Above Photo: Amber and Casey O’Neil, founders of the 40-member Emerald Grown cooperative, help independent farmers lower their costs by working together. (James Tensuan for Leafly)
‘Run By the Farmers, For the Farmers’
Editor’s note: This week (June 19, 2017), Leafly launches a four-part series on California cannabis farming by Paul Roberts, author of “The End of Food.” Roberts examines the choices California cannabis growers face as the state enters the legal era: Scale up, build a craft brand, join a cooperative, or go deeper underground. Today: Independent farmers find a safe haven in agricultural cooperatives.
Markets, like ecosystems, respond to massive disruption with a wave of experimentation and adaptation—and that’s certainly been the story in California’s cannabis sector. Ever since legalization upended the decades-old status quo, players have scrambled to develop new business strategies to exploit the chaos—or simply survive it.
Some, like Jai Malloy, have scaled up. Others, like Sam Edwards in Sonoma, have moved to the other end of the scale continuum with a “craft” strategy.
Yet the reality is that many existing cannabis farmers lack the resources or expertise to carry off either of these strategies—or, at least, carry it off all on their own. For many of these growers, the solution has been a strategy that borrows from both large- and small-scale producers—the cannabis co-operative.
A case in point is Emerald Grown, a forty-member co-operative located in the town of Laytonville, in the Emerald Triangle’s Mendocino County. Founded three years ago by farmers Amber and Casey O’Neill, the co-operative follows a strategy of adaptive mimicry: using collective action to achieve the scale efficiencies of larger operators. By sharing seeds, expertise, and other resources, for example, co-op members can significantly boost their individual yields.
By pooling their cash, they can afford attorneys and consultants to navigate local regulations. And, most significantly, by coordinating harvests and pooling their crops, co-op members can deliver the large bulk shipments that California’s cannabis wholesalers increasingly demand.
Most of Emerald Grown’s members farm on less than 5,000 square feet, says Casey, which makes it very hard for an individual farmer “to deliver the kind of consistently large volumes that big buyers now want.” But collectively, says Casey, they can play in the big leagues.
Teaming Up to Compete
That sort of collective muscle is essential at a time when small farmers must not only compete with much bigger producers, but must also deal with a cannabis “downstream” – distributors, wholesalers, and retailers—that is becoming just as big scale.
Like Washington and Colorado before it, California is seeing signs of retail sector consolidation and the emergence of mega-retailers and dispensary chains with enough market share to squeeze cannabis suppliers, much as big-box grocery chains squeeze their own suppliers. In fact, some big urban dispensaries want to compete directly with cannabis producers by building their own cultivation operations. (Oakland’s iconic Harborside medical dispensary, for example, is launching an industrial-scale greenhouse operation in Monterey County’s Salinas Valley.)
Meanwhile, there will be further price pressure from a new generation of distributors and “platforms,” such as delivery services like Eaze, an app-based service that is using rapid service and big-data analytics to dominate California’s medical cannabis delivery market.
For all these reasons, says Amber O’Neill, eventually, “every producing community is going to need a cooperative serving it–something run by the farmers and for the farmers.”
Gaining Popularity in the Emerald Triangle
The O’Neils say there are at least half a dozen similar organizations across the three counties of the Emerald Triangle. Some have emerged from the informal, self-governing collectives that have loosely coordinated cannabis production since the state decriminalized medical cannabis in 1995. Other organizations are coalescing around specific geographies or communities. In neighboring Humboldt County, for example, a growers alliance called Humboldt’s Finest has been launched to market five local sun-grown flower lines developed jointly by botanists and “maverick growers”.
The structure and methods of these new collective organizations will likely vary. Where Emerald Growers follows strict state guidelines for member-owned agricultural co-operatives, others have morphed toward more commercial entities, such as limited liability corporations or “mutual benefit” corporations.
Yet whatever the structure, these organizations will perform broadly similar functions—pooling members’ output, resources, and skills in order to boost scale and efficiency while preserving and enhancing whatever makes their product unique. Some co-operatives, for example, will centralize their processing by leasing or even building space for joint processing and for storage.
Cooperatives will also play a consultative role, helping smaller farmers deal with the complexities of licensing and testing, or improving their growing methods to ensure better price premiums. And, importantly, co-operatives will give growers more negotiating leverage with wholesalers, retailers, distributors and other market intermediates that want to control growers’ access to consumers. In fact, in some cases, co-operatives themselves are getting into the retail space: Emerald Grown is considering applying for a state license that would allow it to open several storefronts.
Adapting, Surviving Means Sacrificing
Yet these very strategies point to another inescapable reality: many smaller scale cannabis farmers may not want to make the kind of adaptations that may be essential to survival. Case in point: to get the volumes that wholesale buyers now demand, Emerald Grown has had to push some members to focus on a smaller number of popular strains—a strategy that has resulted in commercially viable volumes but has irked some long-time farmers.
“It’s bittersweet,” Casey says, “because people are having to give up the strains that they really love just because there’s not enough of it to really compete in the marketplace.”
Similarly, some farmers are reluctant to embrace the sort of rule-dominated operations that legalization will require—a reluctance Amber says deserves careful attention. “One of the things I say to folks is, ‘you’ve got to prepare yourself to be more professional than you’ve ever been in your life, as far as being a really good bookkeeper and running your business fully transparently and paying all of your taxes,” she says.
Compliance with the regulations “is like a whole other job to add to the farming,” she adds. “So if folks don’t feel like they are going to follow through with all of those steps, I don’t recommend it, because there is not going to be any ‘half-way’ legal. If you’re not prepared to go the full distance, you should really re-evaluate whether this is what you want to be doing.”
That may seem like a deeply personal decision—yet it’s one whose impact will go well beyond the lives and livelihoods of individual farmers.
The reality of California’s cannabis market is that most small farmers simply won’t be able to make the transition to legal operations. Some will try and fail. Others, put off by the bureaucracy and sharp competition, won’t even try. Amber says some of the older farmers she and Casey know are simply going to retire. But others will likely take a different path and will continue to sell their product in the black market. Just how many of California’s tens of thousands of small farmers will end up taking this fourth option is impossible to know right now. But if the numbers are as large as some industry observers fear, it could have a huge, and not entirely positive, effect on the success of legalization in California and beyond.