Crisis in California’s cannabis industry: – Mass extinction – VG

CANNABIS FARMER: Russell Perrin is a father of two and runs a small cannabis farm on the family property in Calpella, California.

MENDOCINO (VG) California legalized commercial cannabis. Then came the hangover: overproduction of “Walmart cannabis” and a crushing tax burden.


Just updated

At the end of 2020, the smallholder farmer Russell Perrin received around 30,000 kroner for a legal kilo of cannabis.

A year later, he sold a lot for around 10,000 kroner a kilo – and then he considers himself very lucky.

The average price for Northern California cannabis farmers is now down to 6,000-7,000 kroner, corresponding to what it costs in practice to produce one kilo.

Many people do not get rid of cannabis in California’s legal market at all.

It’s a fate much of Perrin’s production from last year will probably suffer as well. Then it goes to destruction.

“People are stuck with hundreds of kilos right now,” says Perrin.

PLANTS: Russell Perrin with some of his plants. The harvest time in cannabis cultivation is in the autumn.

Ten billion tax dollars

In 1996, California became the first state to legalize the drug for medical use.

A legal market was driven by, among others, small farmers and cannabis connoisseurs. In 2017, the goal was to extend the legalization to apply to recreational use, but the new law had a number of unintended consequences.

Five years later, the industry is on its knees with overproduction on the one hand, extensive taxes and regulations on the other and insidious, growing illegal turnover on all sides.

Annual tax revenues of ten billion kroner are at stake for California, which, among other things, is earmarked for services for vulnerable young people.

“The situation is so serious that fighters now fear that the cannabis industry in California is facing an existential crisis,” it said. a recent report from the libertarian think tank Reason Foundation.

PAR: Patricia Vargas de Gauder and Forrest Vargas run Sun Roots Farm in Covelo, Mendocino County, California.

– Mass extinction

– We now see a mass extinction of smallholders, says Patricia Vargas de Gauder.

Together with her husband Forrest, they run the farm Sun Roots Farm in Covelo, north of Mendocino County, and are active in a growing rebel movement against California’s cannabis policy.

Their cannabis is grown alongside “medicinal herbs, fruits, foods and flowers in an ecosystem paradise” with alpacas wandering around.

Sun Roots spend only one percent of their land on drug cultivation.

– But cannabis sells more than ordinary products. Peppers and lettuce will give you a few dollars, while cannabis potentially gives you hundreds. But those days are over, says Vargas de Gauder.

Without cannabis, the couple’s business model looks completely different.

– We have had good years that keep us up now. But if we have a few more bad years, I’m afraid it’s the end of it all, she says.

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LAST YEAR’S: Russell Perrin shows off some of what he has left from last year’s cannabis production.

– Messed up properly

Father of two Russell Perrin opens some boxes in his small business in the small town of Calpella.

He shows self-grown cannabis with names like “Forbidden Fruit” and “Bazooka Scout”.

– Wow, it’s so loud. I am interested in aromas, the incense, says Perrin.

He misses California’s previous cannabis law that allowed medical use, but was less regulatory otherwise.

– They messed it up properly with the new law. People here love the old. Then you could bring your product on selected sales days, all exchanged and sold. The new law stopped all that. Now we have to have a distributor, we can not sell directly ourselves, he says.

MARKETING: Rahel Ber stands at the Mendocann store in Hopland, California.


A few miles south of Perrin, in the Mendocann store in Hopland, Rahel Bel stands with samples for the hashish company Biscotti.

– They should have waited with Prop 64, instead of pushing. I do not think people understood what kind of doors they opened. Now we see big companies coming in with money and lawyers. Families who have run farms for generations are being wiped out, says Bel.

Perrin and Patricia Vargas de Gauder of Sunroots also point to the large companies that came in under the new law, which commercialized cannabis in California.

– The greenhouse cannabis is so cheap that the outlets will not relate to ordinary outdoor cannabis. They are too many, and they drive prices down, says Perrin.

In addition, it has now become common to buy shelf space in cannabis stores.

LARGE USE: A golf cart is used to get around the greenhouse of Glass House Farms in Carpinteria, California. The company is among the best-selling in the state.

– Before got yours weed place on the shelf if it was good. Now it’s like regular stores. This is the way American capitalism does it, says Perrin.

– There is an overproduction of cannabis. You have those who grow thousands upon thousands of square feet of this biomass cannabis out in the desert. It has a negative effect on the environment, the market and our water supply, says Vargas de Gauder.

She calls it “Walmart cannabis.”

– They can sell at low prices because they have cheap labor, large investors. No one wants to buy high-quality products from small farmers, she continues.

LOGO: Russell Perrin has hung this sign on the small business premises he had to build in order to operate legally under current regulations.

The bottleneck

The 2017 law, called Prop 64, also allowed local authorities to ban the retail sale of cannabis.

According to the report from the Reason Foundation, around 80 percent of California has done this, which means that outlets are clumping up in cities such as San Francisco.

– I think the demand is there, but there are too few outlets to make it fly. It’s a bottleneck! says Perrin.

But worst of all are the taxes and fees. Vargas de Gauder lists a large number of them. She believes over-regulation is the cause of the problems.

– From the outside, California looks like a place where we are very progressive, but when you dive into the regulations and taxes, it’s just too much. It kills the small farms, she says.

GOVERNOR: In May, Gavin Newsom promised to ease the tax burden on the state’s cannabis farmers.

The governor intervenes

The result is a situation where the illegal market now accounts for two-thirds, according to the Reason Foundation.

– High taxes on legal products, lack of legal sales in many regions, encourage consumers and producers to seek out the illegal market, they write in the report.

Governor and Democrat Gavin Newsom now appears to be intervening. In mid-May, he launched the state’s next budget proposal.

There he will iron out the biggest tax burden for cannabis farmers, an agricultural tax that follows the amount grown, not the income. Now it amounts to around 3,500 kroner per kilo.

According to Vargas de Gauder’s estimate, this tax – together with all the other taxes – means that in practice you go to zero or minus already for production costs at current market prices.

– We believe the market will change. Small farmers are making a lot of noise right now, she says.

Corrected: VG first wrote that the Reason Foundation was a “liberal” think tank. The right thing is that it is a “libertarian” think tank. This change was made on Monday 06.06.22 at 23:50.

Corrected: VG first wrote that according to the report from the Reason Foundation, 20 percent of California had introduced a ban on cannabis outlets. The correct thing is that 20 per cent had not introduced a ban. The sentence is aimed at 80 per cent having introduced a ban. This change was made on Tuesday 07.06.22 at 00:30.

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