Despite regulations having been passed and gleaming new licensed retail operations springing up all over the country, California in particular has been supporting the illegal cannabis trade for many states that still operate under prohibition laws. According to a study conducted by the Department of Food and Agriculture, in 2016 (the most recent year for which figures are available) about 10 million pounds of California-grown cannabis left the state, and that growth moves in two directions — on one end, it moves speedily toward gratifying the regulated market, and in the other direction, toward satisfying a multibillion-dollar black market elsewhere.
This is widespread, with only 6,000 of the estimated 50,000 growers in California’s fertile growing regions having sought licensure since the state began issuing permits, according to The Orange County Register.
Why might this be?
Cannabis sold where it’s grown may be fresh enough to sell at market value, but could triple in price once it’s exported, even though for every mile that product travels, it ages and potentially loses potency. So, flower that’s classified as old or unsuitable in California can still be viable on the black market and highly sought after in other states.
Indeed, hit up any SoCal dispensary, and prices are likely to range from top-shelf “private reserve,” at $80 per eighth after tax, to a highly affordable $100 per ounce for last year’s outdoor crop, whereas on the Golden State side market, a pound can go as low as $500. With this price drop in mind, we’re left wondering if small-scale craft growers still make ends meet, particularly if they don’t ship product beyond state lines, where their return on investment is likely to be much more lucrative.
Consumers Purchasing Low-End Bud For High-End Prices
THC Design, a high-end cannabis company based in Los Angeles, makes uniquely strong and clean flower. Co-founder and head of sales Jairia Pass speculates that because of the decentralized regulations surrounding cannabis cultivation, many consumers are unknowingly purchasing middle-grade buds for high-end prices.
“I think people may not truly know what ‘super-premium’ cannabis looks like. They’ve been accustomed to the product they get locally, but are pleasantly surprised, even blown away, when they experience THC Design flower for the first time. Our hope is that once they discover what truly premium product is like, they won’t need to buy from the black market because we offer a safer, more dependable experience.”
Besides superior quality and predictable outcomes for customers, the volume of cannabis produced is also a vital bridge to consistent cash flow for growers and producers, and many black-market farmers agree with the compliant, customer-focused point of view offered by THC Design’s cofounder.
Grower R* of Humboldt County knows from 14 years of getting their hands dirty that the quality of craft cannabis is currently being usurped by volume when the product is heading across state lines.
“It’s been about volume forever, no matter what the state was doing,” shares Grower R. “No longer are you gonna have a boutique grow like you had 5–10 years ago. You used to have to grow 300 pounds to survive, now you need closer to 1000 pounds.”
Continuing on the difference between compliant and black-market pricing, R clarifies that grow expertise is important, and that many underground customers simply don’t get to consume flower of the highest caliber.
“Quality is of true importance, otherwise it has to be turned into a product,” explains R, referring to cannabis extracts. “Shitty, cheap stuff often gets kicked to other states. The prices are lower for sure, and they’re creeping back up, but we haven’t seen the bottom yet. In the black market, the person suffering a loss nowadays is the middleman,” the middleman being the trafficker who gets the cannabis to illegal markets, as opposed to the grower who sells directly to dispensaries.
Volume, Grow Expertise And Cleanliness Plays A Part In Cannabis Pricing
Another up-north grower, M* of the Emerald Triangle, thinks cannabis is going to see many more changes still before we’re done perfecting grow techniques. Of the volume boom, M says, “Growers will be happy as long as it’s viable to grow acres of [cannabis]. But the ma and pa days are over. Of course, there’s some high-end product, but overall the best doesn’t ever make it to a store. Most people in that game like to inflate self-importance and think they are real farmers. Try growing a hundred acres of strawberries at $2 per pound.”
Grower R knows just how important California’s experienced cannabis workers are, pointing out, “Novices will never make a better craft-quality product, especially in a new place. Be prepared when starting in a new market to have some realistic expectations, unless you’re importing a Master Grower. Just like wine and other plants we consume as intoxicants, there is an entire culture and years of mastery behind the best quality [cannabis]. You can start a business as a total nobody in California because of the diverse pool of experienced talent. If you were starting in Vermont, it’s totally different.”
As cannabis nutrients and genetics continue to be fine-tuned, crops become less complicated to sustain, even when growing at home as a hobby. However, large-scale, licensed cultivation remains a game for experienced professionals only, and amateur cultivators are unlikely to come out on top without first experiencing several problematic, even failed harvests that suck up their initial financial investment.
According to Humboldt County growers R and M, the green there may be premium, but if a customer don’t personally know the grower, then they’ll likely know next to nothing about where the black-market cannabis they consume came from.
Jairia Pass stresses that with this mystery comes major risk. “What the black market does is force the end consumer to just buy whatever is available, and that product may be unclean, full of pesticides, or even dangerous to their health.”
Mikel J. Alvarez, vice president of retail operations at Blüm dispensaries in California and Nevada, agrees, saying, “The issue with the black market is that consumers do not know what they are actually consuming. It could be filled with pesticides, metals, and even gasoline to mask the smell.”
Without rigorous, regulatory third-party testing of all cannabis sold for consumption, we can only go on the hope that big-name brands do provide clean product that offers standardized outcomes we know and trust — and that the same goes for black-market product.
Is Standardized Pricing For Cannabis The Answer?
When asked if there is a push to provide affordable cannabis options in stores, Alvarez notes the shock of some customers, whose eyes widen with surprise at some of the high-end post-tax prices.
“It is a sticker shock for most people today walking into a dispensary because of the taxes that have to be charged by the state and local municipalities, if they had been able to purchase medically last year,” Alvarez says, before suggesting, “As prices go up, sales will go down and a new equilibrium will be created. The market is adjusting right now and we will see how [it] responds.”
Does this mean that the industry will diverge between cannabis of extreme potency, or extreme volume? For his part, Alvarez aims to please all Blüm clientele, including with an offer of lower-cost options.
“Our ethos is premium-quality cannabis with professional service. Just because the price is lower, does not mean that the product is not good. It might not test as high in THC or terpenes, or look as pretty as other buds. However, the quality is there for all of the products that we sell.”
Expert cultivation results in high yield and more potent product, but potency is just as important as clean, nontoxic product with consistent terpene and cannabinoid profiles, which can fluctuate with today’s divergent grow methods. Sadly, for black-market consumers, a guarantee of potent, clean product is not yet even a remote possibility. Though there are good nuggets, there are no guarantees.
*Names changed to protect growers’ identity.