That’s on top of the inherent obstacles cannabis companies face, including a dearth of banking services and the inability to take standard business tax deductions.
Most marijuana cultivation managers in California, Colorado, Oregon and Washington state rolled with the punches, staggering their crews and spreading out operations to allow for social distancing.
That’s partly because several established markets – including Colorado, Oregon and Washington state – have weathered the boom-and-bust phase of overproduction and subsequent departure of some growers stung by rock-bottom prices.
The pandemic, meanwhile, hasn’t slowed consumer demand for cannabis – in fact, it’s up year-over-year in many places.
As mature markets consolidate and smaller growers bow out, 2021 will usher in a new set of market dynamics.
“Over the past few years, there has been a trend in Colorado of more independent cultivators shutting down, so it will be interesting to see what happens with these stand-alone grows in 2021,” said Ryan Milligan, director of cultivation for Denver-based Green Dragon.
“Whether or not these cultivators grow more cannabis next year will have a huge effect on the price of cannabis flower going forward.”
Marijuana Business Daily surveyed several growers in four western markets to ask how their year turned out in terms of prices, yields and significant challenges.
Here’s what they said:
In Desert Hot Springs, Ethan Woods, founder and CEO of Desert Underground, said his team experienced increased yields by improving processes, sanitation and strain mixes.
That improved quality of flower along with sluggish demand also helped the business fetch higher prices.
The range of challenges was all over the map, from labor shortages because of the pandemic to wildfires to lack of financing and banking. Specifically growers also struggled with pest management, according to Woods.
Wholesale cannabis prices in both the recreational and medical markets have undergone large swings throughout 2020, including some unexpected highs.
“The pandemic has fueled some of the volatility and high prices seen at certain points, but we have also experienced the cyclical increases and declines in price tied to the outdoor harvest in the fall,” said Dan Banks, director of cultivation strategy at Denver-based Lightshade.
Milligan with Green Dragon agreed, saying prices have gone up from last year.
“Probably about a 15%-20% increase from 2019,” Milligan said. “In the summer, when cannabis supplies are typically at their lowest, prices were even higher than that. ”
He attributed the increase to the coronavirus pandemic as well as the early frost in September that damaged many outdoor cannabis crops.
Like the rest of the country, the pandemic forced Colorado growers to prioritize employee safety, stagger workflows and contend with unexpected labor shortages.
“We have seen particular struggles at times on the postharvest side because we, like many others, utilize third-party support for the peak labor demands of harvest events,” Banks said.
He added that wildfires and smoke in the fall were particularly problematic for the company’s greenhouse operation because of the reduction in lighting intensity and air-quality challenges.
At Veritas Fine Cannabis in Denver, Mike Leibowitz, managing partner and co-founder, said that being deemed “essential” by the state government during the pandemic was a big moment for the industry.
But it also created logistical challenges.
“We took flowering rooms offline to allow for distancing on our trim and packaging teams, which has reduced the amount of product we can put out,” Leibowitz said. “But it has allowed us to create a very safe, responsible environment for our teams.”
Massive wildfires were a major factor for cultivators this year, though overall prices have begun to stabilize after market fluctuations driven by overproduction and attrition.
Bend-based Oregrown was able to significantly increase its yields “despite working with terrible air and sun quality during the fire season,” said Hunter Neubauer, co-founder and board chair.
“Thankfully, we cultivate in both an indoor facility and climate-controlled, light-deprivation greenhouses so we weren’t impacted by contaminants falling from the sky.”
But the residual smoke did block some sunlight and affected yields.
“Without the fires, we would have seen an even better year-over-year result in both the quantity and quality of our greenhouse light-deprivation flower,” Neubauer said.
Adding water shortages to the wildfire impacts added up to “environmental challenges that were as extreme as they’ve ever been,” according to Neubauer.
Growers report that crop yields were up from last year.
“Many reported a slow start to spring, but the long summer and late fall made up for it in most areas,” said Crystal Oliver, executive director of the Washington Sungrowers Industry Association.
Joe Feltham, chief operating officer for Arizona-based multistate cannabis company 4Front Ventures, sees prices up as much as 20%-30%, “which is the first real increase in this market in years.”
Overall, wholesale cannabis prices have been trending upward over the past few years, according to Oliver.
One exception: Lower-quality extraction grade flower is seeing a dip in prices, but that’s typical for the end of the year after the fall harvest floods the market.
Oliver also said the pandemic boosted costs for complying with safety requirements – including purchases of nitrile gloves and other supplies.
“So, in order to ensure producers/processors remain profitable, prices need to come up a bit,” she added.
Other issues facing growers in 2020 included labor challenges stemming from the pandemic – in particular, keeping workers safe while they juggled child-care issues such as closed schools and day-care centers.
Oliver pointed out that her organization is thankful the Washington State Liquor and Cannabis Board has temporarily allowed children of licensees to be on business premises.
Bart Schaneman can be reached at [email protected]