Marijuana Prices are Crashing – Panic Among California Growers

Here’s the NPR story:

Here’s the article:

For decades, illegal marijuana cultivation has been an economic lifeblood for three counties in northern California known as the Emerald Triangle.

The war on drugs and frequent raids by federal drug agents have helped support the local economy — keeping prices for street sales of pot high and keeping profits rich.

But high times are changing. Legal pot, under the guise of the California’s medical marijuana laws, has spurred a rush of new competition. As a result, the wholesale price of pot grown in these areas is plunging.

Demand Not Meeting Supply

In 1983, the Reagan administration launched a massive air and ground campaign to eradicate pot and lock up growers in northern California. Charley Custer, a writer and community activist, had just arrived to Humboldt County from Chicago. With the Reagan crackdown, Custer recalls, wholesale prices shot up — to as high as $5,000 a pound. That sudden and ironic windfall for those growers willing to risk prison time transformed the community.

“A lot of people were living on welfare and peanut butter and banana sandwiches for a long time before pot made it possible to be part of the middle class,” Custer says.

Nearly 30 years later, Custer says that boom may be over.

“Outdoor growers are having a hard time unloading their fall harvest,” Custer says. “And this is six months later and when some people do move it, they don’t get nearly the price they were hoping for.”

That goes for both legal growers who cultivate limited quantities of pot under the medical marijuana laws and illegal operators who often grow larger amounts.

Prices are now much less than $2,000 a pound, according to interviews with more than a dozen growers and dealers. Mendocino County Sheriff Tom Allman says some growers can’t get rid of their processed pot at any price.

“We arrested a man who had … 800 pounds of processed,” Allman says. “Eight hundred pounds of processed. And we asked him: ‘What are you going to do with 800 pounds of processed?’ And he said, ‘I don’t know.'”

‘Only The Good Ones Make It’

As recently as last December, things were still pretty upbeat. At Area 101, an events and healing center near Laytonville, local growers gathered to celebrate the Emerald Cup, an annual competition for the season’s best pot buds. But the event’s host, Tim Blake, says the mood has darkened since then.

“There’s a tremendous amount of concern, borderlining on fear,” says the former underground grower who now cultivates medical marijuana.

He says the drop in pot prices is in part the result of more growers and a more tolerant legal landscape. But he says another factor is quality. Indoor-grown marijuana is increasingly favored by dispensaries and consumers for its looks, consistence and potency. It costs more to produce than pot grown under the sun, but commands as much as double the price. That’s one reason retail prices haven’t hit the skids.

“What’s happening is the people that don’t have quality product aren’t selling it,” Blake says. “So they’re the ones that are creating this panic. So it really comes back down to that, just like in every other agricultural industry. When you get too many vineyards and too many people growing vines out there, then only the good ones make it.”

Matt Cohen is one of those growers who are making it. On an organic farm near Ukiah, Cohen raises chickens, grows vegetables and cultivates high-grade medical pot. He has avoided the downturn by distributing marijuana directly to patients. But other growers who rely on middlemen and dealers for legal and illegal sales are in financial trouble.

“And I know people, and they’re living from credit card to credit card,” Cohen says. “They’re not even making money. It’s just a lifestyle that they’re in and the alternative is to go do what?”

Instability And Anxiety

In recent weeks the upheaval has spurred a series of unprecedented public forums about where things are headed for the marijuana industry, especially if Californians vote to legalize pot this fall.

“The displacement of persons deriving supplemental income through clipping, gardening and distribution of marijuana dwarfs the number of growers who will lose their income entirely,” says local activist Anna Hamilton, who organized a gathering in Garberville. She says the broader community is already feeling the ripple effects of falling pot prices.

“There are business foreclosures, storefronts closing. There’s a lot of instability and anxiety,” she says.

Still, amid the turmoil, Custer says some locals haven’t lost their sense of humor. He recalls a recent musical revue where three performers in miniskirts, sunglasses and spiky heels mocked the plight of local pot growers all to the beat of the ’60s hit “My Boyfriend’s Back.”

“‘My dealer’s back and I’m gonna get ready/Hey now, hey now, my dealer’s back,'” Custer sings. “It was a song of hope in this hopeless situation. ‘It’ll happen to you. Your dealer will come back.'”

Or maybe not. California’s pot economy is transforming, and it’s starting to resemble a real commodities market where only big players can compete. It’s a shift that could leave some growers in the dust.

What’s interesting about this story is this: Prices are crashing as a a result of the potential legalization of marijuana in the Golden State. This is hurting a lot of sub-par quality sellers.

This goes to show us once again: The war on drugs and government meddling in the business helps nobody more than the guys who produce and sell drugs.

Once the state withdraws, the market becomes open, more competitive, subject to more scrutiny, less subject to gray areas, and thus prices come down. As a result, the return on investment in getting people hooked on drugs via free samples declines, so that fewer and fewer people will fall into the trap of drug addiction and drug abuse.

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