Outlook for Humboldt County Cannabis Operations Photo: Tim Oldenkamp/Unsplash
July 27, 2022

Eradicating California’s cultivation tax has raised some hopes in Humboldt County, but growers will reap only partial benefits according to Jesse Duncan, Humboldt native, commercial cannabis farmer, and consultant to cannabis businesses. He said he does not see an “immediate windfall for growers;” instead, “the middlemen will get the most benefit” from the tax cut. Duncan has not heard about any price effects from the tax cut but reckons it might amount to “about $25 per pound at the grower level.”

Duncan writes an opinion column in The Lost Coast Outpost, a Humboldt County-focused newspaper. Duncan’s advice and vision for Humboldt and Emerald Triangle growers is a mix of hard truths and optimism, culled from his years in the cannabis business and informed by his financial background and education.

In a far-reaching interview with Duncan, two themes stood out: his deep respect for cannabis farmers and his rational outlook for Humboldt and the Emerald Triangle in the years to come. Most recently, Duncan has seen companies moving great quantities of flower, with buyers looking for “sorted pounds, clean trim work, and consistency,” while avoiding “ugly brown weed.” On the grower side, “a lot of people are sitting on flower – outdoor and light dep,” due to low prices and, in some cases, lack of demand for a particular crop.

The contrast in what is being produced and what is in demand is the crux of the issue in Humboldt as Duncan sees it. He is seeing a proliferation of indoor and climate-controlled grows stepping in, as outdoor product without bag appeal is sold for biomass, including “compromised flower” – flower with mold or other undesirable aspects. Compromised flower needing remediation is going for $20 per pound. According to Duncan, biomass can be a decent business “if you can get a contract for $35 to $50 per pound,” with some growers getting “$150 to $175 for good biomass – and a lot of it.”

Duncan is not impugning outdoor growers with the above criticisms. He pointed out, “inconsistency [in sungrown flower quality] is largely due to weather conditions.” Such conditions are highly variable in Humboldt and the Triangle amid different topographies and temperatures, as well as general weather unpredictability.

When asked about the notion of appellations as a possible salvation for smaller sun growers, Duncan said he believes the scheme as currently envisioned may be a recipe for disaster. He succinctly conveyed the direction of the appellations plan as “slicing up the region into 10 to 15 named appellations.” He was frank in his assessment of the plan: “it’s not going to work.” He does not see consumer palettes as developed to the point of discerning terpene profiles, much less the more obscure facets of the cannabis plant’s myriad components. He believes marketing Humboldt flower as a single appellation will have a greater chance of success.

As a born and raised resident of Humboldt County, Duncan is very tuned into local markets. Regarding real estate, he is hearing of loads of cannabis properties both on the market and coming onto the market as the effects of low cannabis prices exact a toll on formerly flush farm owners. Indeed, Duncan has heard “talk of 70% to 80% of Humboldt licensees going under” and “50% of licenses lapsing” as the financial crunch bears down on the county.

Duncan noted the “back to land” people started growing cannabis in remote areas and became wealthy, spurring macroeconomic growth in the county, such as stores, restaurants, and other businesses. The collapse of the cannabis business means other, non-cannabis businesses will also be imperiled. He related an anecdote illustrating the county ethos, recalling the time a petition was circulated to keep big box stores out of Humboldt, even though the big box stores offered more variety and better pricing.

As a part of the community, a cannabis grower, and one offering free consulting to cannabis farmers, Duncan’s attachment to his milieu and respect for decades of cannabis farming is clear. That said, Duncan is a proponent of “million square foot cultivation sites” in Humboldt and to “let small farmers run them in collaboration with the owners.” Duncan is talking about “centralized cultivation at a much larger scale” in Humboldt, economies of scale to offset ever-lower cannabis prices. His approach is “radically different” than the Humboldt / Triangle way of doing business, but he believes it is necessary and one gets the feeling it is going to happen regardless of Emerald Triangle ethos and culture. Duncan said, “it’s already happening,” as the industry bows to the inevitability of economics.

Pulling back to the present moment, Duncan is seeing dispensary wholesale “spending way down,” as well as some “failure to pay” and “waiting to get paid” as emerging issues in the Triangle. Not unlike Oregon, Duncan sees the influence of the illicit market in the oversupply situation. He said a small amount of production is “landing in the regulated market,” with 70% of the overall cannabis market still illicit. The persistence and, frankly, success of the illicit market is due in part to the shellacking prices have undergone since last summer. Indoor product is down over 41% since July 2021, greenhouse is down 46%, and outdoor has fallen over 51% since last summer. The combination of an illicit market, fed by legal and illegal grows, and crashing prices suggests Duncan’s views are both timely and prescient.

The Emerald Triangle and its most famous county are in the midst of a complete industry overhaul, where big cannabis will eventually dominate, but former farmers may find opportunity as large firms seek the secrets of the most famous cannabis in the world.