After the smoke clears: What’s next for Northern California’s cannabis industry?

Published: Oct 14, 2017, 7:29 am • Updated: Oct 13, 2017, 9:31 pm

By Bruce Kennedy, The Cannabist Staff

The devastating and deadly wildfires in Northern California could hardly have come at a worse time for the region’s well-established and highly respected cannabis industry.

Growers in the area, famous for its world-class quality cannabis, were in the midst of their autumn harvest as the wildfires tore through Sonoma, Napa and Mendocino counties — leaving in their wake a rising death toll, millions of dollars in property loss and scores of acres of scorched farmland and forests.

A California Growers Association leader quoted by the food-and-dining website SF Eater estimated that 3,000 to 7,000 cannabis farmers operate in Sonoma alone, while another 7,000 to 10,000 farms in Mendocino — part of the Emerald Triangle cultivation zone — also are endangered by the blazes.

Related: How some cannabis farmers’ livelihoods could be wiped out by California fires

This year’s harvest in Northern California has an added significance, as growers prepare for the implementation of adult-use cannabis sales on Jan. 1.

According to the latest weekly report from Cannabis Benchmarks, a Colorado-based firm that conducts price-reporting on state marijuana markets, growers in Northern California have been investing “significant time, effort and capital” toward bringing their sites and facilities into compliance with the state’s new regulations.

Price declines already in effect before calamity

Even before the worst of the wildfires hit, Cannabis Benchmarks reported California’s state Spot Index — the current market price at which cannabis is bought or sold for immediate delivery — was continuing its current decline seen in 2017; falling just over 1 percent this week to settle at $1,445 per pound.

The report also looked backward at previous fire incidents for a possible indication of where California wholesale cannabis prices might be heading in the coming months. In 2015, wildfires hit other cannabis growers in another part of Northern California; wildfires that are currently similar in terms of acreage and destructiveness to this year’s fires. And at that time, California’s Spot Cannabis Index fell more than 23 percent in the space of about 10 weeks.

The focus now is on saving lives foremost and property where possible. But as growers are forced to assess their personal losses and damages, another concern in the Emerald Triangle is the extent of the fires’ impact on the region’s legal cannabis businesses and reputation.

Due to federal prohibitions, most cannabis-growing businesses are unable to secure federal crop insurance, qualify for federal disaster recovery funding or get loans from traditional banks.

“The lack of access to federal crop insurance will be devastating and most (affected cannabis operations) will not have any safety net to fall back on to rebuild their businesses,” Patrick McManamon, CEO of Ohio-based Cannasure Insurance Services, wrote in an email to The Cannabist. “Banking has been such a major impediment to the overall success of this industry that this will only exacerbate the problem further.”

More news from Northern California

• California cannabis growers reeling from “most financially trying, stressful year ever”
• Some cannabis farmers’ livelihoods could be wiped out by California fires
• Cannabis farmers accused of offering California sheriff $1M bribe
• Auditor slams California sheriff’s use of funds from cannabis permits to bust illegal grows
• California police find pot grow with 6,800 plants, tunnels between rooms

It likely will be the outdoor grow operations that suffer the most. A lot of cannabis that survived the wildfires could be contaminated by smoke and ash — as California-based GreenState reported, there are already rueful jokes by some cannabis growers about changing strain names like “hickory Kush,” “beef jerky” or “campfire pot” for cannabis diverted to illicit markets out of state.

McManamon expected licensed outdoor growers in the fire-affected areas to face a “complete loss” on their smoke-damaged crops — although the Cannabis Benchmarks report suggested that some farmers might be able to recoup a portion of the losses on their tainted cannabis by diverting it to “feedstock” for cannabis extraction and processing operations; companies that typically utilize cannabis trim.

In the meantime, “We have been working with some great insurance agents in the affected area and they have been working really hard to educate the local industry about what is available and (how to) implement risk management best practices into the businesses wherever possible,” McManamon said.

Efforts to help others, providing relief

While there will be significant disruption to the supply chain locally in Northern California for months to come as the region recovers from natural disaster, some local cannabis businesses are rising to the occasion and working to help victims of the wildfires.

Cannacraft, California’s largest medical cannabis manufacturer, is loaning out 12,000 square feet of its office space in Santa Rosa to the American Red Cross for use as a regional headquarters. The company is also donating more than $40,000 of products to medical marijuana patients who have been displaced or forced to evacuate by the fires.

And the California Growers Association, which promotes growers and independent businesses within the state’s cannabis industry, has also formed a fund to assist those impacted by the fires.

The Cannabis Benchmarks report did have some bright spots amid the tragic news.

A large percentage of the Emerald Triangle region’s cannabis was already harvested before the wildfires hit and, according to local sources quoted by Cannabis Benchmarks, crops in Humboldt County have “largely been spared.”

Ben Larson, founder of Gateway, an Oakland-based cannabis startup accelerator and venture fund, told The Cannabist that while the fires are “certainly devastating,” especially to outdoor growers, he doesn’t expect a significant impact to California’s overall industry — in part due to an already existing surplus of cannabis flower that numerous distributors and growers have “been trying to offload for months.”

However, “This is not at all to detract from the devastation experienced by the individual growers impacted by the fires in Sonoma and Napa counties, and beyond,” he said. “It’s absolutely terrible.”

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Topics: California, California Growers Association, cannabis industry, commercial cultivation, emerald triangle, farming, fire, growing marijuana in california, northern california, outdoor growing Bruce Kennedy