Farmers in Humboldt County, California are struggling to turn a profit in the legal cannabis business. This is primarily due to California’s severely oversaturated market. In other words, the price per pound of legal grade cannabis is starting to decrease, however, the cost to grow a pound of cannabis remains the same. An oversaturated market can be devastating, and many farmers are beginning to feel the effects of this situation.
Jason Gellman is a second generation farmer who owns his own cannabis business in Humboldt County. After growing up surrounded by the business, the Northern Californian is struggling to sell his crop at a decent price. “Times are really, really tough for small farmers,” Gellman told siliconvalley.com. “Most of us are in the red right now and if you are lucky enough to sell your product, it seems to be the average price per pound is around $700 which is way, way down.”
According to Gellman, the average cost to grow a pound of cannabis is about $500. With a profit of around $200 per pound, Gellman and many other farmers are struggling to maintain operations.
How Did California’s Cannabis Market Become So Oversaturated?
The primary reason behind decreasing cannabis prices is a surge in overproduction. According to Natalynne DeLapp, the Humboldt County Growers Alliance Executive Director, survivability for these farmers is in question. “California farmers are producing four to five times more cannabis than our legal market can consume. Simple supply and demand economics demonstrates when your supply outpaces your demand, the prices go down,” DeLapp told siliconvalley.com.
Furthermore, DeLapp claims this over production is due to California’s legislation regarding the production of cannabis. The state is moving closer and closer to stripping away limits on the size of these farms. Therefore, more cannabis is entering and cluttering the market.
Even though this is a complex situation, there are a few ways to correct the market. For example, California could begin regulating the size of these cannabis farms. In other words, many farmers are demanding that the state places a cap on acreage. In addition, farmers are demanding that the state reduces cultivation taxes that can amount to about $150 per pound.
While many farmers are struggling to make ends meet, they still have hope. In 2 to 3 years, the legal grade cannabis market might expand. Many farmers hope to enter interstate and global markets through future legislation. Until then, Gellman and many others will have to weather the storm. Luckily, these resilient farmers are preparing for it. According to Gellman, “We’re still in a beautiful place, we’re surrounded by friends and family, so we’ll make it. We’ll survive one way or the other.”