Pubdate: Sat, 17 Jan 2015
Source: Herald, The (Everett, WA)
Copyright: 2015 Associated Press
Author: Gene Johnson, Associated Press


High Taxes and Not Enough Stores Is Creating an "Economic Nightmare" 
for Farmers.

SEATTLE (AP) - Washington's legal marijuana market opened last summer 
to a dearth of weed. Some stores periodically closed because they 
didn't have pot to sell. Prices were through the roof.

Six months later, the equation has flipped, bringing serious growing 
pains to the new industry.

A big harvest of sun-grown marijuana from Eastern Washington last 
fall flooded the market. Prices are starting to come down in the 
state's licensed pot shops, but due to the glut, growers are - 
surprisingly - struggling to sell their marijuana. Some are already 
worried about going belly-up, finding it tougher than expected to 
make a living in legal weed.

"It's an economic nightmare," says Andrew Seitz, general manager at 
Dutch Brothers Farms in Seattle.

State data show that licensed growers had harvested 31,000 pounds of 
bud as of Thursday, but Washington's relatively few legal pot shops 
have sold less than one-fifth of that. Many of the state's marijuana 
users have stuck with the untaxed or much-lessertaxed pot they get 
from black market dealers or unregulated medical dispensaries - 
limiting how quickly product moves off the shelves of legal stores.

"Every grower I know has got surplus inventory and they're concerned 
about it," said Scott Masengill, who has sold half of the 280 pounds 
he harvested from his pot farm in central Washington. "I don't know 
anybody getting rich."

Officials at the state Liquor Control Board, which regulates 
marijuana, aren't terribly concerned.

So far, there are about 270 licensed growers in Washington - but only 
about 85 open stores for them to sell to. That's partly due to a 
slow, difficult licensing process; retail applicants who haven't been 
ready to open; and pot business bans in many cities and counties.

The board's legal pot project manager, Randy Simmons, says he hopes 
about 100 more stores will open in the next few months, providing 
additional outlets for the weed that's been harvested. Washington is 
always likely to have a glut of marijuana after the outdoor crop 
comes in each fall, he suggested, as the outdoor growers typically 
harvest one big crop they continue to sell throughout the year.

Weed is still pricey at the state's pot shops - often in the $23- to 
$25-per-gram range. That's about twice the cost at medical 
dispensaries, but cheaper than it was a few months ago.

Many growers have unrealistic expectations about how quickly they 
should be able to recoup their initial investments, Simmons said. And 
some of the growers complaining about the low prices they're getting 
now also gouged the new stores amid shortages last summer.

Those include Seitz, who sold his first crop - 22 pounds - for just 
under $21 per gram: nearly $230,000 before his hefty $57,000 tax 
bill. He's about to harvest his second crop, but this time he expects 
to get just $4 per gram, when he has big bills to pay.

"We're running out of money," he said. "We need to make sales this 
month to stay operational, and we're going to be selling at losses."

Because of the high taxes on Washington's legal pot, Seitz says 
stores can never compete with the black market while paying growers 
sustainable prices.

He and other growers say it's been a mistake for the state to license 
so much production while the rollout of legal stores has lagged.

"If it's a natural bump from the outdoor harvest, that's one thing," 
said Jeremy Moberg, who is sitting on 1,500 pounds of unsold 
marijuana at his CannaSol Farms in north-central Washington. "If it's 
institutionally creating oversupply ... that's a problem."

Some retailers have been marking up the wholesale price three-fold or 
more - a practice that has some growers wondering if certain stores 
aren't cleaning up as they struggle.

"I got retailers beating me down to sell for blackmarket prices," 
said Fitz Couhig, owner of Pioneer Production and Processing in Arlington.

But two of the top-selling stores in Seattle - Uncle Ike's and 
Cannabis City - insist that because of their tax obligations and low 
demand for high-priced pot, they're not making any money either, 
despite each having sales of more than $600,000 per month.

Aaron Varney, a director at Dockside Cannabis in Shoreline, said 
stores that exploit growers now could get bitten in the long run.

"Right now, the numbers will say that we're in the driver's seat," he 
said. "But that can change. We're looking to establish good 
relationships with the growers we're dealing with."
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MAP posted-by: Jay Bergstrom