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With Growers in the Shadows, California Faces Cannabis Shortage

March 26, 2018
An employee stocks cannabis shortly before the first day of adult-use cannabis sales in San Francisco. (Noah Berger/AP)
It’s the opening chapter of California’s new era of regulated cannabis, and already a market disruption is underway.
Generally, retailers have ample product on store shelves for both adult use and medicinal cannabis consumers, but some brands are now in short supply. Prices are mostly stable, though new state taxes on legal purchases have meant sticker shock for customers.

Meanwhile, the black market appears to be thriving anew—invigorated by dissuasive taxes on growers, plus licensing fees and frustrations over difficulties of entering the legal economy. If more cultivators aren’t licensed by the state, manufacturers for cannabis concentrates for vape pens, waxes, and infused edibles fear they may run short of their critical production component – leafy cannabis trim – by summer.

“If more local jurisdictions don’t get their acts together and start licensing quickly, we’re going to have an issue with supply.”

Bryce Berryessa, cannabis business owner

Some state lawmakers, led by a pro-cannabis Republican, want to eliminate cultivation taxes to convince growers that the state-permitted cannabis economy is the way to go. But taxes aren’t the only obstacle. Cannabis industry advocates say a glut of local government bans on cannabis sales, cultivation and business, particularly delivery services, isn’t helping market stability.

“I would say in general, the manufacturers are very impacted, and the amount of farmers that don’t have licenses is a big change,” said Kenny Morrison, president of the California Cannabis Manufacturers Association and a licensed edibles and concentrates manufacturer and distributor. “And that is only a small part of the overall problem.”

To understand the early-onset confusion in America’s largest cannabis economy is to know this: Many old friends in the industry are now having trouble doing business with each other.

Related

California’s High Cannabis Tax Could Doom Legalization. Here’s a Fix

At Canna Care, a medical-only dispensary in Sacramento, purchasing manager Don Davies used to rely on a stable of medicinal growers registered as cultivators for the dispensary’s collective. Now one of his most loyal growers—a friend who consistently provided him with potent, high-grade cannabis for $2,500 a pound—hasn’t been able to get a state cultivation license.

Other former Canna Care growers have had trouble partnering with licensed cannabis distribution companies, Davies said.

“We have lost people that we have literally worked with for years,” Davies said. “They are now off the list because they are no longer state-certified.”

Related

Report: 99% of California Cannabis Growers Are Still Unlicensed

Instead, soon after the Jan. 1 dawn of California’s regulated era, a cannabis distribution company came offering Davies similar quality cannabis compared to what he used to buy from long-time business partners. He says the distributor “wanted $3,200 to $3,600 a pound,” telling him it needed to cover state taxes and fees accumulating along the supply line.

Davies balked at the prices. But good fortune followed. The distributor found few buyers and came back with a decidedly better offer: $2,300 a pound, a market godsend to help stabilize the dispensary’s prices.

“Right now, we don’t have any clones. Normally, we have several racks of them.”

Katie Rabinowitz, Magnolia Wellness

Still, at retailer Magnolia Wellness in Oakland, which is licensed for medical and adult-use sales, there are frustrations. General manager Katie Rabinowitz says the dispensary’s normally ready supply of cannabis clones for at-home cultivators have virtually disappeared due a supply disruption from nurseries still navigating the state permitting process.

“Right now, we don’t have any clones,” Rabinowitz said. “Normally, we have several racks of them, each with six-plus trays with 40 to 50 per tray.”

Magnolia Wellness has maintained its supply of cannabis flower, albeit working with some different cultivators than before amid the slow march to state licensing. Rabinowitz says the dispensary has cut prices of some brands to ease consumers’ added burden of multiplying taxes, including a 15% excise tax on sales.

With Oakland as a major manufacturing center, Magnolia Wellness has maintained supplies of many popular cannabis foods and vape products. But overall, its concentrate selections are down 10% to 15% in terms of choices offered.

“For some of our patients who have loyalty to a certain brand or company, that’s where we’ve had some negative sides to this,” Rabinowitz said of the shortages. “But overall, we were able to stock up with inventory, and some of our top-selling brands have their licenses.”

Related

California Bill Would Temporarily Cut State Cannabis Taxes

In Southern California, Chris Francy, operator of the Bud and Bloom and OC3 retail stores in Santa Ana, says his shelves are packed with products for medical and adult-use consumers. There is no shortage, he said, but significant changes in what’s available.

“It is still easy to fill up a big store with products,” Francy said. “But it is just that not all of the brand names have been able to move forward yet” into the regulated era.

Francy says his dispensaries are carrying more pre-packaged cannabis flower from branded producers over boutique buds from smaller farmers. Many of his edible and concentrate selections are also different than last year.

“We’re definitely in flux. Some of our brands haven’t been able to jump the gap with licensing or strike a deal with distributors,” he said. “Certain brands have gone offline.”

Overall, the state’s Bureau of Cannabis Control says it isn’t hearing of any significant shortages for California cannabis consumers so far.

But Morrison of the Manufacturers Association says the Golden State is plagued with “cannabis deserts”—vast regions with few retail offerings, particular due to a crash in the cannabis delivery economy as hundreds of unregulated delivery drivers haven’t found cities willing to license them.

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Hezekiah Allen, executive director of the California Growers Association, says local bans on cannabis cultivation could take a toll on the market.

While Allen says currently “there is no shortage of regulated flower out there,” he worries that long-term supply problems could loom because cultivators in more than two-thirds of California “are unable to get a permit because of local bans.”

He said a dramatic political change of heart in one county alone—Calaveras—to ban commercial cultivation after widely licensing cannabis farms may alone have removed 10% of cannabis flower and leaf from the regulated market.

Related

How a Cannabis Ban Turned One California County Into ‘Ground Zero for Chaos’

Meanwhile, Tom Lackey, a Republican Assemblyman from Palmdale and former California Highway Patrol captain, says California is in serious danger of taxing itself into potentially severe market shortages of cannabis product by summer.

“There is no gray area on this issue. You either help people who are trying to get into the regulated system or you’re supporting the black market.”

Assemblyman Tom Lackey

Along with Oakland Democrat Rob Bonta, Lackey has introduced legislation to eliminate state cultivation taxes on cannabis farmers for three years and cut the excise tax on sales from 15% to 11% to entice more producers into the legal market.

Due to state levies on farmers of $148 per pound for cannabis flower and $44 per pound for leaf, Lackey says many growers are remaining in the illegal market—or worse, fleeing to it.

“The small growers will be the first ones to be eliminated,” Lackey said. “It is difficult enough for them in trying to follow the rules and we’re choking them out. … There is no gray area on this issue. You either help people who are trying to get into the regulated system or you’re supporting the black market.”

Related

California’s Limit on Big Growers Just Vanished. Here’s Why

Bryce Berryessa, owner of the TreeHouse dispensary in Santa Cruz and La Vida Verde, a Watsonville cannabis foods and concentrates company, is unnerved in different ways by California’s regulatory launch.

In Santa Cruz, he has lost business relationships with farmers still unable to get local licenses and is now importing flower for growers in other counties. His licensed manufacturing company stocked up on plant trim and accelerated production in anticipation of the new regulated era. But he worries supplies may soon run thin.

“I think a lot of manufacturers stockpiled oil in anticipation of a possible glut in the marketplace,” Berryessa said. “So we haven’t felt an impact yet. However, if more local jurisdictions don’t get their acts together and start licensing quickly, we’re going to have an issue with supply.”

Peter Hecht's Bio Image

Peter Hecht

Peter Hecht, former political writer and Los Angeles bureau chief for the Sacramento Bee, has been reporting on cannabis since 2009. His coverage has been honored for explanatory reporting in the "Best of the West" journalism awards and earned an Excellence in Journalism prize from the Northern California Chapter of the Society of Professional Journalists. Hecht is the author of the book “Weed Land: Inside America’s Marijuana Epicenter and How Pot Went Legit.”

View Peter Hecht's articles

  • HumboldtBiologist

    Do you guys ever write about Humboldt County? I mean besides the horrible article “8 places to get stoned in Humboldt County”? Humboldt County has a major surplus of licensed flower because no distributors or brokers make the trip up here and our cultivators are currently slammed with all their permitting and compliance work. I work for a small consulting firm that helps over 350 grow sites in the county work with CDFW and State Water Resource Control Board for their permits. 7 out of 10 of the licensed folks are having a hard time legally selling their weed, approximately 4 out of 10 sat on their harvest from last year just so they could move it in the legal market this year. One of the problems is the market is geographically skewed. People came to Humboldt to hide from the law and now they are inadvertently hidden from the new legal market…

    • Jeff Johnson

      Try True Humboldt – they are a distribution firm based in Humboldt that moves product all over the state.

      • HumboldtBiologist

        I’ve seen some people work with them but the distribution up here is still inadequate.

      • Open Minds

        Hi Jeff. I know True Humboldt represents great farmers but I’ve yet to see True Humboldt cannabis in Southern California dispensaries, but I do see Flow Kana cannabis here. Why is that?

    • Alan479 Martin

      You can’t be legal even if you want to.

    • cannabistini

      @HumboldtBiologist – I know someone who is looking for trim (biomass). How does one find these growers?

      • HumboldtBiologist

        Its quite simple, anyone who applied for a license submitted their application as a public document. Someone could easily make cold calls to potential licensed cultivators. Assuming they themselves are a licensed distributor or work with one.

  • william

    What California really has a shortage of is people with two brain cells that actually work.

    • 360dunk

      ‘a shortage of is people with two brain cells’

      Hmmmmmm….interesting.

    • Alan479 Martin

      Re elect no one

  • kristine08

    Connecticut sucks because they have a limit on the MGS of THC that can be sold in every type of product and flower. They only sell in 3.5 gram amounts of flower, for between $35 & $55.00, & higher.
    NOBODY can afford to stay in the legal program with those astronomical prices and very low concentrate.
    There is so much chemical in the “slim: version of vape pens, they taste like crap.
    If you do not make a purchase at a legal dispensary at least every six months, your card will be suspended.
    So many issues to “hash out”. 🙂
    There is no consistency. You cannot count on that 1:1 CBD vape cartridge to be in stock. (for example)
    California, has way more choices and logical mgs of THC to choose from. (After all we are not all beginners)
    I’d rather be there then here when it comes to medical marijuana.

    • 360dunk

      Kristine, if it’s any consolation $35-55 eighths are common in the original weed states like California, Nevada, and Washington. Colorado seems to be one of the least expensive, but your Connecticut prices are definitely not out of line in today’s world.

  • 360dunk

    It’s so difficult to grow outdoors in places like Nevada that most people just accept the high dispensary taxes. California, however, has some prime weather and soil conditions that makes growing much easier. The danger with over-taxing dispensary products is that buyers will return to street weed before paying 30-40% more. That means those high taxes will result in more people purchasing cartel-smuggled cannabis, which is exactly what authorities are trying to avoid. Sometimes government is its own worst enemy and it almost always boils down to monetary greed.

  • commander.mcjeff

    Many long time growers were already being screwed when it was the medical only. A number of growers I spoke with could not get their product into the dispensaries for various reasons, such as preferring the indoor top shelf over the outdoor organically grown crops. The article mentions 2300 & 2500 per pound as if that were reasonable. In the last five years growers I spoke with who had been shut out of the medical dispensaries were offering pounds of top shelf organic outdoor for 800-1000 a pound! This was before adult use came into effect. Since the disastrous roll out of adult use legalization, growers I speak to are sitting on many pounds, are unable to sell legally and are begging people to buy their flower crop at the above mentioned 800 a pound. There are more great offers than one can consume in a lifetime, let alone a year. All on the black market.
    Meanwhile, the dispensaries have gotten worse, staff seems dispirited, prices are outrageous and unaffordable, and selection is limited. Concentrates and edibles have been in short supply and the reformulated edibles cost more and aren’t as potent.
    This has not been a change for the better. It has screwed medical patients and reinvigorated the black market with the lowest prices ever.
    It’s a mess and California needs to sort it out. A recent visit to Portland dispensaries demonstrates to me it can be done.

    • nixnoutz

      Thanks for your post! Informative it is.

    • HumboldtBiologist

      “Since the disastrous roll out of adult use legalization” Agreed, but we must also realize the limp, grey, quasi-legal medical market that has existed since Compassionate Care has not helped this whole situation.

    • Alan479 Martin

      It’s not only a mess in CA but everywhere as the greedy corrupt politicians show again how exactly they have ruined the economy.

  • SailerJerry

    Again.. California Politicians are screwing the California Taxpayers and screwing up something the voters voted for. Why are these political leaders making it so damn hard for working, taxpaying Californians to live in the state? Making the legal weed business complicated and expensive only pushes the good guys away and brings in the black market dealers. California Political Leaders are out of control.

    • Alan479 Martin

      It’s not only a mess in CA but everywhere as the greedy corrupt politicians show again how exactly they have ruined the economy.

      • SailerJerry

        Reno Nevada isn’t too bad. Prices are sometimes high, but the businesses seem to have it together.

  • love.violet524

    The blessing in all of this so far is that we can now grow our own pretty easily. That’s a big step forward. <3

    • HumboldtBiologist

      Here in Humboldt County, Fortuna CA is requiring $100 annual fee and biannual police inspections for personal cultivation.

      • love.violet524

        What does that mean? Do you mean that even my single closet-grown plant would be inspected by cops twice a year? They’d expect me to pay somebody $100.00 per year to grow in my closet? … even in Humboldt? I’ve been Humboldt County dreamin’ for years now… Things are seriously under-cover here in Kern Cty.

        • HumboldtBiologist

          Yes that is exactly what it means. If you live in Fortuna Ca, you have to submit to these things or your personal grow is illegal by city ordinance. Fortuna is the enclave of conservative timber and cattle ranchers and the have always hated the cannabis community.

          • love.violet524

            Thanks, HumboldtBiologist! I’ll have to modify my Humboldt County Dreams to exclude Fortuna! I have enough of that type of energy here in Kern county. I guess those were the people who rose up about the farmers market a few months ago. How did that turn out? Sorry it’s taken time to get back to you, but the comments here just kept buffering – forrever… … ….

            Listen, There’s an Awesome webinar finishing up on healing properties of cannabis called “The Sacred Plant”. This last episode has really great info on the healing properties of the various cannabinoids and terpenes, and it has personalized treatment methods for serious illnesses, with genetic testing and matching of the person and the plant-strain. Blue Dream seems to be a hit for multiple sclerosis, seizures, and such.

            The webinar covers various elixirs, oils, and such, custom-made for each patient according to their unique DNA… The name of the testing facility (here in CA) is EarthHealthcare.com and they have doctors to give intensive treatment and guidance. Here’s the link: https://thesacredplant.com/webinar/webinar7fpc Enjoy! It’ll be up until Fri/13th at about 9:00 pm EST. If you miss it, just let me know. I was able to download it, I just haven’t uploaded it to my Google Drive yet… Peace & <3

            PS – I'll tell you one thing that is kind of disturbing. I learned from an interview with the people from Miriams Hope that systemic pesticides are transferred from the mother plant to the seed, and it can take up to 8-10 generations of organic breeding to purify that seed strain from that particular mom. Those pesticides are, of course, concentrated in the oils, and if those oils are processed with chemicals like butane, alcohol, and ethanol, they most likely contaminate the oil too. This is a big deal for people turning to herb for help with cancer and other serious ailments. What about all of those plants that were sprayed with paraquat? and all of their descendants? What about our seeds today?