What would you do with $750 million in weed?

A thick smell of cannabis is permeating many New York suburbs, the result of cannabis decriminalization in 2019 — yet cannabis growers in the state have faltered when it comes to getting their produce to market.

The state began issuing cultivation permits to over 200 farms last spring. Growers have since sown seeds, cultivated rows of plants throughout the summer and only completed the harvest a few weeks ago. Hundreds of thousands of pounds of marijuana worth millions of dollars are now ready to be sold in dispensaries.

The only problem is that the cannabis isn’t sent to major retailers, it just piles up. Despite a thriving gray market and repeated guarantees from state regulators that cannabis dispensaries will be commonplace by the end of this year, no legal recreational dispensary has been launched in New York.

Estimated at over £300,000 by the Office of Cannabis Management, stockpiles pose a lot of problems for growers. Cannabis can deteriorate over time, to say the least. According to Cannabis Benchmarks, a research firm that tracks wholesale marijuana prices nationwide, the stash can be worth as much as $750 million based on an average projected wholesale value of about $2,500 per pound.

Nearly $1 billion in farmer earnings will fall as their crops are slowly distributed. In the meantime, producers need to figure out how to store it permanently to ensure the weed stays as fresh as possible while protecting it from theft or contamination.

The Office of Cannabis Management is attempting to open legal recreational dispensaries

Candidates for one of the first 150 individual retail licenses and 25 nonprofit licenses expect to hear from the state in the next few days, but this positive move by the OCM is just the beginning of the lengthy process of operating a legal recreational pharmacy.

Melany Dobson, CEO of Hudson Cannabis, a 520-acre plantation about two hours north of New York City, said, “It’s an unknown route to market.” She says, “We’ve been repeatedly promised that dispensaries will launch before the end of the year will.” I acted like that was our only proof, so we’re prepared for that.

Since 2016, Dobson has run the company, which previously operated under the Hudson Hemp brand, together with her brother Ben Dobson and sister Freya Dobson. The fields were bare on a bright November day, with wisps of rotting leaves strewn about. Harvesting was complete within the past week and the cannabis was safely stored elsewhere.

The OCM, which oversees cannabis licenses from its Albany headquarters, has set a high standard for its early retail ventures — while dealing with a mountain of paperwork. The state has guaranteed that initial licenses will go to applicants convicted of marijuana-related offenses prior to the legalization of marijuana, or their relatives, so long as they have experience owning and operating a business in New York. It takes a lot of evidence to show such credentials and an application fee of nearly $2,000.

After a petition complained of unnecessarily strict regulations, a federal judge in Albany last Thursday temporarily barred the OCM from issuing retail licenses in several regions, including Brooklyn. “The goal is to have the dispensaries operational before the end of the year,” said Aaron Ghitelman, a spokeswoman for OCM. “We’re still shooting for the first sales” until 2023.

When issuing cultivation licenses, the regulator prioritized smaller companies that already grow hemp — which is typically used in legal CBD products — over large companies with no history in the state. The licenses came with many restrictions, including the requirement that farms grow no more than one acre of what is known as the canopy (equivalent to about two acres of land size) and that most of the growing should be done outdoors.

Due to the typical Northeast environment, New York’s cannabis growers are forced to work to a tight schedule. Farmers typically plant marijuana seeds in May to allow for outdoor growth rather than greenhouse cultivation. The high season lasts until the end of October, when the harvest begins. The challenge for the rest of 2022 — or however long it takes for legal recreational pharmacies to hit the market — is keeping the grass green.

Keep the crop green until recreational dispensaries are introduced

Like wine, cannabis needs to be stored in a humidity and temperature controlled condition. For example, the plants must be kept at a certain temperature throughout the drying process. Over time, producers are more concerned about changes in potency and the smell of the harvest, although there are physical changes as well.

“Old cannabis develops a brownish tint,” explained Melany. With prolonged exposure to air, light, and rising temperatures, THC breaks down into cannabinol, a weaker and ultimately less helpful molecule.

Hudson Cannabis claims the ability to preserve cultivated cannabis in circumstances that limit degradation for up to 12 months — a costly facility not every grower can afford. Dozens of stacked yellow and black bins, each containing about five pounds of the plant, are already adjacent to the company’s warehouse. Nonetheless, farmers are changing their farms to accommodate the delays.

However, not every cannabis farm is like Hudson Cannabis, which has significant funds and a shared decade of experience between Hudson Cannabis co-founders Ben Dobson and Melany. In addition, the company leases large tracts of land to local farmers to graze grass-fed goats and cattle. The Dobsons are confident they will weather the rough patch between harvest and eventual groundbreaking for retail pharmacies.

The risks are greater for many other cannabis farms in upstate New York. In recent years, a surplus of hemp-derived CBD products has caused wholesale prices to drop across the country, leaving some farms in financial distress or bankruptcy. Legal THC sales seemed a possible solution for such farms to recoup their losses. According to an August Mayor’s Office statement, the recreational cannabis market is expected to surpass $1.3 billion in revenue by next year in New York City alone.

Conclusion

Farmers like the Dobsons will remain in a dilemma until legal recreational pharmacies are open. Because interstate sales are prohibited, growers cannot sell their crops to outlets in Massachusetts, New Jersey, or other states that already have retail outlets. Either New York or nothing.

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