Pubdate: Sun, 16 Apr 2017
Source: New York Times (NY)
Copyright: 2017 The New York Times Company
Author: Thomas Fuller


SALINAS, Calif. - This vast and fertile valley is often called the
salad bowl of the nation for the countless heads of lettuce growing
across its floor. Now California's marijuana industry is laying claim
to a new slogan for the valley: America's cannabis bucket.

After years of marijuana being cultivated in small plots out of sight
from the authorities, California cannabis is going industrial.

Over the past year, dilapidated greenhouses in the Salinas Valley,
which were built for cut flower businesses, have been bought up by
dozens of marijuana entrepreneurs, who are growing pot among the
fields of spinach, strawberries and wine grapes.

"This is cannabis meets Big Ag," said Steve DeAngelo, the executive
director of one the nation's largest marijuana dispensaries, who last
year founded Harborside Farms to supply the business.

The 47-acre farm is dotted with greenhouses that emit the pungent
smell of thousands of marijuana plants and warehouses where
farmworkers who spent their careers tending to raspberry plants now
sit in rows delicately trimming the leaves from harvested cannabis
buds. When the last greenhouses are built here next year, the facility
will be one of the largest legal marijuana farms in the world.

Harborside and other farms like it are a sign of a new chapter for
America's cannabis industry, in which marijuana is grown openly, like
any other crop. Despite the federal ban on marijuana, leaders of the
industry are taking a Manifest Destiny view, believing it is only a
matter of time for pot to become as widely accepted as alcohol across
the country.

California, with its ideal climate and vast market, is at the vanguard
of the movement to normalize the drug and produce it cheaply and in

"California is destined to do with cannabis what we've done with every
other fruit and vegetable," Mr. DeAngelo said. "And that's take half
of the national market."

The move to mass-scale farming is occurring just as some members of
the Trump administration are advocating a revival of the war on drugs,
including marijuana, which is now legal in some form or another in
about 30 states. The federal ban precludes growers of California
cannabis from legally shipping out of state, although tons of it seeps
out anyway.

Terry Garrett, a cannabis analyst based in California, estimates that
American consumers spend at least $50 billion a year on marijuana. By
contrast, legal marijuana sales total around $7 billion, according to
data compiled by BDS Analytics, a company that specializes in data on
the cannabis market.

American cannabis laws and politics are starkly contradictory:
Cannabis growers here, in Colorado and in the other states where
cannabis cultivation is legal are regulated and taxed. But Jeff
Sessions, the attorney general, recently compared cannabis to heroin.
He and others in the Trump administration have threatened a crackdown.

Greater enforcement of the federal ban does not appear to be imminent.
Russ Baer, a spokesman for the Drug Enforcement Administration, said
"nothing has changed in terms of our enforcement approach."

The D.E.A. remains concerned about diversion of marijuana to the black
market, Mr. Baer said, but its priorities are elsewhere.

"Our attention is so focused on the opioid epidemic right now," he
said. "That's where we've committed the vast majority of our resources."

The aggressive moves in the Salinas Valley into large-scale cannabis
farming, replete with plans for conveyor belts and high-efficiency
Dutch-built greenhouses, are already roiling the industry. Some are
worried that the marijuana business is getting too big too fast and
predict a glut of California marijuana and sharp price declines.
Growers in recent years have already reported steady declines in
wholesale prices of marijuana, although retail prices have remained
relatively steady.

Small cannabis farmers who have operated for decades and fear they
could be wiped out are among the most alarmed.

"We are watching the industrialization of commercial cannabis," said
Tawnie Logan, chairwoman of the board of the California Growers
Association, an organization that lobbies for cottage growers' access
to the market. "For them, the name of the game is the profit margin."

Ms. Logan said small growers were grateful for the legal battles that
veterans of the industry like Mr. DeAngelo of Harborside had waged for
the industry but felt betrayed by Harborside's move to mass production.

"They say they are fighting for the little guy while they set up a
50-acre farm," Ms. Logan said.

Outside the Salinas Valley, the majority of cannabis farms in
California have growing areas that are smaller than 5,000 square feet.
The Harborside growing areas will be more than 70 times as large,
around 360,000 square feet, and will have a capacity of 100,000
plants, including the nursery.

The industrial cannabis farms in the Salinas Valley are beginning
their operations during a period of legal limbo in California. Voters
approved recreational marijuana in November, but California lawmakers
will be working out detailed regulations in the coming weeks,
including the question of whether to put a cap on the size of farms.

Newly passed regulations in Monterey County are forcing cannabis
growers to be more public than ever before.

"The industry is cautiously coming out of the shadows," said Mary
Zeeb, the treasurer of Monterey County, which is assessing a tax of
$15 per square foot on cannabis cultivators.

Monterey County, which encompasses the Salinas Valley, has received 73
applications for cannabis farm permits, and more than 40 of those are
already operational, said Brandon Swanson, a planning manager for the
county's Resource Management Agency.

A typical cannabis farm in the valley now operates with two or three
greenhouses, and there is plenty of room to expand. "Nobody is at full
capacity of what their land can do yet," Mr. Swanson said.

The rush into cannabis farming has been disorienting for neighboring
businesses. Gerald Voge, a fifth-generation flower grower, said he had
received many unsolicited offers from cannabis businesses to buy his
20-acre nursery, including a recent bid of $6 million. He is refusing
to sell.

His neighbor's run-down, 10-acre nursery recently sold for $3.9
million to pot entrepreneurs.

"Everyone is running after gold," Mr. Voge said. "I am afraid that in
three or four years a lot of people will go belly up."

Maximillian Mikalonis, a former legislative aide in Sacramento who
helped write California's medical cannabis regulations, said lawmakers
must decide in the coming weeks whether to curb the move toward

"It is a critical moment, a defining moment for the future of the
industry in California," Mr. Mikalonis said.

The choice, he said, is between a "marketplace for small and boutique
operators who have been doing this for generations - or domination by
the forces of agribusiness."

Some believe the consolidation of the industry, as has happened across
the food industry, is inevitable.

"The effort to protect the little guy is ultimately doomed," said Tom
Adams of BDS Analytics. "The retailers are going to have to get big or
get out."

Overproduction is also a concern in the industry both because it could
push down prices and because California cannabis could flood the
markets of other states.

California produces more cannabis than it consumes - three times as
much, by conservative estimates.

"The entire experiment will fail if California's continues to sell out
of state," said Hezekiah Allen, the executive director of the
California Growers Association. "The more product that leaves the
state, the more the federal authorities will intervene."

The owners of Harborside Farms say they are acting on the imperatives
of the market.

Jeff Brothers, the chief executive of the parent company of Harborside
Farms, spent decades in the cut flower business, where he learned the
importance of scale, he said.

"Harborside takes grief for being the 800-pound gorilla," Mr. Brothers
said. "But if we want cannabis to be widely accepted, we need it to be

By setting up in Salinas and taking advantage of the agriculture
infrastructure, Mr. Brothers said, the company will be able to halve
its cost of producing marijuana. He uses a wine analogy to describe
the difference between small growers in Northern California and the
Big Ag growers in Salinas.

"They can be the specialty brands, and we will be Mondavi," Mr.
Brothers said.
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