Despite its relatively young age, America’s state-legal cannabis industry has been insanely lucrative. In just a few short years, the sector has generated billions of dollars in revenue, created hundreds of thousands of new employment opportunities, and filling state coffers with millions in tax revenue. However, while some cannabis farmers and companies have been laughing all the way to the bank, others are struggling to keep their heads above water and barely holding on. It has gotten so bad that California’s Humboldt County has okayed a $1 million grant to help cannabis cultivators survive amid a significant drop in cannabis wholesale prices.
With a growing number of players jumping into the sector, the cannabis market has been flooded with so much product that it has outweighed demand by a significant margin. Consequently, cannabis prices have been declining, ultimately falling to a paltry $400 a pound from $1,100 a pound. As this is not enough to cover production costs let alone make a profit, the county’s board of supervisors has approved a $1 million emergency grant program to keep cannabis cultivators in Humboldt County from going under. According to Economic Development Director Scott Adair, his office has been “inundated” with urgent, desperate requests for assistance from farmers who are looking down the barrel of impending insolvency.
Extremely low cannabis prices are to blame for the current market emergency and the subsequent requests for aid and relief, says Adair, with market prices now being too low to cover the cost of cultivating, processing and distributing cannabis. As such, the program will offer grants of up to $10,000 for individual farms and $50,000 for larger, collaborative efforts. Production has also been impacted by drought, wildfires and fire-protection measures that increase costs. Furthermore, with most cannabis cultivators in Humboldt growing their crop deep in the mountains, transportation, regulation compliance and irrigation costs also add up.
All these issues affect solvency, Adair says, and there’s only so much the county can do. The grants are intended to support expenditure and activities that boost revenue or reduce other costs, not to replace lost revenue. The grants will be part of Humboldt County’s Project Trellis. Which is funded via a 10% excise tax and part of the excise tax revenue levied on marijuana sales.
With most of the surveyed farmers saying that they will be unable to make their October excise tax payments, Project Trellis may lose a large chunk of its funding. Meanwhile, the emergency program’s details will be discussed at the Oct. 6, 2021, Project Trellis Advisory Committee Meeting.
California’s marijuana cultivation sector is facing a difficult time, and it may only be companies such as American Cannabis Partners that grow and sell their own cannabis that can still thrive.
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