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The economics of growing medical pot

In the era of medical marijuana, some growers lead lifestyles that might be familiar to many people around the Capitol. Self-described workaholics, they aren’t getting rich, but many make nice, six-figure incomes.

They also face an uncertain future. Their business already exists in a legal gray area, tacitly approved of in state law but illegal in the eyes of the federal government. But that legal environment could also change in the coming months and years—to the delight of some and the trepidation of others.

According to a pair of growers who supply dispensaries, a legalized market for medical marijuana would be welcome.

Both say their business would continue to thrive, even with the introduction of bigger players and bigger economies of scale.

Each was reached via the Marijuana Policy Project (MPP), and both asked that their names not be used.

“I don’t think it would have a particularly major impact,” said one grower, who farms indoors in the Bay Area. “I think profits across the industry would stay about the same. You’d see shakeout like there would be in any industry. I think it would be a good thing for us. It would provide us with opportunities and get the criminal element out of the business.”

Another grower, who runs a large operation in Mendocino County, said that a legalized and regulated market for medical marijuana would probably lower slightly the prices people could charge for pot.

But it would also lower stress and expenses, he said. The land where the Mendocino farm operates totals many dozens of acres, but the actual growing in a season usually takes place on only one acre. A typical crop might cost $250,000 and return $750,000, he said. But due to enforcement, they might not collect at all—and also be on the hook for lawyers and court fees.

He also estimated that running a legal operation would allow him to cut his carbon footprint in half. The operation requires two diesel trucks, a 24,000-watt generator—and constant movement around the property from year to year to avoid the watchful eyes of Californians Against Marijuana Planting (CAMP). He said he also places quotes around “Californians” whenever he says or writes it, he said, due to the fact that surveys show that most Californians would like to get out of the business of shutting down medical marijuana operations.

“We’re way out of town,” he said. “We should be doing this in Ukiah, next to the highway. Closer to fuel, to the electrical grid, to the industries that should be serving us.”

This is a key point that Bruce Mirken and other members of the MPP have been trying to emphasize in media interviews. Illegal operations in national parks have been blamed for extensive environmental damage. But Mirken said this is a product of marijuana being illegal, and that a legal industry could run with less environmental damage than California’s vaunted wine industry.

Both growers said they would welcome more regulation. Both also said they welcome crackdowns on large illegal operations happening in national parks. In fact, the Mendocino grower said that if federal enforcement is relaxed against growers, the state should step in quickly with new, stronger regulations. Otherwise, he said, “We’ll have a lot of people who say they’re growing medical marijuana and they’re not.”

As for the idea they’re getting wealthy, both men said they make between $100,000 and $200,000 a year. But each also described working 70 to 80 hours a week.
For one thing, the actual growing is only part of the business. The Mendocino grower said that these days he was “knee deep in mud.” But, he added, “A lot of time, I have nice clean clothes on and I’m meeting with someone about doing business with their dispensary. I do a lot of advocacy, too.”

One grower said they had a fulltime job outside of growing. The other runs a patient collective on the side, and reports his profits as income as a caregiver and even works each year with an accountant to stay on the right side of the law—to the extent that’s possible.
“We don’t do terrible, it’s not like we’re selling hotdogs or something,” said the Bay Area grower. “But I’d say the guys in finance do a whole lot better than we do.”

Legalizing medical pot could help address the state budget deficit, advocates say. There is between $1 billion and $2 billion in medical marijuana sold in California each year, according to Dale Gieringer, state coordinator of California National Organization for the Reform of Marijuana Laws (CA NORML). However, the semi-legal nature of the industry makes this income hard to tax. Gieringer said that fully legalizing medical marijuana could result in $100 million a year in tax revenues to the state.
“People always point out that alcohol prohibition was repealed during the depression,” Gieringer said. “One of the appeals of it was the tax money.”

Gieringer has also published economic analyses of what would happen to the industry under full scale legalization and under federal recognition of medical marijuana. “Both were very positive for the industry,” he said—especially for the type of skilled, boutique providers who produce the high-end strains sold in clubs.

A fear that does sometimes come up is the introduction of large scale agribusiness concerns—particularly if someone genetically modifies a hardy, high-yield, low-maintenance variety.
But this doesn’t worry the growers. “There would be a plethora of new products,” the Bay Area grower said. Then he added, “People who come in and grow medical marijuana just to make a quick buck generally don’t do well.”

By Malcolm Maclachlan