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Friend or foe? Legalized recreational marijuana’s impact on California flower industry

Hardly a week goes by when I’m not asked, “What will the legalization of recreational marijuana in California do to the flower business?” This article is everything I know about how to answer that question right now.

In early December 2016, just three weeks after Californians approved the Adult Use of Marijuana Act, I suggested to the CalFlowers board of directors, “We have every reason to believe that the recreational marijuana legalization just passed in California will have a greater impact on the state’s floral industry than anything in the past quarter-century.”  

I based this on an analysis of several factors affecting California flower production since the late 1980s. One was the impact of increased assessed value of agricultural property between 2002 and 2012 in California counties where cut flower production is highest.

When flower farmers are presented with greater economic returns using their land for something other than growing flowers, some number will stop growing flowers. Essentially, a first-year microeconomics student might predict that, even before his or her first mid-term exam. But not all flower farmers stopped cultivating flowers, and it’s unlikely that all California flower farmers would switch to growing marijuana. It’s not as simple as economic theory might predict.

Despite the political right’s love of states rights, the Trump administration appears bent on enforcing federal laws that classify marijuana as a Schedule I drug, placing it in the same category as heroin. For the record, the Obama administration also didn’t reclassify the substance, but the current administration is suggesting it may be more active in the enforcement of the federal laws.

It has been explained to me that one intent of California’s new law is to prevent vertical integration of the state’s marijuana market. Essentially it’s designed to prevent the creation of “end-to-end supply chain” monopolies. To achieve this, the industry has been fragmented with many limitations and restrictions on how a grower, processor or distributor can participate in this market.

Further, a permit process has been pushed to the county level and California has 58 counties. Some counties have prohibited cannabis growing, while others have approved it. It is also my understanding that this situation may not be completely clear until later this year.

There are a few public reports of California flower farmers already switching greenhouse capacity from flower growing to marijuana growing, although I’m not aware of a credible independent study that has documented this situation. Let’s just say that I’ve heard or read about flower-growing capacity in each of California’s three major flower-growing regions already switching from flowers to marijuana production.  

However, we don’t know what impact this will have on California’s overall flower production going forward. For example, between 1993 and 2015 California’s cut flower output grew 122 percent, while two significant changes were unfolding:   

• With the help of imports, the U.S. flower market grew from $739 million in 1993 to $1.4 billion in 2013, a 192 percent increase.

• The number of California flower farms was reduced by at least half between 1993 and 2013. (This is an educated guess because public records make it hard to compare over time.) Many of California’s commercial farms went out of business since 1993, but those that remained participated in the largest growth the industry has experienced since 1983.

In December 2016, the CalFlowers board looked closely at the looming marijuana-growing change on the horizon. Many board members had already invested time into evaluating the options for their own businesses. It had been only three weeks since California voters approved the ballot measure legalizing marijuana for recreational use, and some of these businesses were already prepared to make investments in this new and uncertain market.

One thing became clear in December — somewhere, in all the opinions expressed, was the truth but all the opinions expressed by individual board members couldn’t be true at the same time.

Under these circumstances, the CalFlowers board of directors did what any responsible trade association would do — they commissioned a study by a qualified and credible third party to gather data and render an opinion based on that data combined with the expert knowledge of the third party. CalFlowers commissioned the Agriculture Issues Center, based at the University of California-Davis, to conduct a study and render their findings at this year’s Fun ‘N Sun conference in Carlsbad, CA on Aug. 12.  

My own forecast is that marijuana will be a ‘friend’ to some flower growers, supplementing the flower-growing side of their operations, and it will be ‘foe’ to others. In the end, I still believe the industry’s greatest challenge is to move more Americans to enjoy more flowers more often. If consumers are going to buy and consume marijuana under the law, let’s see if we can get them to also enjoy flowers while they mellow out.

Michael LoBue is chief executive officer at the California Association of Flower Growers & Shippers in Capitola, CA. He can be contacted at 415/561-6111 or lobue@cafgs.org.