We received 101 responses, with variations in response rates among questions. Within this group, 36 growers provided feedback about their participation in state and county licensing initiatives, and 35 on the income they received from cannabis cultivation. We received feedback about the ways in which the legalization system could be improved from 30 participants. Although this is a small number of cannabis growers compared to estimates of the grower population, preliminary conclusions regarding grower perceptions can be drawn from this sample for the purpose of guiding future research on California’s cannabis policy.Of the 36 growers who provided feedback on their participation in state or county licensing initiatives, over half reported that they had not participated in them . Of the 35 growers who reported both on participation in licensing initiatives and income sources, 31% reported income from cannabis and had not applied for cultivation licenses, indicating their noncompliance with state and county regulations. Among the growers who had not applied for cultivation licenses and who also reported on income sources , 39% indicated that they obtained no income from cannabis, 11% received less than a quarter of their income from cannabis, 11% received between a quarter and half, 22% received between half and three quarters and 17% received more than three-quarters of their income from cannabis .
Among those who had applied for state or county licenses and reported income sources , 17% reported receiving no income from cannabis,vertical farming system 6% received a quarter or less, 6% received between a quarter and half, 12% received between half and three-quarters and 59% received all of their income from cannabis cultivation. Non-licensed growers who supported their livelihoods from cannabis cultivation and explained their noncompliance said they were unable to apply because of county cultivation bans or unformulated guidelines and cost constraints . Additionally, 20% indicated they planned to apply. A small grower from Siskiyou County explained, “I live in a ban county. I plan to apply in a nearby city once the city puts a cultivation ordinance on the books.” A small grower from Mendocino County specified that the plant “track and trace” provisions of the licensing system were cost prohibitive. Compliant and nonlicensed growers also commented on the state’s licensing system and how it could be improved . All respondents except one identified specific limitations of the system related to at least one of three themes: costs, regulatory inconsistencies or alterations needed to production practices.Of the growers who commented, 70% identified costs as inhibiting compliance with state legalization initiatives. A medium-sized grower from Mendocino County described the multi-agency licensing system as “Too many departments asking for too many fees.” A small, nonlicensed grower from Nevada County attributed increased costs to regulations around sales and transport: “I would be willing to pay my fair share of taxes on products sold if I could continue to be responsible to test and transport my own product, deal directly with dispensaries as I did for years.” Similarly, a small grower from Mendocino County, who had applied for a license, described lost profits from distributors controlling the pricing structure: “The distributor is controlling prices and gouging farmers because regulations prevent small farmers from taking their products to other licensees.”
Respondents identified possible inconsistency between county, regional and state production regulations as constraining their engagement with the legalization initiative. A large grower from Humboldt County said, “Often, one agency will approve a project, and the other agency involved doesn’t. Then, you are in violation with the approving agency if you don’t do the work, and in violation with the other agency if you do the work.” Respondents identified difficulties in altering their production practices to comply with the new regulatory system. A small grower from Mendocino County indicated that new regulations made previous standard practices illegal: “My situation is totally standard: well fenced-in area, no environmental impact. I grow tomatoes, etc., in hoop houses, and now, because I applied for a license, I suddenly must get a permit for hoop houses that have been here for 15 years.”Several survey participants suggested strategies for improving the regulatory system. A medium grower from Humboldt County, who had applied for two cultivation licenses, argued, “An opportunity to mitigate or a timeline to amortize costs will help small farmers who cannot afford the intense costs associated with regulations.” A small grower from Sonoma County, who was not licensed, suggested, “Keeping grows limited in acreage so that smaller growers can compete is crucial in my mind and will lead to a more diversified agricultural system.” Growers’ responses suggest high rates of noncompliance and characterize legalization as a system that legitimizes the cultivation activities of an exclusive set of growers: large growers with the financial resources to locate their farm in a legal jurisdiction, pay licensing fees, alter their practices and increase production to comply with new laws and remain competitive in legal markets. It is likely that rates of noncompliance within the broader cannabis grower population are even higher than reported in our data, as our survey reached only growers registered on industry listservs; and, even though it was anonymous, it covered illegal livelihood activities, creating potential disincentives to accurately declare practices.
Respondents’ accounts of small growers’ exclusion from newly regulated cannabis market opportunities — due to the misalignment of the regulations with existing practices and the costs of compliance — echo the literature on governmental and nongovernmental regulation and certification of production practices in other sectors, in which codification of regulations or standards has led to formal and informal exclusion of some growers from commodity markets . In the United States, for example, structural exclusion has been documented in the voluntary, third party certification of organic agriculture, because its particular standards and onerous costs have facilitated the dominance of agribusiness at the expense of small growers . Similar exclusionary tendencies are also a defining effect of the rise of the food safety regulatory regime, comprised of both state regulations and market-driven audit requirements . Our research indicates similar patterns with the legalization of cannabis: the burden of compliance not only favors larger producers over smaller ones but also shifts the profit-making opportunities from producers to non-producers . The illicit market continues in California, and the two markets, legal and illicit, likely influence one another. Disincentives for small growers to participate in legal markets can also be attributed to, along with the factors already discussed, the demand for cannabis in the illicit market channels, both in and out of state . As of June 2019, 39 states had yet to legalize cannabis for recreational sales . In California, state and county taxes increase the legal cannabis price, and that higher price may also contribute to in-state illicit market demand. To meet industry analysts’ estimates of $1 billion in tax revenue , at least $7 billion of cannabis needs to be sold through legal markets . In 2018, $2.5 billion was sold, and the state received $345 million in cannabis tax revenues .Accounts from non-compliant growers of the effects of legalization indicate a need to explore strategies that will incentivize growers’ participation in legal markets. Their accounts also raise questions for more research on the socioeconomic and environmental effects of the state’s licensing system. California’s new cannabis regulations put limits on transportation and distribution ,vertical farming racks and consolidate supply chains through a limited number of registered distributors . Further analysis on the effects of supply chain consolidation on compliance rates is needed to understand how non+environmental aspects of the licensing system influence cultivation practices. Further research is also warranted on small-producer cooperatives, which in other agricultural sectors have improved the collective access of growers to information, credit and markets, while also enhancing regulatory compliance, community development and innovation . Grower organizations in the cannabis industry include county and statewide policy and lobbying groups, as well as private marketing and environmental advocacy initiatives . Yet, given the historically clandestine nature of production, industry led cooperatives in the cannabis sector likely do not exhibit the political and economic influence at the state level that is exhibited by cooperatives in other sectors . At this point, producer organizing can receive only limited support from UC Cooperative Extension personnel because of the restrictions on use of federal funds for cannabis research or development. Little is known about the ways in which non-compliant growers presently organize to access illicit markets. It is possible that a reliance on clandestine markets creates disincentives to collective production and market access strategies. Illicit growers may be more likely to organize their resources to avoid detection, and, without access to crop insurance or crime reporting, to protect their operations.
Understanding forms of cooperation in clandestine markets may help identify social as well as economic factors most likely to facilitate compliance . State legalization of cannabis production presents an opportunity for growers to better manage risks and enhance returns. To this end, there is a need for further research and policy exploration of potential participation incentive mechanisms, such as tax credits, crop insurance, small business development grants, extension and training. These mechanisms could promote environmental objectives, community development goals and regulatory compliance. More understanding of what incentivizes growers would help UCCE identify extension efforts most likely to enhance growers’ control over the distribution of economic benefits from legal cannabis cultivation. Analyses of relationships between land use zoning, farm licensing requirements and compliance costs would help inform outreach with state, county and municipal policymakers to promote regulations most likely to elicit compliance and reduce enforcement costs. The high rates of non-licensed production coupled with growers’ accounts of the effects of legalization on communities indicate a need for more systematic research on the socioeconomic contributions that non-licensed growers are making. Because cannabis has historically operated as a cash economy, it is likely that the majority of income from cultivation has been spent locally; cash from cannabis is difficult to transport and invest elsewhere . These contributions to local communities were largely unaccounted for in the state’s economic analysis of the medical cannabis cultivation regulations, on which the recreational cultivation licensing program was based . The analysis identified “significant costs” of regulation for growers, including costs related to local and state licensing, cultivation plan preparation, water and pesticide use approval, farm record maintenance, business license applications, track and trace system operation, processing, legal labor, consultants and farm inputs . The analysis did not address regional effects — for example, the possibility for decreased spending in places with histories of cannabis cultivation as cultivation expands elsewhere and intensifies market competition. Interviews with leaders of cannabis organizations and distributors, growers, and representatives from county employment and benefits departments, among others, to document the socioeconomic changes they experience and witness in this transition to a regulated cannabis market will help build this knowledge base. The state’s economic analysis suggested that labor compliance costs would be the most significant direct regulatory cost for growers . In-depth analyses with growers and workers are needed to illuminate the characteristics of the cannabis labor force and its trajectory since legalization . To mitigate the negative consequences of legalization for growers and rural communities, the exclusionary and racialized effects of regulation also need to be better understood.Legalization of cannabis production in 2017 has generated demands for state regulatory, research and extension agencies, including UC, to address the ecological, social and agricultural aspects of this crop, which has an estimated retail value of over $10 billion . Despite its enormous value and importance to California’s agricultural economy, remarkably little is known about how the crop is cultivated. While general information exists on cannabis cultivation, such as plant density, growing conditions, and nutrient, pest and disease management , only a few studies have attempted to measure or characterize some more specific aspects of cannabis production, such as yield per plant and regional changes in total production area . These data represent only a very small fraction of domestic or global activity and are likely skewed since they were largely derived not from field studies but indirectly from police seizure data or aerial imagery . In California, where approximately 66% of U.S. marijuana is grown , knowledge of the specific practices across the wide range of conditions under which it is produced is almost nonexistent. Currently, 30 U.S. states have legalized cannabis production, sales and/or use, but strict regulations remain in place at the federal level, where it is classified as a Schedule I controlled substance.