(This is a regular column that delves into the complicated issues surrounding California’s immense cannabis market from the vantage point of Marijuana Business Daily Senior Reporter John Schroyer. Based in Sacramento, he’s been writing about the cannabis industry since joining MJBizDaily in 2014.)
After a turbulent transition into a legal market in 2018, marijuana cultivators and other cannabis companies in California’s famed Emerald Triangle are finally finding their footing and are optimistic about the future as they finish off the fall harvest.
“It really has turned into what I call ‘the farmer’s market,'” said Erin Corona, farmer relations director for Emerald Family Farms, a Humboldt County-based distributor and manufacturer that works with about 100 small cultivation operations.
Corona spoke with a broad smile about the recent health of the legal cannabis farming market in Northern California during a Nov. 8 event held by the Humboldt County Growers Alliance in Eureka.
Many reiterated Corona’s overall point: A semblance of normality and the promise of truly sustainable business models has returned to the area after a year of painful market contraction and enormous compliance costs that squeezed thousands of small farms out of the legal MJ market.
According to several who attended the event:
- Wholesale prices have remained around $900-$1,400 per pound, which, in some cases, is hundreds of dollars higher than where prices were in 2018.
- Demand for Emerald Triangle flower and other products has improved steadily.
- The vaping illnesses haven’t damaged the overall bottom line of cannabis businesses.
- New brands still have room to emerge and garner market share.
That doesn’t mean everything is perfectly rosy. There are still plenty of business challenges to tackle.
Market volatility
Several growers and distributors said they’re expecting a seasonal downturn in product availability in another few months – which is standard, since a lot of the California cannabis market remains based on outdoor grown cannabis.
What that means is many are planning not to sell all their product immediately with the hope that wholesale prices will jump a bit come March or April.
“We haven’t seen prices go up like this in years,” said Hannah Whyte, owner of Humboldt County-based Emerald Queen Farms.
“I can sell the same quality flower for $1,400 now that I was selling for $800 a pound (in 2018).”
Whyte said she’s “100%” holding on to a good bit of inventory until the spring in anticipation of an expected price spike.
Dominic Gabriel, founder of distribution company Humboldt Farms, said it is telling farmers they should plan to do the same because it makes the most sense financially.
Next summer, Gabriel said, retailers and manufacturers trying to buy wholesale flower will be “like shopping for Christmas gifts on Christmas Eve.”
Wendy Baker, CEO of Humboldt-based edibles company Space Gem, said her biggest problem has been keeping up with demand for her gummies, which have taken off in popularity over the past few years.
“I went from managing three or four (employees) to 14” in the past year, Baker added.
Remaining supply chain issues
Baker and others, however, said significant supply-chain kinks still exist.
For instance, many retailers procrastinate when it’s time to restock inventory and will often try to sell everything on hand before ordering more.
That means an absence from shelves for some brands – and complaints from customers looking for them.
“There’s 10 days they’ll have our product (on shelves) and 20 days they won’t,” Brandt Collings, general director at Santa Rosa-based Legion of Bloom, said broadly about California marijuana retailers. “It’s not sustainable for us as a brand.”
Baker has had similar problems with her gummies not finding shelf space in various retail shops, but she’s hopeful that a new sales rep hired recently by her distributor will get that worked out.
Collings, however, said that’s one of the biggest problems facing upstream products, because retailers often don’t care which brands they stock as long as they have some type of MJ to sell customers.
Criminal gangs a serious threat
One problem that’s not new but growing is armed robberies by criminal gangs, several stakeholders at the event said.
Gangs are now even using aerial drones to scout legal farms that they can then hijack, said Bill Keller, director of operations for San Diego-based Omni Security, which helps protect dozens of Emerald Triangle farms.
Keller said his guards have tangled with gangs in at least three different attempted robberies in recent months, but he declined to offer details, citing ongoing investigations by the Humboldt County Sheriff’s department.
The sheriff’s office estimated in an email to MJBizDaily that it’s had seven robberies or burglaries this year related to cannabis farms but couldn’t confirm all seven were licensed grows.
“The sheriff’s not hunting you anymore. Now the criminals are hunting you,” Keller said.
Some industry locals said Humboldt County Sheriff William Honsal told farmers they’re within their rights to shoot down drones they see over their property.
However, in an email to MJBizDaily, Honsal’s office rebutted that suggestion and warned “firing at a drone could subject you to criminal and civil liabilities.”
“While it is illegal for someone to fly a drone over your property with intent to spy or trespass, the Humboldt County Sheriff’s Office does not recommend shooting at drones flying over your property and we will not encourage the public to do so,” Honsal’s public information officer, Samantha Karges, wrote.
Karges requested that marijuana farmers who see drones over their property contact the sheriff’s office so the agency can increase security measures and track similar occurrences.
But the security issue remains, and it’s an irony of legalization not lost on many.
“Our biggest concern now is security … We’ve gone from CAMP (Campaign Against Marijuana Planting) to inviting the military onto our property,” said Sonja Miller, chief compliance officer for the Humboldt Growers Network.
(Click here to read the previous installment of this ongoing column.)
John Schroyer can be reached at johns@mjbizdaily.com
