The harms of legalizing cannabis
For a long time, for some of us, almost a lifetime, we have been waiting for the legalization of the cannabis plant in its different uses. Many have paid a heavy price in the infamous war on drugs. How many lives in ruins and properties seized? How many years in prison for non-violent people, whose only crime was to increase the planet’s biomass. For what in the end? For most traditional producers, this new “legality” is a nightmare. The west coast of the United States is a good example of the problems caused by the legalization of cannabis.
This article cannot reflect the scale of the phenomenon, the explosion of cultivation since the Pacific coast states have legalized the recreational use of cannabis. The figures for the number of tons produced, the area exploited, the money invested, and the overall turnover of the cannabis industry are so disproportionate that it is difficult to visualize what they represent.
The situation in California is complex. The price of cannabis products in dispensaries is high, but producers are poorly paid. Some growers are legal, others are not, and people continue to be arrested for growing marijuana. Legalization does not mean that everything is legal overnight. You must have a license to grow cannabis commercially, and pay taxes. To complicate matters, each county may establish its own rules for licenses. In fact, a license is required for almost every step: cultivation, extraction, transport, sale, and I’m sure that I forget some.
If the idea of legalization was intended to give legal status to traditional farmers, after decades of an unproductive “war on drugs”, then it is a failure. Most traditional producers live in remote areas, where they cannot obtain licenses, while others live in communities where they do not always meet the standards required by municipalities. Some of these guys are going out of business, others supply a black market, as usual. Taxes increase prices, creating space for a black market. This said, the dispensaries are submitted to a strict control.
Price volatility is another cause of producer bankruptcy. If you don’t have a license, you can’t sell to a dispensary, only on the black market. Sometimes it is saturated, and the price is well below the producer’s expectations. The neighboring state of Oregon is a good example. When Oregon legalized recreational use in 2015, many people started growing cannabis, thinking it was the golden goose. Oregon has a small population, not capable to smoke all that weed. Remember that crossing the state border with cannabis is a crime, as it is still illegal at the federal level (until when?). So, growers were literally sitting on tons of pot that they could not sell, and the price of a pound dropped as low as a couple of hundred $. This is another strangeness of the situation: all western states have legalized recreational use, but there is still this border between them that they cannot cross. That is why, when Nevada legalized cannabis use in July 2017, Las Vegas (about 40 million tourists per year) was out of business in just over a week. (don’t worry, for a short period of time)
Who grows cannabis nowadays in California? Well, if you have enough money to buy the right facility, make the right investments, get the licenses, then you can consider starting this business, and many people do. Cultivation and extraction activities are largely owned by wealthy investors or investment groups
The production is diversified: Cannabis can be produced in mass, in large fields such as wheat (less dense). In this case, the plants are not properly fed, the quality is poor and the price for it low, but the business model is based on mass production anyway. This model is widespread in Southern California, especially around Santa Barbara where the largest fields are located. Then there are other investors and more traditional producers who grow huge quality plants outdoors, or smaller ones indoors or in greenhouses equipped with a removable black plastic sheet to control light. This technique allows more than one harvest per year. The most remarkable thing is the size of these outdoor plants; now that there is no longer any need to hide, farmers enjoy growing huge plants that were rarely seen before. Their product is sold at a high price. Apart from these two categories, there is the production for the black market, generally of good quality; and then there are plant breeders, many of them. They are trying to improve the varieties that produce THC, but they are also looking for better plants to extract CBD from, which many believe will be the real golden goose of the coming decades.
Production methods are mainly soil outdoors, and hydroponic cultivation in buildings. Coconut fibers and other fiber-based substrates are gaining ground.
Another aspect that was not foreseen at the time of legalization is the environment. In some places, the sudden explosion of cannabis fields has turned into an ecological nightmare. Excessive electricity and water consumption are a major burden on local resources. Nutrient solutions, still rich in minerals, are dumped into the environment in large volume; careless use of pesticides contaminates the surrounding environment and groundwater. Most crops grow on mineral nutrients, organic farming is an exception. After all, when you buy an e-cigarette, do you care how the plant was grown? Flowers with pesticide residues are sometimes found on the market.
In summary, at the moment, this whole production sector is a mess. Although some people at different levels are trying to improve the situation, the implementation of regulations is slow, both at the state and county levels. For the time being, we can say that with legalization, everything has changed but nothing has been solved.
The consumption pattern is also changing. Most users prefer to smoke extracts in e-cigarettes rather than traditional buds. In addition, all kinds of confectionery are in vogue; they have doses low enough that consumers do not feel overwhelmed by their effect. Products containing CBD are in high demand and may even exceed the sales of THC-rich products in the near future. Progress in the medicinal use of cannabis is accelerating, with significant amounts of money being invested in research.
Canada is the next Eldorado. Since Canada legalizes cannabis at the federal level, most of the money invested in cannabis is l in Canada, and in huge amounts. When the new legislation comes into force, it will have an impact on the entire cannabis scene in North America, and perhaps the world over.
As part of a good initiative, many counties are overturning marijuana related convictions. This will help many people who have been excluded from formal employment because of their criminal record.
For the “supply industry”, fertilizers, growing systems, soil, lighting, ventilation, etc…. the times are also changing. Jim Hagedorn CEO of Scotts Miracle Grow wants to dominate the cannabis industry. He said in a 2015 interview that he will spend $500 million to buy this branch of the gardening industry (today the investment figure is closer to one billion). To his credit, he managed to convince a rather conservative board of directors to follow his point of view.
Scotts Miracle Gro is a multinational company based in Maryville, Ohio. The company started in 1868 as a family business selling seeds. In 1995, it merged with Miracle Gro to form the Scotts Miracle Gro Group, today a leader in the field of lawn and gardening in general. They have a wide range of products, the classic powder fertilizer “Miracle Gro” and a more controversial range of pesticides, fungicides and herbicides products. They are also the exclusive distributor of the infamous Round Up, which they have licensed from Monsanto. They carry so many brands that if you are a gardener, chances are that you have a Scotts product in your shed or garage. Over the years, the small family business has become a monster that distributes these products all over the world. In 2017, their gross sales were close to one billion, with net income before taxes of $314 million, And currently they are announcing a turnover of 2.8 billion dollars (scottsmiraclegro.com). There is nothing wrong with making money (god bless America), but it is an understatement to say that the group has no sense of the ecological urgency in which we are.
Just one example to make my point: from November 2005 to March 2008, Scotts Miracle-Gro sold $73 million worth of bird seed coated with a pesticide known to be deadly to birds and fish. In 2012, they pleaded guilty and paid $4.5 million in fines. In total, they lost 8 cases for environmental protection violations, for a total of $12.519 million.
Enough old history. In 2015, SMG acquired General Hydroponics and Vermicrop, in 2016 Agritech (Botanicaire) and 75% of Gavita, all of them through its subsidiary Hawthorne. They own the main fertilizers and hydroponic systems, soil, lighting, organic supplements and various cultivation accessories. In the fall of 2017, they strengthened their presence in the cannabis world with the acquisition of CanFilter ($72.2 million), bringing the total investment to $565 million since the process began in 2015. In early 2018, they acquired Sunlight Supply, one of the two leading distributors in the United States, for $450 million, for a total investment of more than $1 billion.
There was not much resistance. One company, Fox Farm, has withdrawn its distribution of Sunlight Supply, which will be distributed solely by Hydrofarm, one of the largest distributors in North America. This one does not belong to SMG, but was purchased by a group of Canadian private investors, Serruya.
Now that legalization is underway, the whole industry is becoming in the hands of multinationals who would not have touched cannabis-related business with a ten-foot pole just a few years back. We must be vigilant to avoid a similar situation in Europe when the law changes. For the moment only Gavita belongs to SMG. Can Filter Europe is not concerned, nor is the European branch of General Hydroponics (GHE), which remains an independent company but will have to change its name to “Terra Aquatica”.
Ironically, SMG didn’t make as much of an investment as he thought. First, their shares appreciated in value after these acquisitions, but quickly the results did not live up to expectations. Like everyone else, they had not anticipated the changes that legalization would bring. New growers, other types of production, less indoors; farmers’ needs are no longer the same, some of the companies they have bought are almost obsolete, and certainly not in line with the current market.
Many of us have been waiting almost a lifetime for the end of this particularly stupid prohibition. It seems that we have had a kind of naive vision on this subject: cannabis is becoming legal, common sense and justice are being restored, period. There is much more than just that, and California’s experience shows that, to revert decades of dark ages, some planning is in order, and a framework must be designed in advance. Let’s hope that Europe will learn from the situation in North America to design the inevitable legalization in a more thoughtful way.