New York cannabis growers are struggling to stay alive

I’m really excited to bring you all today’s Sunday Read. This one comes from guest writer Trina Mannino.

Trina has been closely reporting on New York’s cannabis industry for outlets like The City, The Craig Newmark Graduate School of Journalism at CUNY, WHCR, and others.

Today, Trina dives in to all the issues facing New York’s cannabis growers — and why that means thousands of pounds of weed might go to waste.

-Jeremy

📚 The Sunday Read

Many small-scale New York cannabis farmers are worried they’re getting left behind by the state’s fledgling retail industry.

Last year, the state’s licensed growers — today, there’s nearly 300 — harvested an estimated 300,000 pounds of weed.

But much of that product hasn’t been distributed to consumers because there are currently only 21 operational, legal adult-use dispensaries, some of which are delivery only, across the state.

Many have self-funded their weed enterprises or have taken on significant debt.

Another season without moving product isn’t an option. 

“I have people who are willing to invest in me and bet on me . . . but I won’t take their money like I did last year because I can’t bet on the state,” says Jeanette Miller, a Niagara County cultivator who also is a founding member of the advocacy group Cannabis Farmer’s Alliance and a substitute teacher.

So now, farmers like Miller are saddled with almost year-old product in the middle of the industry’s second summer planting season. 

Before we dive into how they’re navigating this, here’s how they got here: 

• February 2022: Gov. Kathy Hochul signed a bill allowing hemp farmers to apply for adult-use conditional cultivator licenses to jumpstart the recreational market and supply the conditional adult-use retail dispensaries.

• March 2022: The state opened the application portal. Farmers raced to complete their applications to get out from under hemp, which went bust across the state.

• Summer 2022: The inaugural group of licensed farmers scrambled to source seeds to make the summer planting season before fall harvest time.

• October 2022: The governor told the Advance Media New York editorial board that 20 dispensaries were on track to be open by the end of 2022 and an additional 20 or so each following month. 

• December 2022: Only one retail location was open by the end of December.

• Today: With 21 stores operational at the time of publishing, you see where this is going: Too few stores plus too much weed equals lousy news for cultivators. 

So what’s a cultivator to do now?

Most farmers who are sitting on last year’s product have to decide to try to sell it even though the quality and potency may have diminished.

Many are reluctant to do so but feel like they have no choice. 

Justin Merkel, a Finger Lakes region cultivator, says he invested over a quarter of a million dollars in his cannabis enterprise in 2022 alone. But he hasn’t moved any of the 1,000 pounds of flower that he harvested last season. 

In the meantime, he’s relied on his heating and cooling business to keep his farm afloat. 

He’s concerned that if and when he sells his flower to a retailer at a wholesale price, they’ll likely double it to make a profit. Yet, the product won’t be reflective of the retail cost because it’s several months old. 

In other words, consumers might be paying top-dollar for a potentially lower quality product — or, in the very least, market rate for cannabis that should be discounted.

“​​If we’re trying to build a brand from the ground up, we really can’t afford to start out like this,” says Merkel.

There’s also the biomass issue. 

That’s the plant material that’s often turned into crude and distillate, a concentrated form of THC, that are used in products like vapes and edibles.

Most cultivators — though some also have processor licenses — don’t have the means to process biomass independently, so they must take it to licensed processors.

The problem is that many processors are currently backlogged because of the slow retail roll-out. 

Michael Yager, a cultivator in Erie County whose family has been farming since the late 1800s, says it’s financially risky even if processors are willing to take on a growers’ product. Many processors right now can’t pay growers their cut until they offload products to retailers.

“I don’t think any other industry that I can think of works that way,” says Yager. “A box maker doesn’t get paid when somebody puts something in that box and goes to Walmart, and Walmart sells their product.”

Instead, he says, “You make a box. You sell it to somebody. They pay you — 30, 60, 90 days later.”

New York State to the rescue. Maybe?

Various program ideas and bills have been floated to assist farmers.

The Cannabis Growers’ Showcase has gained the most traction. 

As it stands, the program will allow at least three AUCC cultivators to offload their cannabis products through a CAURD retailer at municipality and OCM-approved events in addition to dispensaries and processor and cultivator locations.

One processor, to every three cultivators, may also participate in each sanctioned event.

Showcase retailers will only be able to mark-up cultivators' flower products at a maximum of 50 percent.

While that means less money in retailers' pockets, it could partly address farmers' concerns, like Merkel, of consumers paying too much for a less quality product.

The program has experienced whiplash. Here’s the last two months in a nutshell:

• The idea was first publicly introduced in May at a Cannabis Association of New York town hall. 

• At the meeting, members of the Office of Cannabis Management (OCM) estimated that a pilot program would launch within a month.

• As that time frame came and went, the New York Post reported that Gov. Hochul’s office put the program on hold. 

• But in a surprising turn of events, the program was back on the table at the July 19 Cannabis Control Board Meeting (CCB) and was approved to proceed.

Concerns about the program remain.

Since the meeting, the OCM ruled that processors can't contribute more than 35% of the showcase's inventory.

That’s still a sizable portion dedicated to processors, especially when the program itself is called the Grower’s Showcase.

On top of that, the initiative also doesn’t help farmers sitting on biomass and that need to process it. 

The application is now open and the program only runs through the end of the year.

What’s next?

The roll-out of the Grower’s Showcase may be too little, too late for some.

For instance, Yager has already composted most of the plants he cultivated this season to avoid sitting on a glut of product. Again.

For those trying to make the most of the remainder of the outdoor planting season, more stores appear to be on their way:

• At the latest Cannabis Control Board meeting, the board approved 212 provisional dispensary licenses.

• That brings the total number of possible retail dispensaries to 463.

Time will tell for how long it takes them to be operational. 

Damian Fagon, the OCM’s chief equity officer, told Cultivated founder Jeremy Berke in a Twitter Space earlier this month that he expects it will take at least six-to-twelve months for these stores to open, mostly due to red tape related to the real estate.

But just as the state issues more conditional dispensary licenses, it’s expected that medical cannabis registered organizations, known as ROs, will be able to join the adult-use market as early as late December — much sooner than expected. 

This worries small farmers because:

• ROs can sell indoor-grown weed, which is often more sought after by consumers compared to outdoor and greenhouse-grown products that Adult-Use Conditional Cultivator (AUCC) farmers can only cultivate at this time.

• Because of their size and access to capital, ROs can sustain losses far longer than small farmers.

Half of the RO’s shelf space is proposed to be dedicated to conditional cultivators and processors’ products when they enter the adult-use market until 2025, according to the Revised Adult-Use Cannabis Regulations.

But many are skeptical of how that will work in practice, especially for farmers. 

For Miller, she is trying to stay optimistic. She says that if the ROs “work against us, we’re crushed. But if they work with us, we can all prosper. The world is abundant.”

This story was edited by Jeremy Berke.