Cannabis and the Humboldt County Economy

Cannabis has long been the economic backbone of Humboldt County.  While efforts to quantify exactly how large a contribution cannabis makes to the local economy are challenging, a recent estimate from the Humboldt County Sheriff’s office states that approximately 4,000 illegal pot farms still operate in the county.[1]  Including licensed grows, the total is around 5,000 farms. Assuming just 500 pounds of production each and a price of $500 per pound, these farms would generate approximately $1.25 billion a year.  In addition, Humboldt has a large number of commercial-sized indoor grows not included in these numbers.  Regardless of the exact figures, cannabis plays a huge role in the local economy and has since the demise of the timber and fishing industries.  

For those who don’t know, the price of outdoor or sun-grown cannabis collapsed this year, down over fifty percent from a year ago.  Humboldt County, like the state of California, produces a lot of outdoor weed and because 70% of localities throughout the state have banned commercial cannabis activity, there are relatively few dispensaries to sell products.  With excess supply and limited opportunities for distribution, prices are falling fast.  Add to that the fact that Oregon and Oklahoma are now moving enormous amounts of cannabis on the black market, Humboldt pot farmers in both legal and underground markets are getting squeezed. 

To the dismay of many in our local industry, we are finding there simply isn’t much demand in the marketplace for the outdoor cannabis we produce.  Indoor and mixed-light flower which tend to have a tighter bud structure and tend to be more visually appealing are predominantly filling dispensary shelves and commanding better prices.  Admittedly, stating this is near heretic here in the county given our historic reputation of producing “premium” organic sun-grown product.  Regardless of our beliefs or our historic dominance in the market, transaction data shows the same – that Humboldt ganja is no longer what it once was. 

Cannabis Benchmarks aggregates reported sales data from states with medical and adult-use markets and produces pricing and transaction data on a weekly basis.  The most recent report dated the tenth of December shows that outdoor flower accounts for just 8% of legal transactions, versus 65% for indoor-grown product.  In terms of volume of overall product sold, outdoor accounts for 13% and indoor, 53%.[2]   Mixed-light or greenhouse flower makes up the balance.  In other words, the numbers (not our opinions) show that outdoor-grown cannabis is seeming to lose its luster, with prices and market action reflecting this new reality.  While many believe that sun-grown cannabis is better for the environment and for your body as it houses a greater percentage of medicinal compounds like terpenes, the market simply isn’t on board at the current juncture, and resultingly, our local economy is at risk.    

I know many growers throughout Humboldt and neighboring counties who can’t move their product in either the legal or underground market right now.  Desperation is growing among the farming community, and sadly, it’s been noted that suicides are on the rise among growers.[3]  Some of us have already lost friends and it’s terribly sad to see.  

Given the significant price collapse we saw in wholesale or bulk prices for outdoor flower this year, the Humboldt economy is facing significant risk.  According to the St. Louis Federal Reserve Bank, countywide GDP or economic output slacked off in 2020 (presumably due to COVID).  One might expect this year to show another decline in formal economic activity given the dynamics we are discussing.[4]  While much of the revenue derived from cannabis production goes unreported as a majority of farms still operate in the unregulated market, consumption of goods and services will undoubtedly take a hit as growers struggle to move product or sell at very low prices and have less to spend.

As cannabis prices fall and sales stagnate, economic activity in the county will be negatively impacted.  Inefficient farms and those with moderate product quality are already going out of business, trimmers are being offered far less or being stiffed on their pay altogether, laborers are losing work, and cannabis brokers are getting squeezed and fading away.  Retailers and others providing services to these groups will likely be hit hard in the coming months.  Unfortunately, we’re probably in the early innings of what promises to be a tremendously uncomfortable and disruptive adjustment to the local economy. 

Remember that economic activity is primarily a function of two things, how much people have to spend and, importantly, how they feel about their future economic prospects.  With greater economic uncertainty, folks generally spend less.  Without another pony show, our county may be in very deep trouble.  Luxury goods and service providers will likely be the first to feel the pain, with other industries groups following as overall economic activity declines and people tighten their belts, spending less on things like clothing, autos, and recreation.  

You may recall that pot prices collapsed similarly in 2017.  During that time, some local businesses like retailers reported 25-30% declines in sales and there was real fear in some circles that Humboldt faced an economic collapse.  It never materialized as corporate interests, out of towners, and successful local growers built out cannabis infrastructure and sunk large sums into engineering, compliance, construction, and legal services as part of the regulatory permitting process.  Humboldt and other areas began to aggressively abate illegal operations and statewide, demand for legal cannabis increased rapidly with the onset of adult-use or recreational sales in 2018.  New dispensaries opened and many manufacturers came online who needed cannabis to create value-added products like extracts, edibles, tinctures, and topicals such as lotions and salves.  Pot prices, after cratering just a year or so prior, then increased significantly in 2019 and 2020.  Upward price momentum, coupled with the infrastructure buildout and permit-related spending just mentioned spurred Humboldt’s economic growth once again and helped us avoid economic disaster.

I’m not sure we get such a quick rebound this time around.  While things like cannabis tourism, and the potential for national and international cannabis markets bode well for the county’s economic future, neither will happen overnight.  Instead, industry insiders believe it could be years.  Mark Lovelace, our former supervisor who now works as a cannabis consultant to municipalities and counties recently noted on The Humboldt Chronicles that it could be five years or so for a fully functioning national marketplace to take hold.  Others think even longer.  By then, many Humboldt County farmers will be out of business.  In fact, within the cannabis industry, folks are now estimating that fifty percent or more of small operators will fail in California this year and the current environment has been labeled an extinction event.

The ramifications of widespread farm failure will be serious for Humboldt.  Right now, we boast of moderate unemployment rates and record home values.  With the collapse of the cannabis industry, we may all feel some economic pain given the interconnectedness.   Mountain properties are currently experiencing huge declines in value and residential home values could eventually follow suit, as they too collapsed during the last recession in 2007-2008.  A local recession (or depression) will hamper consumption and spending and force many to reevaluate their lifestyle.  Depending on the duration of the downturn and developments regarding national and international cannabis marketplaces, the county may have to redefine its economic paradigm once again.  Only time will tell.

[1] Cortez, Mario.  (2021, June 29).  Illicit Cannabis Grows Remain in the Thousands Humboldt County Sheriffs Office Says.  The Times Standard.

[2] New Life Data Services.  (2021, December 10).  U.S. Cannabis Spot Index.  Cannabis Benchmarks.

[3] Schroyer, John.  (2021, August 16).  Marijuana Farmers at Greater Risk of Taking Own Lives Amid Hardships, California Industry Officials Warn.  Marijuana Business Daily.

[4] FRED.  (2021, December 8). Real Gross Domestic Product: All Industries in Humboldt County, CA.  St. Louis Federal Reserve Bank.

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