California Has Already Issued More than 2,000 Cannabis Cultivation Licenses. Are Growers Being Set Up to Fail?
Is California setting marijuana growers up to fail?
With the state’s adult-use cannabis market barely two months old, CalCannabis, a division of the California Department of Food and Agriculture (CDFA), has issued more than 2,000 temporary cultivation licenses, sanctioning 400-plus acres of pot gardens.
Collectively these state license holders could produce nearly 4.2 million pounds of weed per year — more than double the amount Californians are expected to consume, according to estimates by the CDFA. More licenses are being approved every day as aspiring growers up and down the state rush to get in on a $5 billion market.
And in Humboldt County, only a small fraction of our local growers have gained access to the legal marketplace.
“This should scare the shit out of any growers,” said former Humboldt County Supervisor Mark Lovelace, who’s now working with local governments around the state as a cannabis policy advisor for HdL Companies. He’s been watching would-be cultivators flood into the state’s new regulatory system, and now he’s warning growers that California’s legal weed marketplace will be overcrowded and extremely competitive — and likely to have a sky-high failure rate.
“It’s just gonna be a tough industry, a really tough industry,” Lovelace said.
With the supply of product confined by California’s track-and-trace system, which follows weed from seed to sale, the state market will also be limited by finite demand. There have been several attempts to calculate that appetite. A CalCannabis study, for example, came up with a total statewide consumption figure of 2.5 million pounds per year. They expect legalization to spur some experimentation (causing a temporary bump in demand of less than 10 percent), but they also expect the black market to hold onto about 30 percent of the state’s weed sales, leaving a legal market of roughly 2 million pounds (or less) per year.
Another study, the 2017 California Cannabis Opportunity Report, estimated even lower demand — 1.6 million pounds per year — but for the sake of discussion, we’ll use the larger CalCannabis estimate.
The next challenge is estimating how much will be produced. For his own calculations Lovelace has been assuming growers will produce a pound of cannabis for every 10 square feet of canopy per harvest cycle, or roughly 45 grams per square foot. He acknowledges that it’s challenging to nail down a single number, especially considering the different spacing used in indoor versus outdoor grows, but the 45 grams-per-square-foot estimate is the same figure used in a 2010 Rand Corporation study by Jonathan Caulkins. Plus, Lovelace said growers he’s talked to have confirmed its general accuracy.