California wildfires a bump in the road for state’s marijuana industry, insiders say

The Legion of Bloom’s Sonoma County cannabis farm, which was decimated by a wildfire this past week. (Photo courtesy of Legion of Bloom)

By John Schroyer

The wildfires ravaging Northern California over the past week have burned tens of thousands of acres of land, torching more than 30 marijuana farms and adding a new wrinkle to the January rollout of the state’s regulated cannabis industry.

But many industry insiders believe that the more than 20 blazes – which have destroyed parts of Napa, Sonoma and Mendocino counties – won’t lead to a serious inventory shortage of product given the sheer immensity of marijuana production in California.

“It’s a drop in the bucket compared to what the state is producing,” said Erich Pearson, the CEO of Sparc, a San Francisco-area medical cannabis retail chain that lost its Sonoma County farm in the Nuns fire.

That blaze also affected Napa County and has burned more than 54,000 acres as of Wednesday.

Losses still uncountable

Russell Weisman – a co-founder of the Legion of Bloom, which also lost a Sonoma County cannabis farm in the Nuns fire – echoed Pearson’s point.

He said that while his company’s losses were likely in “the millions” of dollars, the fires won’t prove a serious hit to either his company or the state’s industry at large.

“It’s just going to be a little road bump. It’s not going to affect us all that much,” Weisman said, noting that the Legion has a network of dozens of farms across the state.

As of Tuesday, Weisman said, Legion’s losses were still uncertain, estimating the company had probably lost between 1,000 and 2,000 pounds of flower.

However, company officials are still assessing how much was actually lost, and Weisman is hopeful that many of the farm’s plants could be salvaged.

Hezekiah Allen, executive director of the California Growers Association, said Tuesday morning he was aware of 34 cannabis farms that had “suffered significant crop loss or damage.”

“We expect that number to go up,” Allen added, because many of the fires continue to burn and damage assessments remain underway.

That lack of solid damage assessments is one of the reasons it’s hard to get a handle on just how big a dent the blazes will put in the California marijuana market, several sources reiterated.

Allen said it will likely be weeks or even months before a true picture is available of the actual damage that was wrought.

Still, even while Allen was noting that a lot of cannabis growers had lost everything and were concerned about how they’d be able to rebuild, he agreed that the overall impact on the state MJ industry would likely prove to be “pretty modest” given how much marijuana is grown in California.

“Generally speaking, even though these fires are massive – we’re talking 150,000 acres in a state that’s more than 1 million square miles – I tend to think it’ll be pretty modest in terms of overall supply,” Allen said.

And while those such as Pearson don’t expect any serious inventory shortage or resulting price pressure, Business Insider reported Monday that an analyst from Colorado-based BDS Analytics believes MJ prices could go up between 10%-20%.

Testing a big question mark

Many unanswerable questions remain at this point, several sources said, including whether smoke-damaged outdoor cannabis crops will be able to pass mandated state testing, a requirement that is slated to begin in January.

“Even in years past, where we’ve had wildfires in areas where there’s cannabis growing, there was no required testing,” said Amanda Reiman, vice president of community relations for Flow Kana, which works with roughly 60 cannabis farms in northern California, including several that were affected to some degree by the current fires.

“It’s really impossible to know until we start submitting cannabis for testing. We know that smoke can have an impact on the plant, and we’re not sure yet how that’s going to bear out when it comes to what’s required by the state to certify cannabis (for sale),” Reiman said.

“We’re also starting to brainstorm about what can be done with cannabis that may have been damaged by smoke that may not be suitable for smoking or vaping.”

For instance, Reiman said, it’s possible still that smoke-damaged MJ that may not be able to be sold as raw flower could be used for extraction or edibles.

“If this had happened even a year into legalization and licensing, we’d have a much better sense of the impact, because we would know what farms were impacted, we’d know the size of those farms, we’d know how much we produced the previous year,” Reiman said.

“We don’t have any of this pre-data, so it’s really tough, because we’re at a point in our regulatory system where we don’t have a timeline or a history of regulated cannabis,” she added. “This is kind of like Year Zero.”

Fires exacerbating existing concerns

Kimberly Cargile, the CEO of Sacramento medical cannabis dispensary A Therapeutic Alternative, said she and other retailers are already worried about a potential shortage – not of inventory at large but of any cannabis products that will be allowed to be sold via the regulated market come January.

“We have an overproduction of unregulated, unlicensed cannabis, but we don’t have an overproduction of licensed cannabis farms,” Cargile said. “We were already concerned that as of the first of the year we weren’t going to have enough licensed cultivators to work with. … The supply from locally licensed permitted farms has decreased, with these fires.”

That’s led Cargile and other retailers, she said, to begin stockpiling in advance of the new year, to ensure that they don’t run out of cannabis once state-regulated sales begin in January.

The fires, she added, have only exacerbated her concerns.

“This just added another change to the myriad of changes we’re having to deal with. We’re having to weather the storm,” Cargile said.

Pearson, the CEO of Sparc, is confident that MJ farmers who did lose everything will rebound, in large part because they’ve learned, from long years in the black and gray markets, to be resilient.

“It’s nothing new to us, frankly, and I don’t think it’s anything new to the industry, having losses like this. Farmers are used to losing everything, primarily to law enforcement,” Pearson said. “We’re a tenacious bunch.”

John Schroyer can be reached at [email protected]

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