California Fires Not Expected To Hurt Overall Cannabis Prices

“California is America’s number one domestic cannabis producer, growing about 13 million pounds a year. So the timing of these wildfires couldn’t get much worse,” said Sarah Browne,  a cannabis market researcher, and writer, founder of Radar MRX. “The fragile, fragrant flower blooms right now — in the middle of fire season. Many growers have already cut a portion of their harvests or were on the cusp of cutting. Others report that their product is covered completely with ash and soot and smoke. And what smoke does to the delicate bud isn’t pretty. Not only does the smoke taint the taste and smell of the crop — just like wine — but smokey crops are more susceptible to diseases such as mold, mildew, and fungus.”

The fires are taking place in Mendocino country, which is part of the famed Emerald Triangle. Communication has been spotty since the landlines are mostly down and internet and wifi reception is spotty. Many in the area have taken to scouring Facebook for updates from friends that own farms to find out if they have suffered damage. If crops didn’t burn down then they are surely tainted by the smoke and ash. Since the area is responsible for a large amount of cannabis, the people that track marijuana prices closely were asked whether this fire would impact pricing. At the risk of sounding insensitive to farmers who had lost everything, those chose to remain unnamed but had these comments At the risk of sounding insensitive to farmers who had lost everything, those chose to remain unnamed but had these comments regarding cannabis prices.

“While there are supposedly several thousand (I’ve seen estimates between 3,000 and 5,000) small individual farms in Sonoma, much more product comes out of the Emerald Triangle of course. There are fires up in Humboldt / Mendo / Trinity, but they do not appear as severe or widespread. Also, keep in mind that 2015 was a pretty bad year for fires as well and ultimately we saw prices go down with the harvest as they do usually.

Some supply will be destroyed or ruined, but from a wholesale market perspective, the delta is so small, especially this time of year, that there will be little impact on average wholesale prices across the state.
However, there would or will be higher prices for local dispensaries that will need to find replacement sources.  Also, if any brands have long-term purchase contracts from impacted growers, then they could see disruption in getting product to market as well as inconsistency of end product (e.g., they’re using a specific strain with a specific THC/CBD profile for an infused product, and now they have to tinker with the processing equipment to use a different feedstock).”

There are unconfirmed reports of some dispensaries in Santa Rosa having burned down. Browne said, “Santa Rosa has emerged as the epicenter of the modern legal pot economy in California. Imagine if fires like these swept through Silicon Valley? Imagine the effect on the tech industry? Many companies spent a small fortune qualifying and preparing for Prop 64 by leasing Santa Rosa warehouse space. Now those buildings are gone. And the cannabis industry can’t be insured, to say nothing of the homes and jobs lost.”

“Spark Farm in Glen Ellen was completely devastated,” said Kristin Nevedal, Founding Chair of the International Cannabis Farmers Association, a group of farmers and scientists that promote sun-grown cannabis products. She was also hesitant to discuss any other farms that may have been destroyed since it could hurt their standing with investors. She also pointed out that many farms don’t have insurance and for some homesteaders, it was their entire lives that had gone up in smoke.

The industry insider also speculated on how these farmers will report their losses if they could report them at all.

“There may be strategic or tactical reasons to claim losses are bigger than they actually are/were, or that they are less than they actually are/were.  For example, if someone was growing more plants/canopy than permitted, they may need to under-report losses, but if folks have some form of insurance, they may want to over-report.  With so many growers, and especially during this volatile time ahead of the regulatory transition, I would image that there are a variety of operating farms in some degree of acquisition or divestiture… how does this impact the valuation and status of those deals?”

One potential solution for the farmers that have tainted crops is to sell the product to producers of concentrates. The extraction process could remove the smoke and ash particles and essentially “clean” the cannabis. However, prices for concentrate materials tend to be lower than craft cannabis prices for flower. Yet, even as devastating as the fire is to farms, human life and animal life, there can be recovery.

“Having experienced total loss of our family farm just two years ago in the Butte Fire, my heart is broken for all of those affected by the Northern California fires these past few days,” said Bloom Farms Founder & CEO Michael Ray. “We all need to take care of each other. We are mobilizing and coordinating efforts in the cannabis community to provide any relief that we can in this terribly sad time.

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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