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Is the Oklahoma cannabis market to blame for the crashing industry? Ft. Jessica Baker

Is the Oklahoma cannabis market to blame for the crashing industry? Ft. Jessica Baker

Oklahoma cannabis market

Anybody who is operating in the legal cannabis industry is likely feeling the strain of a seemingly shrinking market. Despite the massive growth of the national cannabis industry thanks to legalization in multiple states, the increased production of cannabis is tanking prices.

Cultivators and business owners are beginning to wonder if the industry is still profitable for small operators.

Jessica Baker owns and operates Clone City in Oklahoma City. She provides high quality clones to cultivations across the state, and has definitely noticed the industry beginning to shrink there.

Oklahoma has been the red-headed step child of the cannabis industry since it legalized medical cannabis in 2018. What started as a highly unrestricted industry that exploded into the largest cannabis market in the country in just two years, has turned into an industry that is rapidly shrinking.

Oklahoma has been, you know, an interesting market to say the least when we first got there, you know, three plus years ago, it was a very immature market in terms of the knowledge surrounding cannabis was pretty limited to you know, the little bit of, of knowledge that people have gained over the years from, you know, the private market, which is always amazing, but the strain names and things like that really weren’t, hadn’t quite hit Oklahoma yet. But now, you know, it is pretty much you’re hearing the same things as you’re here in Colorado and California in terms of growth techniques, terminology, and cultivars that are now popular in Oklahoma. So I feel like I’ve really seen that change and people get really enthusiastic about cannabis.

According to Jessica, the Oklahoma cannabis market has evolved to more or less replicate the Colorado and California cannabis industries, despite only being available to medical patients. However with easy access to a patient card and no cap on cannabis business licenses until very recently, the Oklahoma cannabis market quickly saw the consequences.

An oversupply of cannabis has led to the price per pound tanking across the country. While Oklahoma has been getting a lot of attention recently for the state’s efforts to restrict future licensing and regulate the industry more strictly, it is by no means the only state with the issue.

Many blamed Oklahoma when the industry began tanking following the COVID pandemic. However the criticism typically fails to account for the pandemic and the impacts that had on the industry as a whole.

With restricted trade and major impacts to the supply chain, inputs needed to cultivate cannabis at a commercial scale went up in price, if they were available at all. Without raising their prices to match their costs, many cannabis businesses began operating at a loss just to stay competitive with larger commercial competitors.

I think it has dropped nationally, because there’s just so much cannabis being grown and a lot of states that never were legally allowed to grow before. And I think with metric or not, I think there are still ways that people are probably putting that on the private market, even though they’re meant for the public market. But I think there’s just a glut and cannabis.

Overproduction is not an issue exclusive to Oklahoma. Oregon’s legal cannabis industry faced serious issues early on due to similar regulation. A lack of restrictions on who could grow cannabis led to a massive oversupply of cannabis, which dropped the price per pound drastically.

The state eventually passed a law that would allow the export of Oregon cannabis to neighbor states. However no neighbor states have passed a similar law yet, making it irrelevant. Eventually the market consolidated as grow operations could no longer afford the overhead costs with such a low profit.

It isn’t just overproduction impacting the current cannabis market either. Inflation, high gas prices and multiple other factors that impact individuals has resulted in less people purchasing cannabis recreationally.

 If gas is $5 a gallon, and you have to make a choice between buying your eighth or ounce for the week, or continue to put gas in your car to get to work and everywhere else you’re going, then you may have to sacrifice by spending less on cannabis.

For example, Colorado has seen a 30%+ decrease in cannabis sales since July 2020, the peak of the pandemic. While at the time many people had more disposable income thanks to stimulus checks and saving from staying inside, that has changed drastically.

When looking at the industry as a whole, it is hard to conclude that Oklahoma is solely to blame. Just about every legal cannabis market in the country has seen a drastic drop in price per pound.

As consumer purchases decrease, so does distributor purchases. With growers sitting on a massive stock of cannabis product from 2021 thinking the pandemic boost would last, there is an oversupply of product sitting in storage.

The longer it sits, the less it is worth.

I mean, people have already gone out of business, and it’s just the nature of business. 100% of all businesses don’t survive in any industry. So especially in a boom and bust scenario, and with the banking issues we have and the tax issues. You know, it’s not simple.

Listen to the latest episode of The Real Dirt with Chip Baker to hear more about how the Oklahoma cannabis market has been impacted along with analyses of other state markets, and what it all means for the future of the industry!

Transcript:

Chip  

This is Chip Baker with The Real Dirt podcast. We’re back again. Wow. It’s been a long time since we put out an episode. But we got a lot of important things going on in the cannabis industry and we felt like this was the perfect time to get back into it. 

You know, today it is July 10 2022. I’m in Denver, Colorado. We’ve been spending time all over the country, but primarily in Oklahoma this past year. And it seems that the state of the cannabis union is really in flux right now. You know, with the economy with inflation. With post COVID You know, structure of business and in life, the cannabis industry is really taking a turn. Today I have Jessica Baker as my guest. Jessica owns and operates a series of cannabis businesses in Oklahoma. Welcome, Jessica. 

Jessica  

Thank you for having me on the show, Chip. Always a pleasure to talk to you by cannabis and cannabis business. 

Chip  

Just to introduce yourself a little bit. I know you’ve been on the show before. And many people know you as my wife, but you are a incredible entrepreneur and educator. And let’s just talk about Jessica for one song moment. Okay, great. 

Jessica  

Thank you for the introduction. I am your wife gladly. But I’m also an acupuncturist for the last 15 years and a Western herbalist for the last, you know, two decades plus, so I have well versed in, you know, Chinese medicine and Western herbalism. And also I own several cannabis businesses. I’ve been growing medical cannabis since 1997. Back in the good old days, and so probably grown a lot of different ways. Not every way. But I’ve definitely dabbled in growing in multiple different modalities. And I own a clone nursery in Oklahoma City, as well as cultivation and processing facility. And so we’re kind of do a little bit of everything. And yeah, I love cannabis. And I love your show. Well, thanks, Jessica. And you know, I really appreciate all the women weed warriors out there, you know, this industry is is filled with dudes and dudes often try to dominate, uh, you know, whatever we’re involved with. That’s just the dude power. But, you know, we know so many women, cultivators, women, extractors, women, business owners, and the you know, I get to see it throughout the industry. I see. Maybe you call it discrimination against women business owners, just as we see it in the rest of society. But man, you know, if if the women that you know, in the cannabis industry, I guarantee you, they’re working twice as hard as the dude right next to them. And if you have a problem, you should go like maybe chat with the women that you know, in the cannabis industry and see how they feel about what’s going on. Because often they do have a different perspective than our dude oriented industry.

Bro science. 

Chip  

It is bro science. But yeah, we’re here today to talk about the cannabis industry. Boy, it is in a tailspin. Every aspect of the cannabis industry from the manufacturers and the suppliers of all the equipment, transportation, all the cultivators, the distributors, the the grocery stores, the dispensaries, like everybody is really filling this economic depression right now. Jessica, how has it been an Oklahoma what’s going on there? 

Jessica  

Oklahoma has been, you know, an interesting market to say the least when we first got there, you know, three plus years ago, it was a very immature market in terms of the knowledge surrounding cannabis was pretty limited to you know, the little bit of, of knowledge that people have gained over the years from, you know, the private market, which is always amazing, but the strain names and things like that really weren’t, hadn’t quite hit Oklahoma yet. But now, you know, it is pretty much you’re hearing the same things as you’re here in Colorado and California in terms of growth techniques, terminology, and cultivars that are now popular in Oklahoma. So I feel like I’ve really seen that change and people get really enthusiastic about cannabis. And so you know, the last year we’ve definitely seen especially at the clone nursery, a lot of the big cultivators aren’t buying clones, like they have been the two years previously. A lot of people that were maybe larger Cole debaters came in and bought less clones, because their facilities that were 1020 30,000 square feet, they, maybe they didn’t have the knowledge to pull off that large of a grow at the very beginning. So they were like, Hey, I’m going to scale back, learn a little bit more about it. And then I can always scale up again in the future. And then I know people who, unfortunately, you know, maybe they had a 401k They took out or some early retirement or some other personal investment to invest in cannabis, and it didn’t work out for them. And now they are cultivating anymore, either their want to sell their licence, or they are just kind of letting it stay dormant for a little bit.

Chip  

Tell us about like, what you feel about the number of cultivators that in Oklahoma that are cultivating this year, or number of businesses that maybe have like gone out of business or just aren’t operating? 

Jessica  

Well, I only know a handful of those, but I can say it’s all across the board, from dispensaries to processors to cultivators, I’ve heard a little bit from all of those sectors, saying that they’re they’re taking a break, or that they just downright are going back to their job at the, you know, do an oil rigging or we know whatever it is, I don’t think that’s the proper terminology. But you know, they’ve just decided they’re gonna go back to what they were doing before, right, or what they never stopped doing, you know, and they were doing cannabis on the side. And so, yeah, it has been significant. I know that, you know, where we’ve heard stories about when metric came into, into law at the end of May, that a lot of people never signed up for metric that actually had a licence. And so maybe they were going to do that later. Or maybe they just decided, well, I’m out now that there’s more regulation and work to be done to you know, how to leave or business

Chip  

To catch up on in Oklahoma. They’ve had a series, one, if you don’t know really was a free for all until recently on getting licenced and started cultivation in Oklahoma. But in the past couple of months, we’ve had a series of things going on between changes in the law, moratoriums and the licences requirements for metric tiered licencing. And it has reduced the number of people in the industry, right? Some people just didn’t want to deal with it, or they were barely making any enough revenue to support their hobby, so to speak.

Jessica  

Yeah. And like, oh, MMA, the Oklahoma Medical Marijuana marijuana advisory or stands for something like that. We’ve had a couple of inspections. Now it took it took a couple years or more, but we finally have been starting to get inspected. And our inspectors are telling us that, you know, they’re going to places that are not operational. So a lot of places still have a licence, but they’re not operating. 

Chip  

And we haven’t touched on to the elephant in the room, but it is about the decrease in price.

Jessica  

Oh, 100%. It has to do with also the decrease in profit margins for people. Right.

Chip  

Right. Right. Yeah. You know, it’s not just Oklahoma, across the country, people are having these, you know, this, this decrease in cost per pound cost per gramme from the wholesaler to the distributors to the manufacturers. Everybody has their theory on why you think this is. And some people say it’s just simply supply and demand. I believe it goes a little bit deeper than that. But why do you think the national price of cannabis has gone? So it has dropped so much? And why do you think it’s dropped so much in Oklahoma?

Jessica  

I think it has dropped nationally, because there’s just so much cannabis being grown and a lot of states that never were legally allowed to grow before. And I think with metric or not, I think there are still ways that people are probably putting that on the private market, even though they’re meant for the public market. But I think there’s just a glut and cannabis. I know people regulated market, the regulated market, right. So I know that there’s a glut of you know, cannabis in Oklahoma, and Colorado and California. And in Oregon production, overproduction. People still are sitting on hundreds or 1000s of pounds from last year. And now they’re like, growing again this year. So there’s going to be even more on the market.

Chip  

Do you think this is overproduction in the regulated market or the illicit market?

Jessica  

Probably both both. But yeah, I would say both.

Chip  

Yeah, farmers mostly have one. You know, one business plan and we talked about this many times on The Real Dirt is prices down, grow more, prices up, grow more. And that’s really what’s going on and you know, there was just such this huge decrease increase in demand for cannabis products, you know, 2020 2021 And it’s a fact unemployed people consume more wheat, right? They unemployed people smoke more weed. Right? So, you know, all those people have gone back to work right now we’re at the lowest unemployment rate, you know, the country’s one of the lowest the country’s ever seen like everybody’s back at work, but the economy is not so great.

Jessica  

And if gas is $5 a gallon, and you have to make a choice between buying your Eight for the week or your ounce for the week, or continue to put gas in your car to get, you know, to work and everywhere else you’re going, then you may have to sacrifice by spending less on cannabis

Chip  

Or many people walk. Many people don’t have that option. Yeah, how many people unfortunately, transportation options, but you know, that recreation is one of the first things to go. And you know, they say that, like the vice industries are recession proof, but it’s just not true. As as we see it now, if people just don’t have the money to spend on it, you know, and cannabis isn’t like coffee, or alcohol, right? People really need that coffee and alcohol. And most people can just like do without we, they might want it. But they can do it out do without it. And it’s similar to the cleaning business we were talking about this earlier, is, you know, one of the first ways that farmers can cut their costs is by not buying clones. And you know, one of the one of the things that I see, you know, farmers use clone nurseries for is when they can’t fill up their fields, they can’t fill up their rooms, and they come to clone nurseries often in an emergency situation. Absolutely. I see that. And they say, you know, oh, my clones died or

Jessica  

Yeah exactly my clones died, or I bought clones apartment out or

Chip  

and it’s often because they need to fill up that room. Yeah, but many people are shutting down lights, they’re shutting down greenhouses.

Jessica  

Their rooms are getting smaller. They had, you know, eight rooms and a 20,000 square foot facility and they’re gonna run two of them. Right? That’s where they started their own moms. Right and took clones, right, you know, but most of them still come back saying my clones didn’t work out. I need more. You know, we can all we always need more, you know? Not always but

Chip  

Yeah, totally. But no, we we know several people who have shut down parts of their business, you know, and aren’t cultivating any longer because they can buy cannabis cheaper or as cheap as they can produce it. And so now in their dispensaries instead of buying a built making in house, they’re buying it on the market.

Jessica  

Yes. Yep. I see all of that. 

Chip  

What about this overproduction that’s been going on in Oklahoma.

Jessica  

So you know, the overproduction in Oklahoma is twofold. One, and just to be frank, it’s okay. To be frank, a little bit about the overproduction of Oklahoma, is that a lot of the cannabis just isn’t really that great. So you have inexperienced growers growing outdoor in a really harsh environment. Yeah, or a greenhouse or greenhouses, you know, in harsh environments. And so it’s kind of sub quality weed. And so that’s one reason why the price is so low,

Chip  

because when the market is flooded with whatever it is, the price does drop, but it drops that lowest common denominator with the quality of the weed being

Jessica  

exactly and I think a lot of people, outdoor growers and greenhouse and even indoor, they know that they’re just growing for extraction, and that their quality is only going to be extraction material anyway. And so there’s this large volume of only things that they know will only go to the extractor, so the quality doesn’t have to be there,

Chip  

right but then somehow that extractable quality weed still ends up in the flower market. Oh, absolutely. Right, because there’s just 1000s and 1000s of pounds. Do you have an estimate of how much nobody even knows how much wheat was grown in Oklahoma?

Jessica  

I can’t even try to guess but I mean hundreds of 1000s of pounds million. I don’t even know what 2 million so I think that’s part of it. And then I also think that

Chip  

Hey right now, if people are listening to this, we’re definitely getting some responses about how Oklahoma was fucking up the market for everybody else. But that’s

Jessica  

just not true because California and Oregon have waived for cannabis and Oklahoma even has because there’s more people and it’s better quality and it’s still going for super cheap. And that has nothing to do with Oklahoma’s outdoor and non regulating the amount of plants you can grow.

Chip  

Yeah, so you know talking to people around the country we still see the most cannabis both regulated and you know A private market cannabis is coming from California and Oregon.

Jessica  

I mean, California, of course. 

Chip  

Right. It’s just pot the seed over there. Yes. You just put it in the ground and it grows great. It’s not like that anyplace else in the country. Absolutely. So we got in Oklahoma, we’ve got an overproduction issue, we’ve got inflation issue. And we kind of have a regulatory issue that’s occurred here, too.

Jessica  

But you know, the other thing we have is the fact that a lot of people with no knowledge or history of being in cannabis, or business, or business thought that it would be easy money to get into cannabis. And then three years later, they’re realising that’s not actually true. And so I think that’s a large part of it too.

Chip  

Getting rich quick since 86.

Jessica  

Yeah, I mean, I love you know, it is what it is. But I think

Chip  

that also because, at least at Oklahoma, it’s not get rich quick, is it? No,

Jessica  

it’s absolutely not, you may have some couple of great harvests and think you made some money. But, you know, you never know.

Chip  

You know, few people can do this number, where they like, enter the market, get a bunch of weed, make a bunch of profit, and leave and exit the in and out hot potato business strategy, right people that just doesn’t work for No, absolutely. There’s this just dream. And what happens for most people is they put all of their retirement. All right, exactly. 101 K, you know, their friends, money, their grandparents, whatever, whatever investment, they use it, right, because they’re inexperienced, they may love weed, they may have grown wheat all of their life, they may grow great weed, but none of that matters in commercial sales, commercial production. You know, when the price drops so low, you have to know how to grow that cannabis as inexpensive as possible, but still remain the highest quality,

Jessica  

Absolutely absolute, but most people, especially with how low the prices are right now, even for indoor and a lot of places. It’s really, you have to know how much it actually cost you to grow per pound, to make sure you’re not actually losing money on every pound that you sell. 

Chip  

Yeah, absolutely. In many people, you know, there’s this struggle because people so many people think that like you’re reducing quality and blah, blah, blah, but but so much of it is just organising the space, time and materials, right and people, right, and if you can organise space time materials and people like you will, like have the most efficient operation that you have that you can get a no matter what technique you’re growing under. But when you’re able to do that, then you will reduce your you know, your cost of good your overhaul cost. In hey, let’s talk about that. Jessica, what do you think the breakeven cost of production for farmers should be your needs to be for, for people to continue to stay in the industry or cultivators?

Jessica  

I mean, that’s hard to say if you are just talking about you’re growing for extraction, and Oklahoma pounds for extraction go for about 50 bucks a piece. So if you’re growing cannabis for under $50, and then you know and that’s your entire cost of labour and you know,

Chip  

You’re gonna grow it for extraction in Oklahoma,

Jessica  

then you better be growing it for $25 or $5 of have me just hard to

Chip  

do right because of the manual labour associated with harvest mostly manual labour associated with planning till the irrigation can be put together what but what about indoor?

Jessica  

I mean, indoor again, I’ve seen the indoor for as low as $500 in Oklahoma, and these you know, I don’t know if they’re truly selling indoor if they’re just calling it indoor, it’s hard to say. But I’ve seen what they call indoor that does not look that great.

Chip  

We see this throughout Oklahoma, and we’re unsure if it’s just, you know, nice greenhouse operations, poor operators indoors. Yeah, I don’t know. Yeah, we don’t quite know.

Jessica  

But I know I’ve seen it. You know, I’ve even seen $350 pounds of indoor with somebody that claims they have a 50,000 square foot facility.

Chip  

We have seen those prices in Colorado to hurt them. I don’t think that’s the average price. But those are the lows. What do you think people in Oklahoma or? I’ve heard you sing for the like, how much does it cost to produce it? That’s what I’m asking. 

Jessica  

I mean, I honestly don’t know for people because I don’t know. So you have to Yeah, okay, you know, because I don’t know what they owe on the building they’re growing in are they paying back investors every month for part of this grow? Or if it’s, you know, they own the building

Chip  

for $500. Then like, you know, like you got to indoor specifically, they’re either liquid needing to get rid of round is how much it’s gonna cost, right? Yeah. Like if you’re the one of the best operators in the country, you got all your shit together, you might be at 250 pound indoors, and some people can do it even cheaper. And that’s trimmed all your cost of production in the bag. Yeah, most people it’s not that much money. It’s 450. It’s 750. It’s, it could be $1,000 For some people, and it doesn’t matter how great the weed is.

Jessica  

I mean, I’m still hearing some rumour. There’s a couple growers in Oklahoma claiming they’re still getting 2000 and door lb, I have yet to see that. I’m sure that exists. I get but the emails I get, they’re not selling for that much. 50.

Chip  

So there’s the other thing we talked about, about pricing throughout the country, too. And now what’s even worse, is these emails and texts, often I feel like you’re just driving the price down. And so much of it’s fictional, right? There’s nobody that has the operation that needs 1000 pounds a day or you know, it’s just fictional in order to drive the price down or to manipulate the market or just people fucking around.

Jessica  

Well, and these brokers don’t even get me started on like, how they lowball and then still try to get the same price because at one they in Oklahoma, none of them had a licence to be doing that anyway.

Chip  

Yeah, they you know, they shouldn’t be called brokers. They should be Hey, pardon me, all brokers out there. They’re really nice and honest, dudes. They shouldn’t be called brokers. They should be called hustlers.

Jessica  

Yeah. Well, we always tell the middleman and we really never liked unless they were helpful and actually, like, not just trying to rip off the growers.

Chip  

Well, you know, what I’ve seen between old days in these days, and distributors and brokers is old days, it was like a set like, Hey, I’m gonna get $50 or $100 a pound.

Jessica  

Now they want as much as the grower made. 

Chip  

Yeah, exactly and they’re just trying to lowball the grower to get that price down so much. And then the bad part is, it’s usually not even their money. So it’s often this like, you know, fucked up deal where they’re truly middleman, someone else has the money. Right? And, you know, they’re like, 

Jessica  

they’re acting like they have some inside knowledge into the weed space. 

Chip  

They should be connection and they should be paid for that connection. Don’t get me wrong, but like, I don’t know, if you want a sustainable business and you really wanted to clean up like, you know, having a reasonable brokerage fee. You know, I mean, hell, what a, you know, like,

Jessica  

but you can’t be trying to make $200-300 a pound you’re buying for $500 or $400. Well, not only that, 

Chip  

but like your seeds right now. I know. But hey, man, you’re gonna go they’re gonna go out of business right now. Or your your profit definitely is gonna change.

Jessica  

Yeah, absolutely. As it should. Because I mean, once again, the farmers are always the ones who take the hit.

Chip  

Yeah, let’s talk price structure. That’s a great way to do it. Alright, so we’ve been taught cost to production, but like farmer sells the pound for 500 bucks. Let’s just say $500. He sells it to a dispensary direct. Right? dispensary sells $100 ounces. They make $1,600. dispensary sells $75 ounces. Right. They’re making 12 hundred bucks.

Jessica  

But then 40% of that goes to the tax man because of you know, the

Chip  

well 40% of the profit. So not 40% of the sale. Right. Right

Jessica  

or 40% ofthat profit goes to the taxpayer. Well, that goes to the feds. And then if you’re in Oklahoma City, 15.5% of that immediately goes to

Chip  

passed on though it’s usually not out the door pricing on what I’m talking about. Sometimes it

Jessica  

In Oklahoma they really like out the door pricing

Chip  

Yeah, but this just is just not the standard, you know. And so basically what I’m saying you’re buying it for 500 bucks, you’re selling it for 1600 bucks, you’re making $1,100 profit and then 40% of that should go to the man which is about 400 and something dollars. So like, now you just made the six $700 on a $500 lb there’s still quite a bit of money going on with dispensaries.

Jessica  

Absolutely. But I mean, especially in Oklahoma, man, you’re seeing three ounces for 150 bucks and unit Yeah, but that’s greenhouse or outdoor we No, I’m just saying that like, I’m not seeing the high priced in Oklahoma. I don’t see as much of the high price than you used to. So I do think in some respect, those profit margins may not be as high but I’m sure they’re still high for a lot of places.

Chip  

Sure, sure. And then a lot of those places are produced a lot of you know, if you’re producing the cannabis and you’re selling it, that’s the best deal you got going if you can grow it cheap enough? Yeah. Right? If you can grow it for 500 bucks or $700 a pound inside, and then resell it for that that’s decent money. That’s really good, good money. But I guess my point is this is that restaurants, farmers, entrepreneurs throughout the world operate on 10 and 12%. Net profit. And it just takes a skilled business person to operate in that manner. And you’re still making money, as the dispensaries right at these at these low prices, you have to get the customers come in to buy it.

Jessica  

And you have to have the staff, of course. 

Chip  

You have to have the staff and in all of that, but there’s still money to be made out there. And if you’re in the cannabis industry, and you’re like, oh, man, I can produce $170 $190 pounds in a greenhouse. And I can sell them for 350 or $500. But you’re making good money.  

Jessica  

Yeah, there’s still no doubt about that. It may not be the profit margin you think you should be getting? Or do you use to begin entitled to be or you feel entitled to be getting. 

Chip  

Right. But it is the sky is not falling? There? Will many people go out of business in Oklahoma? 

Jessica  

Well, of course. I mean, people have already gone out of business, and it’s just the nature of business, not 100% of all businesses don’t survive in any industry. So especially in a boom and bust scenario, especially in a boom and bust. Yep. Especially with the banking issues we have and the tax issues. You know, it’s not simple.

Chip  

Well, you know, one interesting thing from my perspective is, you know, we operate hydroponic stores and, you know, potting soil manufacturing is, you know, how bad the manufacturers are and how much the prices have risen on our side. Inflation is truly shit. You know, in all of your cannabis, grow equipment, at Cultivate Colorado, Cultivate OKC you know, we operate an online shop there, cultivateokc.com cultivatecolorado.com. People from all over the country in the world buy products from us. And you know, we have seen, they’re still we still understand there’s the demand there. And even though we have a decrease in business in our retail shops in Colorado, and in Oklahoma, we’re still on an up three year average last year was a banner year for us. But we’ve been able to like still do pretty good and you know, we we made may operate a little bit differently than other people, but many of the stores that are you know, because we’ve been around for such a long time and many of the other stores including like, grow generation and you know, some of the other like smaller stores that either are just oversized or underdeveloped they’re they’re having a struggle hanging on to this industry. But you know, we have a really well established business Kobe, Colorado you know, we expect to weather this storm, you know, you know, well you know, we’re definitely talking to our customers you know, we’re offering the best prices we can we know everyone’s struggling you know, we see new products come out all the time. This past couple of years. We haven’t seen any new products come out

Jessica  

There’s a couple new products that have come out.

Chip  

I guess you’re right, I do have some products coming out. Yeah, growers our potting soil company if you’re not familiar with us, we make potting soil in and outside Denver, Colorado, some of the highest quality potting soil in the world made from cocoa fibre. We’re coming out with two new products right now that we’re actually using, you’ve been using you’ve been a prototyping our organic cocoa for a moment.

Jessica  

Absolutely great cocoa

Chip  

…so we’re coming out with a organic cocoa and a 7030. And we’ve actually put these off for a moment that are coming out with them right now at really great great prices because everybody’s having a hard time right now.

Jessica  

Well it’s also you know, just thinking post COVID and everything going on with not only inflation, but it is a supply chain issues. So really noticing that there are things and all of our grocery stores and markets that we noticed just isn’t there anymore because of supply chain.

Chip  

Oh yeah, it’s it has been hard we have we have bought more cocoa fibre than we thought we were going to use. We’ve really tried to get the biggest deals from our competitors coming from our suppliers, the best deals so we could, you know, be able to like me Eat this market because…

Jessica  

Well I don’t even have it in stock when you need it struggling

Chip  

to manufacture is you’re struggling to get materials. But yeah, so we got a 7030 Cocoa fibre coming out. We’ve got a organic cocoa fibre coming out right now. Call us at cultivate Colorado, look us up at growers grown on Instagram, cultivate Colorado on Instagram, and Facebook. And, you know, follow your progress there. If you’re in the Colorado area, we’re offering incredible prices to you right now on this product. So give us a call if you’re in Oklahoma or Michigan or anywhere in the country, if you’re a grower, or if you’re a grocery store, you know, drop us a line at growers cocoa or it goes big Colorado. We’d love to help it out. How do people getting get in touch with you and your organisation?

Jessica  

In my organisation if you’re a commercial grower in Oklahoma, and you want clones, you know you can reach us at You can go to our website, which is clone dash city.com on Instagram, we’re at the clone city and also clone nursery. You know, because you gotta have more than one and then you can always just Google clone City, Oklahoma, and we come up oh my gosh, probably around 50 These days we really expanded our our mom rooms and got some great Oh, there are Yeah, we plant a bunch of seeds we select for specific finos and then we grow them at least two different ways in Oklahoma and then we put them out on the market so so we know they’re actually going to survive in greenhouses and outdoor yields 

Chip  

Great speaking to you today, Jessica. You know, I fortunately I get to get your wisdom on Cannabis industry all the time. Is there anything you’d like to say to fellow business?

Jessica  

I always have things I want to say.

Chip  

Women Business Owners or just cannabis business owners in general.

Jessica  

I’m gonna say cannabis owners and business owners in general even if you’re not in the cannabis space yet and you’re just thinking of any business endeavour. It is a long game it there is no shortcuts. Like I said you may do well successfully at first and then that’s when your hurdles start. But don’t think this is an easy like I’m in and out and I’m gonna just it is a long game and enjoy it Have fun, please honour and respect the plants and your employees and your business contacts, the earth, all of it. But definitely it is not it is not a short game. It’s a long game. So be patient. Take deep breaths, connect with the other people in your industry community and don’t feel entitled to anything because we’re not

Chip  

Hey, and I just want to say to you listeners. We love you all, keep the plant in your heart and just keep going you know times may be tough but just roll the biggest joint you can and fire it up.

Jessica  

We’re about to!

Chip  

This has been The Real Dirt!

Is Colorado cannabis industry dying or just returning to normal?

Is Colorado cannabis industry dying or just returning to normal?

Colorado cannabis

The Colorado cannabis market that thrived during the peak of the COVID pandemic has been slowly coming back down, decreasing 32% since the state broke records in July of 2020.

Colorado cannabis sales broke $226 million in July 2020 alone, setting a new record for the state. Latest state records show that total cannabis sales in the state for May 2022 were just $147 million.

At first glance this could be interpreted as the market correcting itself following the massive boost it received during the COVID pandemic. It could also be seen as the Colorado cannabis market losing marketshare following the legalization of cannabis in neighboring states like New Mexico and Oklahoma.

This answer is likely a combination of both.

During the peak of the pandemic, cannabis sales rose to record levels across the country. While many restaurants and stores shut down for months, in most states with recreational and medical cannabis, dispensaries remained open.

Cannabis was treated similarly to alcohol in this instance; liquor stores were allowed to remain open in most states during the pandemic as well.

The picture of Colorado’s cannabis industry profits becomes less pessimistic when taken in context and compared to pre-COVID numbers. However the numbers still show an industry that is struggling to grow as the national industry also grows and consolidates.

For comparison, let’s take the same month that we can consistently track according to state released data; May.

In May 2019, total Colorado cannabis sales were $143 million. One year later in May 2020, the state sold over $192 million in cannabis, which would gradually increase month by month until the record breaking month of July 2020 ($226 million).

It is easy to see the boost that COVID gave to cannabis sales in Colorado, as in May of 2021 sales were back down to $194 million. This number is just $2 million more than the same month in 2019.

Comparing to 2019 and removing 2020 from the equation, May 2019 to May 2022 show almost no growth.

Coincidentally, July 2021 was also one of the most successful months of the year, selling $202 million in cannabis products. The industry has not broken $200 million in sales since then.

As an additional comparison, we can look at the same 5 month timeframe from this year (2022) and last year (2021), from January to May.

The mean cannabis revenue in Colorado in 2021 from January to May was $192 million.

The mean cannabis revenue for 2022 is $151 in the same time period.

For a pre-COVID reference, sales for the same period in 2019 were only $133 million.

In other words, while Colorado cannabis sales are down compared to previous quarters, the industry has overall seen growth. The boost the industry gained from COVID has had residual impacts, with more people still purchasing cannabis than before the pandemic.

However the state has not seen a booming month like July 2020 for some time. Current trends in the industry hint that it is unlikely the state will see sales numbers surpassing $200 million until the next holiday season, if ever again.

What is the Cannabis Administration and Opportunity Act?

What is the Cannabis Administration and Opportunity Act?

Cannabis Administration and Opportunity Act introduced

Senators Cory Booker, Chuck Schumer and Ron Wyden have introduced a bill that would legalize and regulate cannabis at the federal level.

The Cannabis Administration and Opportunity Act (CAOA) is a comprehensive legislation that would end federal cannabis prohibition by removing cannabis from the Controlled Substances Act. The CAOA  would also empower states to create their own cannabis laws; ensure federal regulation protects public health and safety; and prioritize restorative and economic justice.

The bill was initially introduced as a discussion draft in 2021, and after receiving over 1,800 comments, the senators made adjustments and additions to the bill before introducing it this to the chamber this week.

The restorative justice aspect of the bill would help undo the decades of harm caused by the failed War on Drugs, ends discrimination in the provision of federal benefits on the basis of cannabis use, provides major investments for cannabis research, and strengthens worker protections. By decriminalizing cannabis at the federal level, the CAOA also ensures that state-legal cannabis businesses or those in adjacent industries will no longer be denied access to bank accounts or financial services simply because of their ties to cannabis.

“As more states legalize cannabis and work towards reversing the many injustices the failed War on Drugs levied against Black, Brown, and low-income people, the federal government continues to lag woefully behind,” said Sen. Booker. “With strong restorative justice provisions for communities impacted by the drug war, support for small cannabis businesses, and expungement of federal cannabis offenses, this bill reflects long overdue, common sense drug policy. I am proud to have partnered with Senators Schumer and Wyden to introduce this critical legislation. The support that we have received from committee chairs and outside groups underscores the historic nature of this bill and the urgent need for Congress to pass it.”

The Cannabis Administration and Opportunity Act has several goals, including protecting public health and safety, and prioritizing restorative and economic justice. This would be done by implementing safeguards like track-and-trace and purchase limits on retail cannabis for the former. Expunging federal cannabis convictions and encouraging states to do the same would be an initial step for the latter objectives.

It would be made easier for more individuals to get involved in the legal cannabis industry by expanding access to loans and capital for entrepreneurs, especially those impacted by the war on drugs.

The regulation and taxation of cannabis would be implemented by transferring jurisdiction over cannabis from the Drug Enforcement Agency (DEA) to the Alcohol and Tobacco Tax and Trade Bureau (TTB). The regulatory framework would be similar to alcohol and tobacco while supposedly recognizing the unique nature of cannabis products.

By default, federal banks would now be permitted to freely do business with legal cannabis businesses without fear of prosecution from the government. Further, cannabis businesses would actually be allowed to claim tax deductions for business expenses, which currently isn’t an option in most states.

One of the last main objectives of the Cannabis Administration and Opportunity Act is to encourage cannabis research which has been severely lacking for decades. The CAOA would require more federal research into the impacts of cannabis on health and public safety.

The bill would also establish clinical trials through the VA to study the effects of medical cannabis on the health outcomes of veterans, compile industry-related data and trends, and establish grants for cannabis research.

For employees, federal drug testing for cannabis would be removed as well as random testing for cannabis. However certain “sensitive categories” of federal employees could still be drug tested. This includes those working in national security, law enforcement and commercial transportation.

Regular industry employees would also get worker protections.

There is no current timeline on when the bill we be held to a vote in the Senate. The SAFE Banking Act which aimed to only allow legal cannabis businesses in states access to federal banking, has been shot down in the Senate several times.

New York Announces Conditional Adult-use Cannabis Retail Dispensary Licenses

New York Announces Conditional Adult-use Cannabis Retail Dispensary Licenses

new york adult use cannabis licenses for retailers

In March of this year the New York Cannabis Control Board (CCB), which oversees the Office of Cannabis Management (OCM), proposed a regulatory framework to create and oversee Conditional Adult-Use Retail Dispensary Licenses.

These licenses will be the first allowing retailers to sell recreational cannabis in New York, outside of tribal lands. However only certain individuals meeting a “justice-involved” standard will be eligible to apply.

OCM officials have said that the state will issue between 100 and 200 Conditional Adult-Use Retail Dispensary Licenses. Plans to release the licenses are currently slated for late 2022 or early 2023.

An “Eligible Applicant” is:

  1. An applicant that has:

    • a) a significant presence in New York State, either individually or by having a principal corporate location in the state;

    • b) is incorporated or otherwise organized in the state; or

    • c) a majority of the owners are residents by being physically present in the state no less than 180 calendar days during the current year or 540 calendar days over the course of 3 years;

  2. An individual, or an entity with one or more individuals, where at least one individual:

    • a) Is “Justice-Involved,” meanings individuals who were; or had a parent, legal guardian, child, spouse, or dependent who was; or were a dependent of an individual who was convicted of a marijuana-related offense in New York before March 31, 2021;

    • b) Provides evidence of the primary residence of the Justice-Involved individual at the time of said individual’s arrest or conviction; and

    • c) The Justice-Involved individual holds or held for at least two years at least 10% ownership and control of a business that had net profits for at least 2 years, or a qualifying nonprofit.

  3. A nonprofit that is: recognized as an entity pursuant to section 501(c)(3) of the Internal Revenue Code; intentionally serves Justice-Involved individuals and communities with historically high rates of arrest, conviction, incarceration or other indicators of law enforcement activity for marijuana-related offenses; operates and manages a social enterprise that had at least two years of positive net assets or profit; has a history of creating vocational opportunity for Justice-Involved individuals; has board members or officers who are Justice-Involved; has at least five full-time employees.

Additional requirements include 51% ownership in aggregate by one or more individuals who meets the requirements of (1) and (2). 30% ownership by at least one individual who satisfies (1) and (2) whom exercises sole control of the applicant or licensee.

As for the license itself, the conditional period for which the Conditional Adult-use Cannabis Retail Dispensary Licenses applies will last four years from when the license is issued. An applicant that receives a license must begin operations within 12 months of it being granted.

Cannabis products can only be acquired from authorized entities, and can only be distributed within the state.

The licensee “shall enter into and comply with all terms and conditions of any agreement with any fund approved by the [CCB] and made available by [OCM], including, but not limited to, accepting a dispensary location identified by the fund or office, any loan agreement with such fund, any lease or sublease agreement with the State of New York or its agents, or any other such agreements into which the licensee enters.”

After the Conditional Period, licensees may apply to transition to an adult-use retail dispensary license.

California Cannabis Tax to be Lifted to Aid Cultivators

California Cannabis Tax to be Lifted to Aid Cultivators

California cannabis cultivation tax to be lifted

In an effort to aid cannabis cultivators that have been hanging on by a thread the past several years, California is completely overhauling its cannabis tax codes to try and help.

The changes, which were adopted last week as part of a broader state budget agreement, will also create tax credits for some cannabis businesses, expand labor rights within the industry and switch collection of a state excise tax from distributors to retailers. That tax will pause at 15% for three years, after which regulators could raise the rate to recoup lost revenue from discontinuing the cultivation tax.

Advocates believe the new tax plan will aid the struggling small businesses operating in the legal cannabis industry in California. With exorbitant application fees, license costs and strict regulatory oversight set by local jurisdictions, it has become untenable to run a small-scale cannabis operation in the state.

While this may just be a band aid over the larger issues plaguing California’s legal cannabis industry, it should at least help cultivators stand a better chance of staying afloat in the competitive industry.

Prior to the removal of the tax, cannabis cultivators had to pay a tax of over $10 per ounce of flower. With 16 ounces in a pound, and the price of a pound of cannabis flower tanking as low as $500 in the last year, growers were potentially paying nearly half of their profit just into taxes for cultivation.

Additionally wholesale prices have dropped by as much as 50% over the past year, particularly squeezing farmers whose outdoor crops sell for less and forcing many smaller operations to close down.

Even the trimmings of cannabis plants were taxed at $3 per ounce, making a byproduct of the cultivation process that can be used to create ointments, creams or extracts just as untenable.

And of course, all of the increased costs levied on growers is then transferred to distributors, then retailers, and finally passed on to the consumer. Officials and advocates are hoping the move will lower cannabis prices overall for consumers while making it more profitable for cultivators.

However the state has yet to take any action on retail sales taxes. Business owners and advocates claim that California will never be able to compete with illicit market cannabis which is just as large in the state due to current taxes.

For comparison, alcohol in the state is only taxed at the state sales tax of 6%, with an additional charge of $3.30 per gallon. Cannabis on the other hand, in addition to state and local sales tax, is levied a 15% additional sales tax.

In other words, a customer who thinks they may be getting a deal on a $100 ounce, could actually be paying over $120 for the same product after taxes. Exorbitant sales tax on cannabis is extremely common in legal cannabis industries across the country. Medical cannabis sales in most states have no additional tax at all.

Lastly, the latest removal of the taxes is set to last only 3 years. While this gives advocates time to fight for more ground and lower additional taxes, reform licensing and equity access to the industry, the fight is not nearly over for cultivators and business owners in California’s cannabis industry.

Pennsylvania Cannabis Banking Bill Headed to Governor’s Desk

Pennsylvania Cannabis Banking Bill Headed to Governor’s Desk

Pennsylvania cannabis banking bill

A Pennsylvania cannabis banking bill that would protect state banking and financial institutions from prosecution is on its way to Governor Tom Wolfe’s desk after passing the House last week.

The legislation is nearly identical to a standalone bill that passed through the legislature earlier this session. The new measure passed with a 173-27 vote.

Sen. John DiSanto (R), the chief sponsor of the bill, had initially introduced the measure as a standalone piece of legislation. But after passing the Senate earlier this year and clearing the House committee, DiSanto filed it as an amendment to the already-passed HB 311. That bill deals with authorizing certain financial institutions to conduct savings promotion programs.

The amendment won’t give financial institutions complete immunity however, as it only applies on the state level. As cannabis is still a Schedule 1 controlled substance according to the federal government, banks and financial institutions can still be prosecuted for working with legal cannabis businesses, even if they are operating in a legal state.

However the amendment represents a step in the right direction for an industry that has been plagued with financial burdens due to federal laws. The fed has been stalling the passage of the SAFE Banking Act which would give federal banks protection in dealing with legal cannabis businesses.

The federal government isn’t necessarily cracking down on any banks doing business with legal cannabis businesses currently. But the implication that they could be punished has prevented almost every federal financial institution from working with legal cannabis businesses.

Now state institutions at least will not have to worry about being prosecuted on the state level. With the federal government more or less looking the other way in regards to state legal cannabis industry operations, more banks and financial institutions can feel safer in working with cannabis businesses.

The text of the amendment officially states that a “financial institution authorized to engage in business in this Commonwealth may provide financial services to or for the benefit of a legitimate cannabis-related business and the business associates of a legitimate cannabis-related business.”

The same protections will also be afforded to insurers. However the amendment also specifies that banks or insurers will not be required to provide services to legal cannabis businesses.

Further, the legislation says the state government cannot “prohibit, penalize or otherwise discourage a financial institution or insurer from providing financial or insurance services to a legitimate cannabis-related business or the business associates of a legitimate cannabis-related business.”

Agencies will be prohibited from “recommending, incentivizing or encouraging a financial institution or insurer” to not provide services just because a business is associated with cannabis.

Banking has been the largest issue impacting legal cannabis industries across the country since Colorado first legalized in 2012. With lack of access to federal banking, and few state institutions willing to take the risk, cannabis business owners are at the whim of whatever institution will take them.

This typically results in higher than average interest rates, stricter monitoring of account activity and even account removal without notice. Credit Unions and smaller local banks will even impose exorbitant deposit fees since they know cannabis businesses will deposit larger amounts of cash compared to other businesses.

Additionally as most credit card companies operate in cooperation with federal institutions, the majority of cannabis businesses are cash only. Robbery and theft is extremely common in the cannabis industry as businesses owners must carry bags of cash sometimes containing hundreds of thousands of dollars since they can’t accept credit from customers.

The Secure and Fair Enforcement (SAFE) Banking Act that has passed the House in some form six times at this point, only to stall in the Senate. It is currently the only federal bill focused on solving the banking issues plaguing the legal cannabis industry.