Wednesday, May 10, 2023

California's Cannabis Market Crashes, Northern Counties Brace For Impact


It took far longer than i expected but the inevitable crash and burn is burn us.  Legalization has made entry risk free and big capital can simply do as good a job.  Now think a five acre greenhouse, multiple species and backup hemp production as well.

Private growers become a craft industry then and that is good enough.  Recall our market for moonshine.

So yes the market is forcibly contracting and producers will need to at least withdraw temporarily no matter how good.

California's Cannabis Market Crashes, Northern Counties Brace For Impact

SATURDAY, MAY 06, 2023 - 02:30 PM

Authored by Travis Gillmore via The Epoch Times (emphasis ours),

California’s cannabis industry is in a free-fall, with some municipalities in the northern part of the state making plans for significantly reduced tax revenues as a result of a collapse in wholesale prices.A cannabis growing operation in the Santa Ynez Valley northwest of Santa Barbara, Calif., on Aug. 6, 2019. (David McNew/AFP via Getty Images)

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Once selling for more than $4,000 per pound, bulk buyers are now shopping in the $300 to $500 range for fresh harvests, according to experts, and some growers reported clearing out their crops for less than $200 per pound for fear of being stuck with product.

The price represents a sharp drop from recent years, according to industry insiders.

“It’s been a steady decline since we got here in 2010, but with the passage of Proposition 64 in 2016, prices accelerated downward quickly,” Rachel Greene, a longtime grower with experience in Mendocino and Humboldt Counties’ cannabis programs, told The Epoch Times. “It was a combination of a lot of people getting in the game and the old corporate warfare model of operating at a loss to drown out the competition.”

Prop. 64—known as the Adult Use of Marijuana Act—was passed by voters and made recreational sales legal, creating the beginning of a regulatory framework to manage the industry.

Legitimate and illegitimate family businesses were severely impacted by the plunge in profits and salability of a once easy-to-move commodity, according to farmers.Marijuana greenhouses in Carpinteria near Santa Barbara, Calif., on August 6, 2019. (David McNew/AFP via Getty Images)

“I used to pay trimmers $300 to manicure each pound, and now I can’t even sell them for that,” a Mendocino County local who asked to be called Jack, for fear of retaliation, told The Epoch Times. “This was a business that benefited families all over the mountains here, and now there are growers and their helpers looking for work. Nobody knows what to do.”

Farmers are reporting a “perfect storm” of conditions, with inflation causing the cost of doing business to escalate significantly over the last two years, while the saturated market in California has left many growers with few options.A Purple Candy Cane strain grows in the Mendo Dope/Greenshock Farms garden.

“There were a bunch of pounds composted out here last year, and a lot of hopes and dreams went up in smoke with the crash,” Jack said. “We’re all kind of stunned by how fast it happened, and it’s not just us hurting. Look at all the empty storefronts. We were the lifeblood of this economy.”
Lost Tax Revenues

Plummeting prices are affecting more than just the cannabis market, as rural regions of the state have become reliant on the industry supporting retailers and the taxes generated by increased cashflows in the area.

The city of Ukiah, the county seat of Mendocino, is preparing for an estimated $1 million drop in tax revenues, in part due to the weakened cannabis industry.

Revenues grew steadily year over year until experiencing a dip last year, with the busiest shopping season—the last three months of the year—resulting in a drop of nearly ten percent compared to 2021, according to city records. However, the records don’t specify how much tax revenue was related to cannabis.

“This doesn’t make the impacts any less real, as we’re seeing the declines in numerous types of businesses, but they are difficult to measure,” Shannon Riley, deputy city manager for Ukiah, told The Epoch Times.

Garden supply sales were down nearly 13 percent in Ukiah last year, and sales taxes collected overall were down nearly 6 percent in 2022 compared to the year prior, according to HdL Companies—a firm providing audit, operations, and revenue management services to public agencies.

The state experienced 4 percent growth in overall sales tax revenues during the same period.

Compared to other cities in northern California facing tax revenue declines, Ukiah is uniquely positioned in the area, acting as a hub for surrounding communities, with medical facilities and shopping available for thousands of residents not living in the city, according to the deputy city manager.

“Ukiah is very well prepared for this type of adjustment and will continue to plow ahead with major infrastructure projects, street improvements, recreation programming and events, and more,” Riley said.

Other areas have not fared as well, with small towns in Northern California that once experienced a boom-and-bust moment with the loss of the logging industry now going through similar circumstances.Marijuana plants grow at the Green Pearl Organics marijuana dispensary in Desert Hot Springs, Calif., on Jan. 1, 2018. (Robyn Beck/AFP via Getty Images)
From Boom to Bust

Known as the Emerald Triangle for the region’s renowned cannabis production, the counties of Mendocino, Humboldt, and Trinity grew in population and in economic activity following the passage of Proposition 215 in 1996, the first in the nation allowing for the plant’s medicinal use.

While census data shows modest growth for each county—approximately 11 percent for Mendocino and Humboldt and more than 20 percent for Trinity—in the 27 years since legalization, residents say those numbers don’t account for the actual number of people that moved in.

The discrepancy lies in the pattern of behavior for many who came to the region to set up their operations from other states, yet never registered to get California driver’s licenses, and returned to their home state once the harvest was complete, according to farmers and local authorities.

In addition, from August to November, a sizable number of people traveled into the area in search of work as trimmers and laborers every year.

“It felt like the population doubled, and we’re a small community so it’s easy to notice the newcomers,” Juan Aguilar of Ukiah told The Epoch Times. “For part of the year during grow season, and especially at harvest, we’d have huge crowds in the grocery stores, people all over town.”

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