Is California's Cannabis Market On The Verge Of A Crisis?

Part One of a Four-part series.  

Is California’s cannabis market on the verge of a crisis? If you ask the California Growers Association (CGA), the answer is yes. On Feb. 19, 2018, the group, which represents more than 1,100 small and independent cannabis businesses, released a 36-page report dubbed “An Emerging Crisis: Barriers to Entry in California Cannabis.”

The report details the structural, political, financial and cultural barriers that are preventing thousands of small to mid-size cannabis cultivators from participating in the state’s newly legal, and regulated, cannabis market.Of the state’s estimated 68,150 cannabis cultivators, only 534 are actually licensed to cultivate cannabis; which averages out to less that one percent (0.78%).

So why aren’t California’s cannabis cultivators entering the market?

In this four-part series, Green Market Report will take a look at the CGA’s report and walk you through the concerns it raises, the solutions it recommends, and why it matters to you. For Part One, we’ll take a look at why this report matters at all.

In order to understand why any of this matters, one first must look at the two laws which serve as the linchpin of California’s cannabis market: Proposition 64, which legalized recreational cannabis in the state, and the 2017 Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which attempted to harmonize the medical and recreational market.

The CGA report claims that the role of small to midsize cannabis businesses was central to the conversation surrounding Proposition 64 and MAUCRSA; citing several passages in Proposition 64 aimed at “ensuring… the industry in California will be built around small and medium-sized businesses.,” and notes that MAUCRSA contains similar language.

After establishing the spirit of these two laws, the CGA report examines how the laws’ implementation fails to live up to the spirit; noting several issues which will be covered in more detailed in subsequent issues of this series.

The result of these barriers has had a deleterious effect on market participation from small to midsize cultivators, leading to market consolidation from larger operators. This consolidation leads to four primary issues which concern the CGA:

A small cannabis farm in California. (Shutterstock)

Biodiversity: Most large-scale businesses rely on standardization and reliability. A consolidated cannabis market would result in fewer strain choices for consumers and could limit the discovery of new strains

Overproduction: The CGA estimates that although the state produces 15 million pounds of cannabis a year, the state only consumes three million pounds. Given that the state already produces more than enough cannabis to meet demand, an increase of large-scale is not needed and could lead to overproduction, which is already an issue in states like Oregon.

Increased Use of Pesticides: A hallmark of industrial agriculture is the reliance on pesticides in cultivation, and this is true of large-scale cannabis grows. Small-scale grows, on the other hand, can be managed without the use of pesticides because of their size. More large-scale growers mean more pesticides.

Economic Collapse: The CGA estimates that there are approximately 68,000 small cannabis farms in California. With an average of 3.6 employees per farm, the number of people employed by those farms totals to 258,000. Thousands of people and the communities they live in have built their livelihoods around those farms and current regulations threaten to destabilize that status quo. If this issue is not addressed, the economic fallout could be dire.

Stay Tuned for Part Two

So what is standing in the way between small to midsize cannabis cultivators and becoming licensed by the state? In part two of our series, we’ll take a look at the state and local policies that prevent cannabis cultivators from entering the California market.

William Sumner

William Sumner is a freelance writer specializing in the legal cannabis industry. You can follow William on Twitter @W_Sumner or on Medium.


  • Chooch

    February 23, 2018 at 2:07 pm

    As of Feb 19, there were actually over 1600 cultivation licenses issued throughout the state. Barriers seem to only exist in Indian/Chinese dominant counties (their culture has a problem with cannabis, or the fear of Indoor grows, taking electricity from their bitcoin farms), and to those still growing in their spare bedrooms. I am visited everyday by huge greenhouse farms that have no concept of economics and a flooded, perfect competition market. Its 2018 and legal, why are farmers charging more than 2017 prices when it was grey area legal but tolerated? Some farms went from 1800/lb wholesale to 3300/lb packaged?? 1500 for packaging, “Get the fuck outa here with that shit!” Excise on the wholesale cost of 1500 is only 360, 1860 per lb is 14.53 per 1/8. The excise tax on the 3300 packaged pound is 792. That brings the lb to 4092 per lb and is 31.96 per 1/8. Cool because the majority of farms are fucking retarded with packaging, and are literally giving the state extra excise tax because of packaging. In this scenario the state only gets 360 of excise tax from the Cannabis, but the State receives $432 from excise tax on the added costs of the packaging. Good job retards, your pricing and lack of education is literally ruining the industry, but none of you grasp the concept that the bubble already burst…Real farmers with lots of land are paid not to grow fruits and vegetables in order to keep the price stable making it worth the farmers time. If avocados are over produced the price plummets and farmers stop growing avocados, and eventually avocados are hard to find and the price increases. In the weed world, no one is gonna pay you to not farm cannabis, the farmers that built the industry will fade away, and the new leaders will be the packaging and branding companies. No one knows or gives a shit who grew the tomatoes for their pasta sauce or salsa, but everyone has a favorite brand or brand of choice. Ragu, Prego, Planter’s Nut mixes, Herdez, Ortega, etc… They may grow some, but its cheaper an easier to low ball the farmer with acres of shit he cant sell. How many tomatoes did you buy last year? How many jars of salsa and tomato sauce did you buy? See my point!
    California only needs 12-14 million square feet of canopy space to produce its cannabis for the year, Monterey county alone plans to permit 10-14 million square feet of canopy space in the first year, thats one county that is growing more than enough cannabis for the entire state. Maybe the state and/or the farmers should have partnered with dispensaries to guarantee that products would be able to sell in the state and not black market. 2018 – year of legalization, 2019- year of cheap turn key cannabis farms and business because of failed startups!!

    Thanks for reading


  • Lewis Goldberg

    February 24, 2018 at 11:16 am

    12 million excess pounds. Hence the still vibrant black market.

    Great reporting.


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