New York’s hemp farms can transition to marijuana in order to supply the state’s earliest retail stores
As one of the first privately licensed cannabinoid hemp farmers in the state, Brittany Carbone and the team at Tricolla Farms in New York’s Southern Tier region — makers of the TONIC brand of CBD products — have worked hard to dial in their cultivation techniques, as well as their product formulations and branding.
Carbone and her husband received their hemp cultivation license in 2017 and produced the first crop from their farm in Berkshire in 2018, but it hasn’t been easy. New York, like many other states, overplayed its hand on hemp, resulting in an oversupply of CBD and a crashing state and national hemp market. And with the Empire State finally making the turn toward recreational cannabis, Carbone knew she wanted to transition the company’s TONIC brand to one that also included THC products, though she was not sure that farming was going to be the best way to enter the industry.
“When the state announced the adult-use (legislation), we were very torn as far as how we wanted to proceed, because as much as we absolutely love cultivating, it is very challenging,” she says. “We grow fantastic hemp but when you’re talking about THC, especially for flower, not just for extraction material, it’s really a different story.”
But in February, New York state made it an easy decision when Governor Kathy Hochul signed legislation creating the conditional adult-use cannabis cultivator license and establishing a path for existing New York hemp farmers to grow cannabis in the 2022 growing season to be ready for the expected opening of retail shops this fall. The two-year outdoor and greenhouse license comes with the ability to manufacture and distribute flower products into 2023.
In April, Tricolla Farms was one of the first 52 adult-use licenses awarded in New York.
“Once this was announced, it was very clear that this was not an opportunity that we could pass up,” Carbone says. “We see this as a really strong opportunity for us to be able to make that transition and to launch a product in this market.”
Getting product to market
With regulations still being written and a goal to begin opening dispensaries through its social equity program by year’s end, the new cultivation licenses leverage the state’s existing infrastructure — both physical and regulatory — and knowledge base to ensure there will be legal products on shelves when those first 100 to 200 stores open.
“And the only way they could get product quickly is by turning to the only people who have authorization to grow anything for cannabinoids right now, which is our hemp farmers who received special authorization to conduct research into the cultivation and/or processing of cannabinoid hemp (distinct from industrial uses, or farm or feed),” says Lauren Rudick, an attorney who specializes in cannabis law at New York’s Hiller, PC law firm.
The state’s hemp program is one of the more regulated in the nation and currently splits the licensees by those who produce hemp for industrial or food uses, overseen by the Department of Agriculture, and those who grow with the intent of extracting cannabinoids, run through the Office of Cannabis Management, which was created to oversee the upcoming recreational market.
Allan Gandelman, president of the New York Cannabis Growers and Processors Association, praised the state’s approach of utilizing the infrastructure in place, including extraction and processing facilities, and said that hemp growers are used to traceability programs and testing as part of the business.
“We literally have all of the infrastructure in place, and it’s a really good thing that New York is utilizing that from day one,” he says.
“We worked hard on getting this legislation passed this year to help give farmers the opportunity to really jumpstart the industry and make sure that there was New York products on the shelves come December when dispensaries are licensed,” adds NYCGPA board member Dan Dolgin, who also grows hemp — both for industrial use and cannabinoid content for Eaton Hemp — at JD Farms, an organic dairy farm in Eaton, south of Syracuse. Dolgin’s was the first hemp license issued in the state and in April he also received one of the first conditional licenses. He has plans to launch a THC line of products to complement the others.
“Those farmers like us have experience growing that type of crop,” he says. “We have the tools, we have the skill set, the manpower and so on to do this the right way and make sure there actually is a crop that’s harvested.”
Helping hemp farmers
The new licenses may also offer a way for many of the state’s regulated hemp farmers to recoup the investment they sunk into growing the plant. Pitched as a way to help revitalize New York’s agriculture base, the state’s hemp program never really took off the way the state, or the growers, hoped it would, due in part to a national glut of hemp following its legalization in the 2018 Farm Act.
“A lot of infrastructure and money went into the hemp program, and not a lot of money came out of it, because the hemp market tanked,” says Rudick.
For many, the conditional licenses feel like a second chance. According to Gandelman, many of the group’s members, like Carbone, have applied for and received or expect to receive one of the new licenses.
“They’re entering what hopefully will be a little bit more of a stable marketplace, in terms of THC and adult use, because the CBD market has been really rough over the last couple of years,” Gandelman says, noting that most of those taking advantage of the new licenses will be small, mom-and-pop businesses and family farms.
“This is an opportunity for those who took that risk to decide if they want to get on board with the THC side,” adds Dolgin.
Gandelman, who grows cannabinoid hemp on his organic vegetable farm in Cortland and sells it under the Head and Heal brand, also received a conditional license in the first round and is excited to begin preparing his business for the THC market.
“This is fantastic, because we could take all of our experience growing hemp here for the last four years in New York, and really transition to growing THC,” he says.
But while the new conditional use licenses may provide an opportunity for hundreds of farms and businesses, the licenses themselves, unsurprisingly, come with their own set of regulations and restrictions.
With an eye on sustainability, the new license allows farmers to grow outdoors, in a greenhouse or in combination. Cultivators are limited to one acre of flowering canopy outdoors or 25,000 square feet in a greenhouse and can use up to 20 artificial lights. They can also split between outdoor and greenhouse grows with a maximum total canopy of 30,000 square feet as long as greenhouse flowering canopy remains under 20,000 square feet.
While Dolgin and Gandelman say the conditional licenses should allow holders to continue growing at the limited level in perpetuity, Rudick says it is unclear if the conditional licenses will convert to a standard adult-use cultivator license, particularly whether they will be able to grow more than one acre, in a greenhouse under more than 20 lights, or in any indoor facility.
“If you can’t hold more than one cultivation license, and the broader, more scalable adult-use license opens up, do you abandon one for the other, or are you going to be able to convert?” Rudick asks. “And that’s a big question.”
In addition, to qualify for one of the conditional licenses, an applicant must have been an authorized industrial hemp research partner for the Department of Agriculture and Markets, cultivating hemp for its cannabinoid content for at least two of the past four years and in good standing as of December 31, 2021.
Holders of the license must participate in a social equity mentorship program where they provide training in cannabis cultivation and processing for social and economic equity partners. Growers will also have to meet sustainability requirements to ensure the cannabis is grown in an environmentally conscientious way.
Carbone, who chairs the NYCGPA’s sustainability committee, says the mentorship and sustainability requirements should help the state build a small business-friendly system that includes an “inclusive and equitable supply chain” and provide an early alternative to the only other operators who will be up and running at the opening of the adult-use market, the state’s medical licensees, most of which are giant multi-state operators.
“I think what the state is doing, as far as these kind of initiatives, with the hemp farmers and processors, and with the conditional retail licenses, it’s definitely leaps and bounds above what we’ve seen in other markets,” Carbone says.
“We’re really trying to do this in a small business-friendly way and use our existing infrastructure, and also do it sustainably because all of these people are doing outdoor grows or greenhouse grows. I think from that perspective, it’s a win-win situation,” agrees Gandelman. “And from the state perspective, that is planning on opening dispensaries later this year, we will have an actual supply chain for those dispensaries.”
But the new licenses bring new challenges for the growers, such as the potential for cross pollination with their hemp crops. Dolgin, whose Eaton Hemp already keeps its industrial and cannabinoid hemp fields separate, says he has enough space on his farm to simply add the new THC cannabis crops in their own location apart from the others. But Carbone says they will shift away from hemp, choosing instead to maintain the CBD line with outsourced hemp while partnering with a cultivator to produce a THC-rich crop for a new line of TONIC products for the New York adult-use market.
“We want to make sure that we’re making the most out of this opportunity that the state is bringing,” Carbone says.