Bad Buzz

How legalization is driving small pot farmers out of business.

by

Ellen Komp, deputy director of the California chapter of the National Organization for the Reform of Marijuana Laws (NORML), has worked for fifteen years to get recreational marijuana legalized in her state.

On January 1 of this year, it finally happened. But Komp is not cheering. That’s because the state’s nascent marijuana-growing industry is benefiting not the small growers who started the industry, sustained it, and sometimes went to prison because of it, but people in suits, many of them nonsmokers who don’t understand the culture. “We call it the greed rush,” she says.

The referendum passed by California voters limited to one acre the amount of land any single person or entity could devote to marijuana, for the first five years of legalization. But that cap disappeared from the final regulations. “The thought is that high-level lobbyists got the ag department to delete that,” Komp says.

In other ways, the state’s marijuana industry, like elsewhere in the nation, seems skewed to larger growers. Komp says the fees and taxes applied to pot farming are overwhelming to the average mom-and-pop grower, and that many remain unlicensed. Meanwhile, big business is gearing up to dominate the industry.

Investors, stock brokers, and fund managers are now entering the marijuana business.

Investors, stock brokers, and fund managers are now entering the marijuana business. Former Speaker of the House of Representatives John Boehner serves on the board of Acreage Holdings, a rapidly growing cannabis company. Pot has been legalized nationwide in Canada, and publicly traded Canadian companies are also getting involved in California. Many of these companies, according to Komp, are vertically integrated so they don’t buy from the small farmer but rather grow cannabis themselves. “We’re legalizing marijuana at the time that capitalism is at the height of its excesses,” she says.

In the lead-up to legalization, there was a great effort to involve minority groups, because Latinos and black people have been especially affected by the war on drugs. The bill allows for people who have past drug offenses to open businesses, but they often don’t have the capital. Many growers are forced to take risks and go to places where they can find cheap but not legal land, Komp says, “exactly the opposite of what we tried to do with legalization.”

In short, it’s a frustrating situation. “I’m trying to be hopeful that we can continue to band together and push for more progressive laws and regulations,” Komp says, “but am very concerned about people’s livelihoods being taken away in the consolidation of the business.”

To date, nine states and the District of Columbia have legalized recreational marijuana use by adults; pot is allowed for medicinal use in thirty states. All of those have opened the door to legal cultivation of marijuana, creating opportunities for dedicated pot farmers to come out of the shadows.

Yet this transition has been marked by signs that large corporations intend to get in on the action. The stock market now lists cannabis-related ticker symbols; pharmaceutical giants are testing marijuana-related drugs; Snoop Dogg’s company has invested in a marijuana start-up. As far back as 2015, Founders Fund, co-created by PayPal co-founder Peter Thiel, announced a multimillion-dollar investment in the industry. The Scotts Miracle-Gro Company has become a big player in indoor growing. Specific strains have been sequenced and patents granted.

In Florida, MedMen Enterprises has signed a $53 million deal to acquire a Florida-based cultivator and the right to open up to more than two dozen dispensaries across the state. Acreage Holdings, which started in Maine and now operates in eleven states, is looking to expand its operations nationwide

Humboldt County is part of California’s “Emerald Triangle,” the largest cannabis-producing region in the United States. Of the county’s estimated 12,500 pot farmers, fewer than one in ten are expected to make it into the legal trade. Many growers now face being drummed out of business.

The road to Garberville in southern Humboldt County is breathtakingly beautiful. Redwoods, Sitka spruce, and Douglas firs tower over the road while in the distance the Kings Range is covered in fog in some areas and bathed in sun rays elsewhere. Rebecca is waiting outside a coffee shop. This is not her real name, as she “hasn’t come out of the shadows yet.” Sitting down for a quick coffee and sandwich, she gets right down to business.

Rebecca shows a local classifieds magazine with listings for two properties near her farm. One, originally listed at $800,000, is now listed at $250,000. The other farm, two parcels of forty acres each, is newly for sale. “This is so sad,” she says. “So many people have to sell. Soon it will be just corporate farms.”

The local free weekly has additional bad news: 250 growers in southern Humboldt have received notices of abatement since August 2017. These inform them that they must start the permitting process to become legal or otherwise remove or mitigate environmental issues related to illegal cultivation within ten days or face fines of $10,000 per day. If they do not pay the fines, their property could be seized and sold.

Rebecca and others who don’t have the money and resources to become permitted might yet lose their livelihoods. She has been working this land for more than twenty years, originally growing plants under tree cover so the helicopters wouldn’t spot them. Growing in the shade, the plants were small, but a pound of pot sold for $4,800. Now, $700 is considered pretty good.

Law enforcement spent five days in Rebecca's neighborhood, cutting plants and making arrests. “It was terror for us," she said. Many growers lost their livelihood.

The operation was at constant risk of being discovered by county, state, and federal police forces, often under the aegis of the Campaign Against Marijuana Planting (CAMP), then the nation’s largest law enforcement task force. In 2015, the authorities went after the biggest growers, many in Rebecca’s neighborhood. Choppers made regular flyovers and, in June, just when the crops were almost ready, law enforcement convoys spent five days in the area, cutting plants and making arrests. “It was terror for us,” says Rebecca. Many growers lost their livelihood.

Despite the constant fear and the danger, being a marijuana farmer was a good life for Rebecca. She built a modest but lovely home from recycled redwood. “I am eternally grateful for the opportunity,” she tells me. “I feel lucky that I get to be middle class in this diminishing American dream. I don’t know how else I would have achieved it.”

Now, with the drop in pot prices, she has to work much harder to make the same income. And the various fees to become legal are so high that she doubts she’ll ever be able to afford them. So, in the summer of 2015, she moved away and went back to school to learn a new profession. Her farm is managed by a live-in foreman who gets 50 percent of the crop. Next year, she will let someone who is already licensed and branded use her land.

“It’s a way to hold out ground,” Rebecca says. “They will get the use of the farm, pay the state and license fees, and I’ll take what I make . . . to complete the permit process.” She shows the paperwork she’s completed for the application and it is already about a half-inch tall. She’s had to pay consultants to complete some parts.

As we talk, we are joined by Rebecca’s friend Willy (also a pseudonym), another marijuana grower. He came to the Emerald Triangle in 1999 as a teenager and began working on a clandestine guerrilla grow operation, then transporting marijuana to his home state. At age twenty-five, after federal drug agents raided his home (at a time when it was clean of cannabis), he realized his life had become too dangerous. He moved to Humboldt County, worked for a grower, and after a year was able to start buying his own land. Now he feels he is watching the vanishing of a unique, independent culture.

“We live in community, resolve issues among ourselves, don’t depend on the government at all, which can make it a great way of life,” he says. But he has had a hard time adjusting to legalization. “It’s extremely hard to take a property on the mountain and retroactively make it work with all their conditions, which were developed for flat land,” Willy says. “They made the strictest regulations for cannabis that were ever made for any crop.”

He says the new rules feel like “a continuation of prohibition” and thinks they are being imposed to help the corporations. “Small growers recognize that we’ll be out-competed. We are the heart of the industry and we know we can get better product if we can stay in the business, but all this is making it very difficult.”

John Casali has lived on his farm since he was five years old, and he talks about his childhood with great nostalgia. Raising animals, growing vegetables, the redwoods, fishing in the nearby river or the ocean. The tight, family-like community. His mother created a new strain of marijuana, Fruit Loops, with a high terpene profile and a fruity flavor. In her honor, he grows only Fruit Loops or strains that are crossed with it.

He has been growing his own marijuana plants since he was fifteen, and he took the farm over when he was twenty. In 1992, walking out of his front door at 6 a.m., Casali was confronted by a man dressed in camouflage who put a nine-millimeter gun to his head. The man was one of twenty-eight federal agents who raided the farm. After four years of fighting the charges against him, Casali was sentenced to 120 months in prison.

“I was fortunate to get ten years and did eight,” he says with difficulty. “For me, what I’m experiencing now is probably totally different from what other people are experiencing. It’s so amazing to be able to do what I’ve done and loved all my life and now it’s legal and I can share it with the world.”

Casali has gotten help from Flow Kana, a corporation that has raised $50 million in funding to support “sungrown cannabis raised through traditional cultivation practices,” according to Amanda Reiman, its vice president of community relations. Established in 2014 as a bicycle cannabis delivery service in San Francisco, the company is now preparing to build a first-of-its-kind cannabis supply chain centered on small craft cannabis farms in Northern California.

At present, the regulations favor indoor growers, who only have to find an appropriately zoned building, get it inspected, and pay for local and state licenses. Outdoor growers must be inspected by state and local officials, and most counties allow only indoor grows, even though these require huge amounts of energy.

Besides excessive regulations, Reiman explains, cannabis growers in California don’t have access to loans because banks are wary of getting into trouble with the federal government.

Currently Flow Kana works with a network of about 100 farms that have jumped through the hoops and are permitted. It has created centralized processing and distribution. Farmers bring their produce to one of two processing centers in Mendocino County, where it can be trimmed, tested, packaged, and distributed to licensed dispensaries.

“Hearing something like, ‘I have arthritis in my knee and your strain is helping,’ that’s a great feeling."

Casali’s Huckleberry Hill Farms grows four Fruit Loops-related strains, each of which had to be individually tested and approved, at a fee. Through Flow Kana and social media, he’s receiving feedback from consumers, which did not happen before. “Hearing something like, ‘I have arthritis in my knee and your strain is helping,’ that’s a great feeling,” he says.

According to Casali, his product made it into the gift box for this year’s Oscars—the first time that marijuana was included. “That’s the kind of opportunity we need,” he says. “Even though Big Ag can pretend that they have good product, they are just like WinCo Foods.”

But even as his fortune has changed, Casali is still concerned for others who haven’t been able to adjust to legalization. “It’s really hard to see the people who get abatement letters and fines and don’t know what to do,” he says. “The stress level around the community is a lot higher.”

The most optimistic person I talk to is a distributor, Dylan Livingearth, the business manager and minority owner of Humboldt’s Finest 420 Collective. Having worked in government jobs—most recently as director of technology for the Illinois Department of Human Services—he understands compliance, bureaucracy, and working with the law.

“There is a set of rules that you have to meet, you pay the fees, and then you’re OK,” he tells me. “We can’t cry when legal comes.” He’s looking forward to the day when marijuana use and sale are legal throughout the land. He thinks it will be a political “platform item” as early as the 2020 elections.

“I think they’re just trying to get rid of all of us and make it available to the corporations,” James says.

When that happens, people will buy from stores, boutiques, and even through the mail. “It’s about partnering now,” Livingearth says. “We’re trying to embrace safety for the growers, the sellers, and the distributors.” He sees the regulations with which farmers must contend as necessary for the industry’s future, noting that only one out of ten businesses survive after ten years. “Cannabis farmers are not special, they are normal, many will fail.”

“Of course,” he admits, “it’s easy for me because I have nothing to lose. I’m not a farmer, I’m salaried. That’s why I can see it with a rational view. Professional people who can navigate business is what we need now. It’s teamwork now.”

Tell that to “James,” a marijuana farmer in Humboldt County. Over the past two decades, he’s gone through the usual process, first working for others for a share of the crop, then buying his own first property, and adding to it. Then he was busted and had to pay fines, do community service, and be on probation for a long time.

Now James has received an abatement letter, after investing $20,000 getting ready for the season, and he may lose his properties. He has tried to sell one of them, to no avail. There is a glut of farms for sale. His lawyer suggested he stop growing rather than go legal because those who have signed up are losing money due to the exorbitant fees.

“I think they’re just trying to get rid of all of us and make it available to the corporations,” James says. He’s deeply depressed and says he’s suicidal.

“I don’t know how to get out of this situation,” he tells me. “One of the last things we had left for a person to make good money is being taken away and it’s very sad.” At this, he starts crying. “I would like the people in charge to read this, the ones who are ruining my life.”