Marijuana Goes Industrial in California

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synteche
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Marijuana Goes Industrial in California

Postby synteche » Sun Apr 16, 2017 2:47 pm

After years of marijuana being cultivated in small plots out of sight from the authorities, California cannabis is going industrial.

Over the past year, dilapidated greenhouses in the Salinas Valley, which were built for cut flower businesses, have been bought up by dozens of marijuana entrepreneurs, who are growing pot among the fields of spinach, strawberries and wine grapes.

“This is cannabis meets Big Ag,” said Steve DeAngelo, the executive director of one the nation’s largest marijuana dispensaries, who last year founded Harborside Farms to supply the business.

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The 47-acre farm is dotted with greenhouses that emit the pungent smell of thousands of marijuana plants and warehouses where farmworkers who spent their careers tending to raspberry plants now sit in rows delicately trimming the leaves from harvested cannabis buds. When the last greenhouses are built here next year, the facility will be one of the largest legal marijuana farms in the world.

Harborside and other farms like it are a sign of a new chapter for America’s cannabis industry, in which marijuana is grown openly, like any other crop. Despite the federal ban on marijuana, leaders of the industry are taking a Manifest Destiny view, believing it is only a matter of time for pot to become as widely accepted as alcohol across the country.

California, with its ideal climate and vast market, is at the vanguard of the movement to normalize the drug and produce it cheaply and in abundance.

“California is destined to do with cannabis what we’ve done with every other fruit and vegetable,” Mr. DeAngelo said. “And that’s take half of the national market.”

The move to mass-scale farming is occurring just as some members of the Trump administration are advocating a revival of the war on drugs, including marijuana, which is now legal in some form or another in about 30 states. The federal ban precludes growers of California cannabis from legally shipping out of state, although tons of it seeps out anyway.

Terry Garrett, a cannabis analyst based in California, estimates that American consumers spend at least $50 billion a year on marijuana. By contrast, legal marijuana sales total around $7 billion, according to data compiled by BDS Analytics, a company that specializes in data on the cannabis market.

American cannabis laws and politics are starkly contradictory: Cannabis growers here, in Colorado and in the other states where cannabis cultivation is legal are regulated and taxed. But Jeff Sessions, the attorney general, recently compared cannabis to heroin. He and others in the Trump administration have threatened a crackdown.

Greater enforcement of the federal ban does not appear to be imminent. Russ Baer, a spokesman for the Drug Enforcement Administration, said “nothing has changed in terms of our enforcement approach.”

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Workers at Harborside trimming leaves from harvested cannabis buds. Credit Jim Wilson/The New York Times
The D.E.A. remains concerned about diversion of marijuana to the black market, Mr. Baer said, but its priorities are elsewhere.

“Our attention is so focused on the opioid epidemic right now,” he said. “That’s where we’ve committed the vast majority of our resources.”

The aggressive moves in the Salinas Valley into large-scale cannabis farming, replete with plans for conveyor belts and high-efficiency Dutch-built greenhouses, are already roiling the industry. Some are worried that the marijuana business is getting too big too fast and predict a glut of California marijuana and sharp price declines. Growers in recent years have already reported steady declines in wholesale prices of marijuana, although retail prices have remained relatively steady.

Small cannabis farmers who have operated for decades and fear they could be wiped out are among the most alarmed.

“We are watching the industrialization of commercial cannabis,” said Tawnie Logan, chairwoman of the board of the California Growers Association, an organization that lobbies for cottage growers’ access to the market. “For them, the name of the game is the profit margin.”

Ms. Logan said small growers were grateful for the legal battles that veterans of the industry like Mr. DeAngelo of Harborside had waged for the industry but felt betrayed by Harborside’s move to mass production.

“They say they are fighting for the little guy while they set up a 50-acre farm,” Ms. Logan said.

Outside the Salinas Valley, the majority of cannabis farms in California have growing areas that are smaller than 5,000 square feet. The Harborside growing areas will be more than 70 times as large, around 360,000 square feet, and will have a capacity of 100,000 plants, including the nursery.


The industrial cannabis farms in the Salinas Valley are beginning their operations during a period of legal limbo in California. Voters approved recreational marijuana in November, but California lawmakers will be working out detailed regulations in the coming weeks, including the question of whether to put a cap on the size of farms.

Newly passed regulations in Monterey County are forcing cannabis growers to be more public than ever before.

“The industry is cautiously coming out of the shadows,” said Mary Zeeb, the treasurer of Monterey County, which is assessing a tax of $15 per square foot on cannabis cultivators.

Monterey County, which encompasses the Salinas Valley, has received 73 applications for cannabis farm permits, and more than 40 of those are already operational, said Brandon Swanson, a planning manager for the county’s Resource Management Agency.

A typical cannabis farm in the valley now operates with two or three greenhouses, and there is plenty of room to expand. “Nobody is at full capacity of what their land can do yet,” Mr. Swanson said.

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Steve DeAngelo, left, and Jeff Brothers, the businessmen behind Harborside Farms. “Harborside takes grief for being the 800-pound gorilla,” Mr. Brothers said. “But if we want cannabis to be widely accepted, we need it to be cheap.” Credit Jim Wilson/The New York Times
The rush into cannabis farming has been disorienting for neighboring businesses. Gerald Voge, a fifth-generation flower grower, said he had received many unsolicited offers from cannabis businesses to buy his 20-acre nursery, including a recent bid of $6 million. He is refusing to sell.

His neighbor’s run-down, 10-acre nursery recently sold for $3.9 million to pot entrepreneurs.

“Everyone is running after gold,” Mr. Voge said. “I am afraid that in three or four years a lot of people will go belly up.”

Maximillian Mikalonis, a former legislative aide in Sacramento who helped write California’s medical cannabis regulations, said lawmakers must decide in the coming weeks whether to curb the move toward industrialization.

“It is a critical moment, a defining moment for the future of the industry in California,” Mr. Mikalonis said.

The choice, he said, is between a “marketplace for small and boutique operators who have been doing this for generations — or domination by the forces of agribusiness.”

Some believe the consolidation of the industry, as has happened across the food industry, is inevitable.

“The effort to protect the little guy is ultimately doomed,” said Tom Adams of BDS Analytics. “The retailers are going to have to get big or get out.”

Overproduction is also a concern in the industry both because it could push down prices and because California cannabis could flood the markets of other states.

California produces more cannabis than it consumes — three times as much, by conservative estimates.

“The entire experiment will fail if California’s continues to sell out of state,” said Hezekiah Allen, the executive director of the California Growers Association. “The more product that leaves the state, the more the federal authorities will intervene.”

The owners of Harborside Farms say they are acting on the imperatives of the market.

Jeff Brothers, the chief executive of the parent company of Harborside Farms, spent decades in the cut flower business, where he learned the importance of scale, he said.

“Harborside takes grief for being the 800-pound gorilla,” Mr. Brothers said. “But if we want cannabis to be widely accepted, we need it to be cheap.”

By setting up in Salinas and taking advantage of the agriculture infrastructure, Mr. Brothers said, the company will be able to halve its cost of producing marijuana. He uses a wine analogy to describe the difference between small growers in Northern California and the Big Ag growers in Salinas.

“They can be the specialty brands, and we will be Mondavi,” Mr. Brothers said.


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