September 28, 2023

The slow start of the legal marijuana market in New York has farmers holding on to the bag

ARGYLE, NY (AP) — Seth Jacobs has about 100 bins full of marijuana flowers in storage on his farm in upstate New York.

And that’s a problem. There aren’t enough places to sell it.

The 700 pounds (318 kilograms) of pungent flower was harvested last year as part of New York’s first legally grown cannabis for recreational use. He also has about 220 pounds (100 kilograms) of distillate. Months later, there are only a dozen licensed pharmacies left statewide to sell what Jacobs and more than 200 other farmers produced.

Now another growing season is underway and farmers who still have a large portion of last year’s harvest are in financial trouble.

“We are really under the gun here. We’re all losing money,” Jacobs said recently at his ranch on rolling land near the Vermont border. “Even the most enterprising and ambitious among us can’t move many products in this environment.”

New York pot growers are not the only ones struggling with difficult economic conditions. Marijuana growers in Western states have also complained that low prices, stiff competition from the black market, high state taxes, and federal banking and export restrictions have made it difficult for legal growers to make money.

But the plight of New York’s farmers is directly related to the bumpy launch of the state’s recreational marijuana market.

State leaders had always planned to launch the market in phases, allowing a diverse group of participants to gain a foothold. However, the state process for licensing new pharmacies is progressing much slower than expected.

Last fall, Governor Kathy Hochul projected that about 20 new stores would open each month starting this year. Instead, one store was open at the beginning of the year and eleven more have opened since then.

Unlicensed stores rushed to fill the void, especially in New York City, but those outlets aren’t a legal market for the state’s farmers. Federal law prohibits New York farmers from transporting their crops across state lines.

That means limited shelf space to sell the 300,000 pounds (136,000 kilograms) of cannabis grown in the state last year, much of the product intended to be processed for items such as gummies and vapes.

According to the Cannabis Association of New York, a trade group, there is an estimated hundreds of millions of dollars worth of unsold cannabis statewide, about 80% in the form of cannabis oil. There are concerns that the smokable flower will eventually become too old to sell.

Jacobs stores his tubs of bud at Slack Hollow Organics in secure, temperature-controlled units. Even more valuable is the distillate at various processors that he waits to sell. Elsewhere in rural New York, Brittany Carbone, co-founder of Tricolla Farms, said the stock they’re sitting on includes 1,500 packs of pre-rolled joints and about 2,000 packs of edibles.

“What we really need to see is more retailers opening up, and that will actually give us the sustainable solution,” said Carbone.

The lack of outlets is a particular problem for small farmers who have struggled financially to produce last year’s crop and now need capital for their second year.

Jacobs, whose brand is Bud & Boro, said he won’t be growing plants for distillate this year because of the backlog. Carbone said they are planting on less than the acres they are allowed by law and are deferring investments in infrastructure such as hoop houses to help grow.

In New York, many critics blame missteps by government officials in their well-intentioned effort to open up the market to a wide range of entrepreneurs. That meant reserving the first legal cannabis crops for struggling hemp farmers. And people with previous marijuana convictions got the chance to open some of the first pharmacies.

Critics say the process has been cumbersome for pharmacy applicants. And there have been issues with a planned $200 million fund to help “social equality” pharmacy licensees with the costly task of setting up stores.

The fund would consist of up to $150 million in private investment. But dormitory authority spokesman Jeffrey Gordon declined to say whether any private money had already been invested, saying in an email only that “work to raise private capital is ongoing.”

Gordon noted New York’s “complex and unprecedented” effort to build a new venture statewide from scratch, which included evaluating 10,000 commercial properties for pharmacy locations and arranging banking, training and other services for the licensees .

The retail rollout was also hampered by a federal judge’s ruling in November that temporarily banned New York from issuing pharmacy licenses in parts of the state, including Brooklyn and Buffalo. The order was later narrowed to the Finger Lakes region before a settlement was reached this week.

The Office of Cannabis Management has taken recent steps to boost demand, including the provisional approval of 50 new dispensary licenses last month. And plans are in the works to allow groups of growers to join retail licensees to sell their cannabis in places other than shops, such as at a farmer’s market or a festival.

“We know these growers are concerned about how to sell last year’s crop as they decide whether to plant a cannabis crop in 2023, and we will continue to support them as more adult-use pharmacies open to sell their products said Aaron, spokesperson for the cannabis office. Ghitelman said in an email.

On a different track, Hochul and the legislature passed a new law that gives regulators more power to seize weed from the illegal stores that compete with the legal ones.

Though frustrated, farmers like Jacobs and Carbone persevere. Carbone has brought its farm brand, TONIC, into six pharmacies. Jacobs has received some periodic payments and hopes the farmer’s market policy being devised will provide him with a new way to sell his marijuana.

“This will all work out,” Jacobs said. “And I want to be there when it is.”

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