Humboldt County gives support to struggling cannabis growers
Since California legalized cannabis in 2016, many growers in Humboldt County have struggled with the transition to the legal market. The costs of production have gone up and the price they’re paid for their harvests has plummeted. Now, the county has approved the equivalent of disaster relief. JPR’s Humboldt correspondent Daniel Mintz recently spoke with JPR’s Liam Moriarty about the cannabis crisis.
Liam Moriarty: Hi, Daniel, welcome back.
Daniel Mintz: Hi, Liam. Good to be here again.
LM: So, tell us about what's happening with the cannabis economy in Humboldt County, and why there's so much concern right now.
DM: Well, for one thing, Humboldt's former advantages in an illegal market are now handicaps; being in obscure locations, semi-hidden. It was good for less attention from law enforcement, but in a legal market, why grow cannabis out in the hills when you can grow it in flat ag lands in places like the Central Valley? And on top of that, drought and wildfires and smoke from wildfires is affecting production.
And at the same time, there's a statewide flood of production. As of the end of August, there were more than 7,000 state cultivation licenses and more are pending, and the sheer bulk has affected price now. At the same time, the size of the retail market — the number of dispensaries — is not matching the production growth.
LM: What's the county planned for trying to stay competitive in that market atmosphere?
DM: The first step is helping farmers get through the price crash. The Board of Supervisors has just approved a million dollars in what they're calling "emergency relief funding" and that's funded by excise tax revenue. Now, the idea isn't to give cash payments, but more to help fund improvements and lower costs. So the margin of revenue can increase. And also in the works is excise tax payment extensions and increased help with compliance is being planned in the collaboration with the planning and economic development departments.
LM: So, how bad is the economic impact?
DM: The county has surveyed cannabis farmers and in one survey of 50 cannabis farmers, the majority said they're not going to be able to pay their excise taxes in the coming cycle. You get an idea of the scale in this clip from Scott Adair, the county's economic development director at the last supervisors' meeting ...
Scott Adair: Our office has been inundated with requests and queries from the cannabis cultivation community for what I can only characterize as being urgent, or perhaps even desperate, pleas for assistance. These pleas for aid and relief stem from the recent bottoming of the cannabis market, where the price per pound is now less than the cost to cultivate, process and distribute that product.
DM: Adair's office is reporting that the wholesale price of outdoor cannabis has dropped from $1,100 a pound to an all-time low of $400 a pound, and even lower for farms selling last year's crop.
LM: Wow. Now, what about the storied "Humboldt brand?" That was supposed to be the ace in the hole for this entire industry up there. Doesn't that have the kind of value that they expected to have?
DM: At this point, marketing the Humboldt brand won't be enough. A state appellation program will be launching soon. But the value of brand is limited, especially for outdoor cannabis in this commodity market that we're seeing. Humboldt, for sure, has a unique story and culture, but we'll see if cannabis branding can be as marketable as it has been with products like Napa Valley wine. And it will still be competitive. Humboldt isn't the only place producing craft cannabis.
LM: Has there been an estimate done on how much this is going to impact the county's overall economy?
DM: There hasn't been a specific estimate, but for sure, cannabis dollars pay a lot, you know, in goods and services here and the county is bracing for significantly less excise tax revenue in the coming cycles.
LM: Now, Daniel, this all sounds pretty bleak. Is there any chance things could improve?
DM: Yes with federal legalization. That will open up the market beyond the confines of the state's borders and that will help. We'll also open up business assistance, such as we see with the Small Business Administration. But that legalization on the federal level is a good two to three years off.