By Chris Van Hook
This past month has allowed me to travel up through Oregon and Washington to visit clients and to get new farms certified. It was a good opportunity to see firsthand the issues looming on the horizon for the Washington State farmers and to compare the approaches taken by Oregon and Washington as both states try to fine-tune regulations for the legal marijuana industry.
The first thing that struck me was that Oregon’s barrier to becoming a legal marijuana grower is set at a level that makes it possible for many small, diverse farmers to become legal growers under state law. This ease of entry does require state registration and other requirements, so it is not without effort; however, the cost of state compliance is low enough for many farmers reap the benefits of this new exciting agricultural crop. A model such as this, where many cultivators from different economic levels can join in the industry, and the economic benefits are shared by those throughout the state, is a far better model than the trend toward high entrance costs and high taxation.
Washington, by comparison, has made the entrance barrier difficult and expensive. The requirements of abundant security systems, fencing, product tracking, paperwork and a system of tax points has made the Evergreen State’s legal market very difficult to get into for an undercapitalized farmer. Hence, fewer, but larger, farms are being developed. While this may seem good from a state security viewpoint, it is short-sighted in that the economic benefits to the state would be far greater if more residents who wanted to grow for the legal market could participate. Instead of the economic benefits being more equally dispersed throughout the economy, high entrance costs and limited entry give monopolies to a very few well-connected people. Limited entry makes the process of permit acquisition more susceptible to corruption and closed-door arrangements.
The manner in which the two states have allowed retail outlets, whether for medical or adult-use, to develop is also very different. In Washington, the state did not limit the number of grower applications, but it did limit the number of legal retail outlets. Hence, a large number of farmers got into the business and successfully grew more cannabis than could be moved through the limited number of legal outlets. This bottle-neck in the system thereby created an over-supply of high quality cannabis, causing the farm price to plummet as growers jockeyed to get their product into the legal market.
Oregon, on the other hand, has again opted for lower barriers to entrance into the retail outlet market. Here, smaller producers or business people are able to navigate the permit process, as well as handle the expenses, so more outlets have opened, allowing for a more market-based equilibrium to develop between consumer demand, number of retail outlets and production. In Washington, an operation that grows cannabis is prohibited from opening a retail outlet. In the over-supplied market, the owners of the legal outlets are able to continue to demand lower and lower prices from the producers. The fact that the farmers are not allowed to sell directly to their consumer puts a serious barrier in place to the orderly growth of the industry in Washington.
Lastly, Washington’s current model of taxing the producer, the processor and the retail outlet separately has kept the price of legal marijuana so high that the black market has continued to thrive.
However, Washington farmers I’ve spoken with did have reason to be cautiously optimistic. The phasing out and reduction of the medical marijuana market will move a lot of those purchasers into the adult-use marketplace. A reduction in the tax bite from 75% down to the mid-30% range, more in line with the taxes on alcohol, would help open up the legal marketplace as well. Real solid growth in the production segment of Washington’s industry will not be possible, however until the barriers to opening a retail outlet are lowered and the number of permitted outlets are allowed to rise.
All of the farms I spoke with in Washington were frustrated with the packaging requirements of the state. Packaging large outdoor crops into 1-, 2-, and 3.5-gram packages is not only time consuming and expensive, but it has a huge environmental footprint as well. Cutting buds down to get an exact weight is a disappointment. One suggestion was to allow for the “deli weight” type of packaging, where a complete flower would be packaged and sold by its unique weight, much like random cuts of cheese. Allowing producers to take bulk units to retail outlets where each sale will be weighed out and packaged at the point of sale would also help reduce the time and expense of the current system. One way or another, Washington will have to look at and amend its packaging regulations and requirements.
Two farms that are leading the way in this difficult industry are Emerald Twist (www.emeraldtwist.net),and Green Barn Farms (www.green-
barn.com). Both Emerald Twist and Green Barn Farms are sun-grown farms in Eastern Washington. Both have reduced the amount of artificial light used to the minimum, relying mostly on the full bright sunshine Eastern Washington receives during a large part of the year. Greenhouses allow both farms to extend their growing seasons, or to run a second light-dep crop during the natural growing season. Emerald Twist is entering its second year as a state-licensed grower, while Green Barn Farms is gearing up for its first season. Both farms see lower prices for their product as a real challenge to remaining viable in the industry, but both have begun taking steps to reduce their production costs and to market the benefits of outdoor, sun-grown produce.
Consumers have a lot of power by the choices they make with their dollars. Consumers need to consider the impacts their cannabis has on the environment. By supporting the legal growers within the state, Washington cannabis consumers can help reduce the black market industry. By looking for a sustainably-farmed cannabis, they can make a choice to support sound water use, farming methods that encourage environmentally-friendly farms and to reduce the reliance on fossil fuels.
Both Emerald Twist and Green Barn Farms are doing more than their share to move Washington’s cannabis industry into a more viable and balanced future.
In the next installment, I will be traveling south through California where a major drought is playing havoc on all agriculture, including marijuana cultivation in particular. Nonetheless, growers are planting large numbers of plants hoping they will be able to secure the water. We will see you then!
Chris Van Hook is the program director for the Clean Green Certified Program (www.cleangreencert.com), as well as a California medical cannabis compliance attorney.