has “fallen into” the cannabis industry. Growing pot isn’t anybodies “plan B” (unless “plan A” was seriously bonkers). The industry is populated almost entirely by people who are passionately, enthusiastically, fervently devoted to marijuana. Job satisfaction is high (*nailed it*). It’s an inspiring atmosphere, to say the least.
Smoking rarely got in the way of work, and work rarely got in the way of smoking.
The business isn’t just for gangsters and degenerates anymore.
With Donald Trump on the Iron Throne, it’s hard to be sure of anything. While he has historically held a progressive stance on marijuana, he has surrounded himself with several high-profile anti-cannabis crusaders (including Chris Christie and Jeff Sessions) who have repeatedly floated insinuations that the Drug War isn’t done.
I started trying to pick up any work I could find around the marijuana business. I hit up friends, and friends of friends, and friendly folks who smelled like weed. My first gig was helping a buddy trim the 30 White Widow plants he had grown in his basement.
The work falls between agricultural and industrial. It requires a broad and diverse skill set. The gardening is peaceful, but there is also a plumbing and electrical system to operate, critical data to track, and a huge amount of routine janitorial work that comes with growing plants, which–inevitably– includes killing rats.
Meanwhile, the early on-boarders to legalization find themselves at the vanguard of the industry. The business is an eclectic mix of outlaws and upstarts; a true meritocracy with no discrimination or prejudice. Whether you’re rich or poor, black or white, Protestant or Juggalo; the only thing that matters is how well you do your job.
It’s also not time to take it for granted that legal weed is the law of the land.
Many folks think that with the pending legalization of the recreational use of marijuana, the fabled Green Rush is approaching it’s peak. While the industry is certainly thriving now, the rush is just beginning. California is set to be the largest cannabis marketplace in the world when it opens in January of 2018. Additionally, the national market place is going to be available soon and even a legitimate international marketplace, eventually.
And while there might still be more patchouli than your average workplace, marijuana growers are some of the greatest people on earth.
However, one thing that’s very important to remember when doing any estimations is that although your grow light may account for a lot of your electricity bill, fans and pumps and other things in your grow room also take electricity. These other items cost 3/4 as much electricity as the grow light. It will be plus about $23,150 .
We offer The Cannabis Cultivation Financial Model which is a fully-functioning Excel financial model that uses a mix of assumptions to estimate cannabis yields, all revenue and cost line-items monthly over a flexible seven year period , and then sums the monthly results into years for an easy view into the various time periods.
Direct expenses include electricity, water, labor and packaging costs.
Cannabis Cultivation Initial investments:
Lets try to calculate how much electricity does it take to grow cannabis indoors for our scenario:.1478 kWh x 1,440 hours x 145 kW = $30,870.
Cannabis Cultivation Direct & Operating Costs.
So, total electricity costs will be about $55,000 . Water costs will be no more than $700 .
Warehouse 7,700 sq.ft. for about 1,000 plants with estimated yield of 350 lbs., 4 harvests a year.
Sales are about 1,400 lbs. per year:
Indoor cultivators produce year-round and can generate between 1 and 12 harvests per year. Main indoor cons include:
Total = $830,000.
Thus, the direct cost of growing the cannabis will be around $180,700 or $516 a pound (42% of wholesale price). It doesn’t include administrative, marketing, distribution costs and taxes , which varies depending on the location.
We also offer The Cannabis Cultivation Business Plan Template which will help you to create professional cannabis business plan for indoor, outdoor or green-housing cultivation facilities to break down your costs, so you know how much it will take to get into the cannabis business.