Tough Times for Pot Farmers

Does the harvest party make it all worth it?

This excerpt is from Bloomberg Business Week titled ‘From Reefer Sadness for Pot Farmers’

Now a new set of variables has thrown the business into even greater uncertainty. On Nov. 2, California will vote on Proposition 19, the "Regulate, Control and Tax Cannabis Act of 2010," a ballot initiative introduced by an Oakland pot enthusiast named Richard Lee that proposes to legalize marijuana for personal use. The new law would permit individuals to possess up to 1 ounce and cultivate 25 square feet worth of plants at private homes, with no medical requirement. Beyond that the initiative's language is murky. Regulation of commercial production and sale of cannabis would be done by counties and municipalities, leaving the mechanics of how it would all work undefined.

One thing seems clear, though, if the measure is adopted: A quasi-black market will be replaced by a much more legal one, and prices for pot are likely to go down. It's impossible to know by how much, but a 2010 Rand study called "Altered State? Assessing How Marijuana Legalization in California Could Influence Marijuana Consumption and Public Budgets" estimates that retail prices could eventually drop by 80 percent. First, suggests Jonathan Caulkins, a public policy professor at Carnegie Mellon University and a co-author of the Rand study, there would be a "honeymoon" period of several years when production would ramp up as California product began to push out inferior Mexican pot across the country. Once that happens, you could have "a real change in industry structure," according to Caulkins. Growers would have to professionalize their operations and become even more industrial-scale to squeeze out smaller margins of profit. In such an environment, people probably won't make the $150,000 or so Jason says he clears every year, and "mom and pop" farmers will be wiped out. Jason is planning ahead. "You wanna go up top and walk through them fields of glory?" he asks. "If you can grow twice as much, you'll make the same amount of money, even if the price is half."

At harvest time, which starts in October, he hires trimmers to cut the buds off plants for $200 a pound. "Somehow I tapped into this endless lesbian crew. They come out from North Carolina or Idaho, jumping trains the whole way," he says. "One year I had a CPA from Paris." He hires a cook to feed them and provides music, wine, and, of course, plenty to smoke. "It's a party," he says, bouncing up and down and making Edward Scissorhands motions with his fingers. His plots are scattered around the forest along with a collection of greenhouses that are visible from overhead but, he hopes, aren't numerous enough to invite a raid.

Jason says he clears $150,000 to $200,000 a year in profit from the land surrounding his house, depending on how good the crop is. He earns more from other plots he owns nearby. He doesn't pay taxes on the income because he doesn't file a return ("I don't lie about it. That's when you get in trouble"). Spending all that cash in the middle of nowhere can be a challenge. He and his wife eat all-organic, and he's got a few trucks to play with as well as a $28,000 Kubota backhoe. Some of the money is "seasoned" slowly into a bank account, so as not to draw attention.