California North Coast cannabis harvest shows growth in quality, plants
Drought may be the least of cannabis growers’ problems as the industry faces a multitude of other challenges including the oversupply of product, price drops and illegal growers.
But despite all that, most of the industry experts who gathered in Sonoma County at Mike Benziger’s 10-acre cannabis and produce farm in Glen Ellen on Oct. 7 agreed the quality of this year’s harvest so far has been stellar.
Eli Melrod, who as CEO of the Sebastopol-based dispensary Solful, enlists Benziger to provide product to sell from the farm Benziger has lived on since 1994.
“It looks like a strong harvest,” Melrod said.
Benziger led attendees around the farm to where three types of plants he grows for Solful stand at least 6 feet high in a 1,500 square foot section. The three names crafted as different strains are as colorful in personality as Benziger — Prayer Pupil, First Class Funk and La “Bomba.”
“The quality of the product looks higher than it’s ever been,” Melrod said.
Benziger also grows produce for Sonoma Food Runners’ kitchen for the needy, his daughter’s Glen Ellen Star restaurant and the tables of other family members from a well-known lineage.
After a lengthy chat about the high points of the “craft cannabis” trends, the group of panelists, which also consisted of Leafly California Bureau Chief David Downs and a few Mendocino cultivators from Esensia — Marley Lovell and Ben Blake — said they refrain from snitching on illegal growers. Instead, they prefer to focus on the quality of their own product to woo consumers.
“The best thing farmers could hope for is direct-to-consumers on site,” Benziger said, referring to an idea of the legal growers to provide tours to gain market share.
Beyond a glut of product that spilled over from last year’s excess, farmers like them are forced to also contend with these illegal growers, who don’t pay taxes.
Cannabis, by the numbers tells tale of two stories
At last count, the California Department of Tax and Fee Administration reported that as of Aug. 17 the state’s cannabis excise and cultivation taxes generated $172.3 million and $40.4 million in second-quarter revenue, respectively. Sales tax came in at $120.5 million for the same period.
The total of all the taxes was $333.2 million, up from $264.4 million in 2020 and $156.3 million in 2019.
Since January 2018 when the California legal cannabis permitting program was up and running, the total tax revenue gained by the state to date amounts to $2.8 billion.
But despite the upward trends in tax benefits to the state, some cannabis insiders insist the industry is hitting a major crossroads with a glut of product lowering prices, along with other climate-oriented pitfalls.
“We’re on the horizon of a potential crisis,” International Cannabis Farmers Association spokesman Sam Rodriquez said on the phone with the Business Journal. “If this continues, we’ll need help from the state.”
“We’re going to have to look at interstate commerce,” he said of the illegal practice of selling over state lines without U.S. legalization. “You know we never anticipated with Proposition 64 (California’s legalization measure) that farmers wouldn’t farm. But farmers are concerned about the glut in the market, and they can’t afford to farm.”
Basically, there’s a limited pie of the marketplace to go around, leading some farmers to consider opting to “fallow,” meaning to temporarily close up shop for the year.
Distributors are also noticing the “overcapacity” of product leading to prices plummeting.
Jim Hoorigan, CEO of Santa Rosa-based CannaCraft, estimated cannabis’s market value has dropped 30% to 40%.
Hoorigan cited figures from Headset, a cannabis data company, showing retail sales revenue for the second quarter fell about $100 million from the $1.4 billion set in 2020 for the same period.
“It’s not a big drop, but it’s going in the wrong direction,” he said.
Further, Hoorigan said the effects of drought might not have all played out yet.
“As a company, we’re always concerned,” he said.
Adam Koh, who compiles research data for Cannbis Benchmarks out of Denver, confirms the farmers’ concerns about pricing.
“Based on our assessments of wholesale flower prices, the current price crash began in June after our California Spot Index reached its peak for the year at $1,489 per pound,” he told the Business Journal.
The amount in contrast compares to $1,851 in volume weight in Arizona and $1,993 in Nevada. The highest among the legal states for a snapshot view in June of the second quarter came in as $3,513 in Massachusetts. Remote Alaska’s flower per pound brought in $3,354.
Fast forward to a snapshot view of October 2021, the data showed the market production value in the United States averaging $1,448. California’s market tonnage plunged to $1,204, which amounts to over three times less than Illinois’ $4,149.
Editor’s Note: This story has been updated. An earlier version incorrectly reported the size of the area on which Mike Benziger grows cannabis. He is permitted to grow in 5,000 square feet and currently grows in a 1,500-square-foot space.
Susan Wood covers law, cannabis, production, biotech, energy, transportation, agriculture as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times, now a part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or firstname.lastname@example.org.