Week in Review: White House versus hemp, CA crackdown & Massachusetts’ MMJ shortfall worries

, Week in Review: White House versus hemp, CA crackdown & Massachusetts’ MMJ shortfall worries

The Trump administration opposes nationwide hemp production, California takes action against unlicensed marijuana businesses, and Massachusetts fears a medical cannabis shortage.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

Hemp sector fires back

The hemp industry gasped this week when a Trump administration official said hemp production should remain limited and that drug enforcers, not agriculture officials, should retain oversight of the crop.

Greg Ibach, undersecretary for the U.S. Department of Agriculture, said there shouldn’t be nationwide hemp production and warned that oversupply could “kill the market for hemp.”

Ibach’s comments alarmed some hemp growers and activists, most of whom want to see hemp rules loosened in the next Farm Bill, which is being rewritten this year.

“To build the market, we need the government to get out of the way,” said Jason Amatucci, executive director of the Virginia Industrial Hemp Coalition.

Hemp growers were even more alarmed by Ibach’s comment that the U.S. Drug Enforcement Administration, not the Agriculture Department, should oversee hemp.

“I don’t think the USDA has a very large role in the regulation of hemp production,” Ibach said. “It’s more at (the Department of) Justice and DEA.”

That was anathema to hemp producers and activists.

“This should be treated as an agricultural commodity,” said Jonathan Miller, lawyer for the U.S. Hemp Roundtable, a lobbying group that pushes for hemp expansion.

California enforcement

As part of a renewed effort in California’s decades-long battle with its cannabis black market, the state’s Bureau of Cannabis Control sent out cease-and-desist letters to roughly 500 companies.

Now that a fully legal industry has been rolled out, there’s likely to be more pressure than ever on illicit companies that are trying to avoid obtaining business permits, paying taxes and generally playing by the rules.

But it’ll be slow going, said Los Angeles attorney David Welch, who has been trying to shut down unlicensed operators for over a year on behalf of permitted dispensaries in Southern California.

“The problem (authorities) run into is resources. They aren’t actually able to effectuate the closure of hundreds of illegal stores operating in the state,” Welch said about the prospect of state and local authorities shuttering all unlicensed businesses.

Los Angeles has even dedicated a 30-person task force to cracking down on illegal MJ companies.

But that won’t be enough, Welch predicted.

“There are hundreds of illegal stores,” he said. “If you look at 30 people … you’re still looking at 12 hours (per law enforcement raid), not to mention the man hours going into each one of these raids. So that’s the problem.”

Another consideration is that a lot of dispensaries are still trying to rely on the old medical cannabis collective model, which will likely just extend the life of the black market.

“If you’re 12 people in (a town) and you’re growing marijuana and sharing amongst each other, you’re a collective,” Welch explained. “If you are 12 people and one person is selling marijuana at a counter, you’re a commercial dispensary, a 10-type license.

“Is it working? No. Is it legal in my opinion? No.

“But it gives people the excuse to sink money into operating illegal dispensaries.”

One avenue Welch wants to pursue is what he calls “private enforcement actions” – filing suit against illegal dispensaries on behalf of legal ones.

It’s a technique his firm has used successfully in Santa Ana.

“We closed down seven of the illegal stores,” Welch said, “and we’re trying to effectuate judgments against 14.

“So we’ve done it before, and we’re looking to do it again in the city of L.A., which is truly the biggest problem.”

Don’t overreact, Massachusetts

Concerns about whether Massachusetts will have enough marijuana supply when the state’s recreational market launches are legitimate, but they shouldn’t be cause for overreaction, according to one industry analyst.

The Bay State is slated to begin adult-use sales in July, and some are worried there won’t be enough cannabis, medical or otherwise, to go around.

“In the first couple of months after legalization, supply constraints could well be an issue,” said Kris Krane, managing partner of Boston-based 4Front Ventures.

“But it’ll be a short-term concern.”

He pointed out that the industry has seen similar situations in other states that have gone recreational, including Colorado, Washington and Oregon.

Using Oregon as an example, Krane cautioned that Massachusetts regulators shouldn’t try to correct the market through licensing more growers.

“The reason Oregon is having the oversupply issues that they’re experiencing is because in the early days of the adult-use program they were having supply-constraint issues,” he said.

According to Krane, Oregon’s problems were twofold:

  • Consumers complained that prices were too high, so some still bought from the black market.
  • Retailers opened, then ran out of supply and closed until they got restocked.

Oregon’s regulators then issued more licenses – an overreaction, Krane says – and now there’s too much product.

“The issue wasn’t necessarily that there weren’t enough licenses,” he said. “It was that the licensees hadn’t scaled up yet. It takes time.”

Krane believes Massachusetts has enough canopy space currently under construction to eventually meet demand.

“I caution against people overreacting,” he said. “This happens in every market.”

Kristen Nichols can be reached at [email protected]

John Schroyer can be reached at [email protected]

Bart Schaneman can be reached at [email protected]

6 comments on “Week in Review: White House versus hemp, CA crackdown & Massachusetts’ MMJ shortfall worries
  1. DC Broughton on

    simple math could have easily prevented the disaster that is Wa. and Or. and soon to be Ca. Quantity caps per license are a must and something has to be done about interstate black market. “legal” states are filled with growers who simply ship their marijuana to prohibited states. Something has to be done to real this in.

    • Geo Klezo on

      not a big fan of the free market, eh?
      how exactly is it a “disaster in WA and OR?”
      do you feel that alcohol and/or guns & ammo sales need to be “reeled in?”

  2. AnnMarie Wynde on

    I suspect (and it is my best guess) the US Fed Gov’t wants to minimize the amount of hemp produced right now and prevent its widespread manufacture not because of any danger of over supply but rather because they plan to take it away from the state cannabis commissions and regulate it and its manufacture Federally as a prescription drug. It’s easier to do this with a small number of producers than if lots of people start growing hemp all over the place. I believe that big pharma and the Fed. gov’t want medical marijuana CBD (hemp) to be handled as controlled prescription drugs including being regulated by the DEA with approval of individual products by the FDA, etc. rather than being regulated by the state cannabis commissions. At some point this would mean that existing CBD products (including their manufacture and testing facilities) would need to get FDA approval or go out of business. (That might be why some of the largest publically traded pot companies are manufacturing their CBD according to GMPs like drugs have to be. The ones that aren’t would have to get with the program or be left behind and it would probably cost them more time, work, testing and money to do so.) The THC recreational products would be left for the cannabis commissions to oversee and would be sold in dispensaries and/or in some states/provinces on the internet. I’m not sure if the gov’t would even allow farmers to grow hemp for non-drug uses because of possible (probable) diversion for black market drug use. The possibility of this happening would make it challenging right now to identify future winners and losers in terms of stock picks. Sticking with the bigger well-financed, sophisticated companies would seem the safest but some of the bigger gains often come from the smaller start-ups. I have absolutely no inside knowledge and this is only my opinion, right or wrong.

  3. Maggie on

    This is grossly mis-stated concerning Massachusetts. Oregon’s oversupply was specific to the October 2017 outdoor harvest. Most of that went to oils, but craft cannabis and small boutique growers and retailers are quite successful, still getting their premium prices, and continuing to open. Massachusetts population per capita outnumbers Oregon, Washington, and Colorado population combined. Citing oversupply in those states is not even a comparison to what will happen here if we do not get places open and in the numbers. Nevada had over 40 places open and ran out in the first week. Massachusetts is at 20 medical looking to be co-located for rec.

    • SB on

      “Massachusetts population per capita outnumbers Oregon, Washington, and Colorado population combined.”

      That’s just plain wrong, and the math backs it up. MA’s 2016 population was 6.8 million. Washington state’s population is 7.2 million. So even WA alone is bigger than MA. However Oregon’s population is only 4 mil and Colorado is at 5.5 mil, which are individually smaller than MA’s population. But with WA, CO, and OR combined, they’re at 16.5 million people which is nearly 3x the size of the state of MA.

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