Cannabis farming has presented a lucrative opportunity for farmers as states across the US continue to legalize the plant. But legalization may also place cannabis and hemp farmers at risk, particularly small growers.
Entering the industry and maintaining compliance can be extremely expensive for smaller-sized farmers. In Illinois, for example, it can cost anywhere from $5 million to $10 million for a grower to get into the cannabis farming market.
Larger operations may be better able to handle the exorbitant fees that come with cannabis farming, but smaller farmers aren’t so lucky. The industry is increasingly putting a lot of financial pressure on growers, and there’s growing concern that these smaller-batch farmers will be weeded out of the industry altogether as a result.
The stringent regulatory requirements that now come with cannabis farming have led to a much higher cost to stay in business. Smaller producers are having trouble staying afloat and are experiencing heavier debt loads before they see one dollar in profit. For example, stacking of small-scale permits by large companies and extensive fees have displaced many small cultivators in California’s Emerald Triangle. Via the University of California–Berkeley, Michael Polson explains, “Faced with stringent regulatory requirements that can cost tens or even hundreds of thousands of dollars, smaller producers are becoming indebted and struggling to stay afloat until they can finally turn a profit.”
Expensive technology and automation implemented by massive facilities increases output, lowers costs, and makes competition unrealistic. In-house lab testing and compliance employees are other advantages of large companies. To compete effectively, smaller farms are under pressure to expand. But with conditions being as they currently are, many smaller cannabis farmers may find themselves dropping out of regulatory programs in their respective state or failing to enter in the first place.
And if the smaller cannabis growers market diminishes, it could strengthen the underground market.
What could help small farmers become legal and minimize the odds of them disappearing from the market is for each state to prevent permit stacking, forgo large farm permit issuance, offer producer cooperatives, and provide tax incentives for ecosystem services (e.g., watershed protection).
Further, support from consumers can also be of tremendous help. Rather than spending their money with larger operations, consumers can become more aware of the smaller farmers near them and use their spending power there.
It’s important for consumers to understand who they’re buying from and supporting when accessing cannabis and hemp products. Smaller farms can powerfully impact the local economy.
Failure to implement these or other strategies could lead to a consolidation of the cannabis industry into a common agricultural product and the diminishing of smaller growers. The consequence would be price collapse and the end of the community that quietly maintained cannabis culture for five decades and that has championed artisanal cannabis products.
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