Economic Importance of Cannabis

Today the cannabis industry has gained legimiticy. An entirely new crop experts including medical doctors, nurses, university-educated botanists, farmers, scientists and businesspeople have entered our ranks. These guys are serious professionals and most of them are well-funded. It´s not like putting together a big grow or moving a load of dope was in the past.  The cannabis green rush also spawned new crop of oportunistic armchair experts, get-rich-quick conmen and everyday crooks. Many of them wear suits and ties. Beware! [caption id="attachment_37781" align="alignnone" width="1920"] Ryan Doran and Dave Feichko from Thailand Organic Cannabis are two groundbreaking grower-entrepreneurs from California that expanded to the tropics where knowledge is scarce and production costs are low.[/caption] The following is an abridged history of cannabis from an economic point of view. Please take special note of how legalization spawned a “brave new world” full on new entrepreneurs. You as a farmer, are on the bottom rung of the ladder and bear the expenses. Industrial hemp was planted around all major seaports in the world. The fiber was used to make canvas sails, hemp rope and other products. This is one of the main reasons cannabis plants are so widely dispersed in the world. Before cotton became popular and nylon and other sythetic fibers were invented, industrial hemp was the main source of rope, canvas, paper, etc. But in 1933 the publisher William Randolf Hurst wanted hemp banned to serve his economic interests. Check out the 1936 film “Reefer Madness” on YouTube, also a product of the US government propaganda machine, supported by Hurst. Suddenly hemp was no longer a drug consumed by deginerates according to the US government. They required farmers to grow industrial hemp to win World War II. Available on YouTube, the 1942 film “Hemp for Victory,” asked patriotic farmers to grow hemp to contribute to winning War. The heyday of hemp was curtailed after the War when the US Government re-imposed cannabis prohibition. The politicians found it more profitable to use cannabis as a tool to villify Mexican workers, blacks, musicians and others they deemed as problem-makers. Cannabis was no longer hemp; it transformed into an antisocial drug. A new word, “marihuana” (marijuana), the Mexican slang word for cannabis, was adopted. Drug cannabis, marijuana, once again gained popularity in the 1960s when it was embraced by change-oriented individuals. Marijuana soon became an international symbol of rebellion. As marijuana use grew, so did the market. By the mid 1970s, the price of female flowers started an upward trend that continues today. A large underground economy grew that attracted a full spectrum of growers and sellers. Terms such as “Sinsemilla-airs” and “Green Gold” were coined and indicitive of the fortunes made. The illicit market became very lucrative and was countered by a draconian political, judicial, law enforcement, prision system with unlimited funds. A slew of anti-cannabis laws were passed in the US and internationally to implement the ban. Scientific evidence and the multitude of “marijuana drug addicts” that comprised about 10 percent of society across all socio-economic levels overwhelmed the political-driven draconian enforcement machine. The politicians decided that it was more profitable to legalize cannabis than keep marijuana illegal. Unfortunately, a few nay-sayers still believe the bullshit rhetoric about how cannabis harms societies youth. Those in denial of the benefits of cannabis usually have an agenda that involves political aspirations and of course money. Ironically, the properties of cannabis have sprouted an entire new branch of medicine, much of which helps children.

Medicinal Cannabis

Modern medical discoveries began in the 19th century. Jump ahead to 1963, the issolation of CBD and 1964, THC, by Dr. Mechoulam. Cannabinoid receptors were cloned in 1990 (CB1) and 1993 (CB2), proving that mammals (humans) evolved with cannabis. These combined discoveries revealed the endocannabinoid system, providing scientific proof that an entire new branch of medicine could exist. [caption id="attachment_37779" align="alignnone" width="1920"] Cedar Gray, owner of Siskiyou Sungrown Farms in Southern Oregon, inspects a CBD-rich flower. He is all business and includes an entomologist on staff.[/caption] In 1996, California passed Proposition 215, the Medical Use of Marijuana Iniative, allowing medical cannabis. Twelve years later, more than 200,000 medical patients were in California. In 2010, Sativex, the first government approved botanical cannabis product, was approved for sale. The maker, GW Pharmaceuticals, a public company, is the first multinational to enter the cannabis arena.

Farming Medical Cannabis

In the USA, the Hemp Farming Act passed became law in 2018, opening the floodgates to CBD-rich cannabis cultivation. The following year more than 20,000 hectares were “reported” cultivated. But, this is the shiny picture on the outside. The reality is much different when we look at amount of cannabis harvested and who profited. For example, farmers in Arkansas, an agrucultrurally-based US state, harvested less than half of the CBD-rich cannabis planted and 94% of them lost money! The dynamics of farming 10 hectares of cannabis is much different than growing a 100 m2 greenhouse full of cannabis. In the US in 2019, the average price of a CBD clone was $4 and seed with a germination rate of 85 percent cost about $4.400 per kg. Cost to plant feminized seeds in a hectare is $6.500, assuming 100 percent germination. Planting 4.250 clones per hectare costs $17.000. Cost to plant 10 hectares of clones $170.000, seeds $65.000. This does not allow for por germination and dead plants that must be replanted. After applying for and receiving permits, an expensive process, land must be rented or purchased. The field must be irrigated, fertilized and weeded. Add harvesting, drying and processing the crop, and expenses add up to $75,000 per hectare, $750.000 for 10 hectares. We have not considered bad weather, disease and pest problems or wildcards like a worldwide pandemic, Covid-19! In June, biomass (the whole plant) of 10 percent CBD sold for $100,50 CBD per kg. By October the price dropped 67% to o $50,80 per kg! During the same period flower sold for $872 per kg and dropped 35% to $566,80 by October. The same principals and numbers can be applied to THC-rich cannabis. This wave of cannabis legalization and production are just starting to arrive in Europe. Many US companies have tried to enter the European market to date. But, they have found more than enough gullible suckers in their own country. For example a US grower, Bruce Perlowin, is featured in a Medical Marijuana Daily article hitting the “groundbreaking milestone of $1,000,000 in a matter of days” for his high quality hemp flowers. Dig just a little bit deeper and learn that his public company, Hemp, Inc., lost $8,302, 992 for the year. [caption id="attachment_37778" align="alignnone" width="1920"] THC farmer, Craig Johnson, owner of Alpenglow Farms, in one of his greenhouses in Southern Humboldt county California keeps his costs low and his profit margins high.[/caption] Some public companies offer stock that is an OK deal if you feel lucky, but all public compaies in the cannabis realm are a risk, a big risk. They always show in their literature such things as, “the cannabis market will top $70, 000, 000, 000 by 2027”. Please do your homework! Please consider who you are when you face the brave new world of cannabis. Are you a legitimate researcher and entrepreneur that used to be a misfit, a dreamer or a crook?