Reefer Sadness for Pot Farmers

The mighty redwoods of Humboldt County Alexandria Sage/Reuters

By Sheelah Kolhatkar

To reach Jason's farm you drive south out of the small town of Arcata, in Humboldt County, Calif., and plunge into the forest that gave the region its "Emerald Triangle" nickname. After passing through hilly ranch country and a stretch on a dusty dirt road, a wooden house peeks out of the fruit trees on 150 acres of land, completely off the electrical grid. Jason is in the kitchen, stuffing cannabis leaves into a juicer.

"Everyone around here is involved in some way," says Jason, a professional marijuana grower. What he means is that a large percentage of people in town, and every other town for miles, is either directly or indirectly subsidized by dope, from the young parents cultivating a few seedlings in the backyard to the owner of the sushi restaurant where seemingly unemployed people eat dinner, always paying in cash.

"I think we're in the middle of a boom time," says Jason, clomping over to a leather sofa with his juice. He's in his late 30s and wearing camouflage pants with a small knife clipped to his belt, heavy-duty work boots, and just enough chin scruff to keep him from looking groomed. Despite its rustic accommodations—personal business is conducted in an outhouse down the path—the house bears many signifiers of high household cash flow: gleaming new appliances, lots of products made by Steve Jobs, a Droid satellite phone. He got into the pot business almost by accident. After several years drifting hippie-style through California, Jason fell in love with the pastoral lifestyle and realized that he had to earn money to sustain it, so he became a businessman. He agreed to explain the economics of his trade, provided Bloomberg Businessweek withheld his full name.

The 1996 passage of Proposition 215, which legalized the possession and cultivation of marijuana for medical use in California, ushered in a green golden age. The legislation permits use of the drug by anyone with a 215 prescription, which can be dispensed by doctors for ailments ranging from cancer to a stiff neck; the Marijuana Policy Project estimates there are 355,000 patients in California who have been advised to use medical marijuana by a doctor. Selling marijuana for a profit is still illegal under state law, and there is no specific definition of how much a person can legally grow or what constitutes a profit, while all marijuana sales remain prohibited by federal law. The very vagueness of the rules created opportunity: Midlevel entrepreneurs such as Jason who were willing to live with the risks and ambiguities of a semi-legitimate market rushed in and thrived, though there are no reliable estimates of how many there are.

Now a new set of variables has thrown the business into even greater uncertainty. On Nov. 2, California will vote on Proposition 19, the "Regulate, Control and Tax Cannabis Act of 2010," a ballot initiative introduced by an Oakland pot enthusiast named Richard Lee that proposes to legalize marijuana for personal use. The new law would permit individuals to possess up to 1 ounce and cultivate 25 square feet worth of plants at private homes, with no medical requirement. Beyond that the initiative's language is murky. Regulation of commercial production and sale of cannabis would be done by counties and municipalities, leaving the mechanics of how it would all work undefined.

One thing seems clear, though, if the measure is adopted: A quasi-black market will be replaced by a much more legal one, and prices for pot are likely to go down. It's impossible to know by how much, but a 2010 Rand study called "Altered State? Assessing How Marijuana Legalization in California Could Influence Marijuana Consumption and Public Budgets" estimates that retail prices could eventually drop by 80 percent. First, suggests Jonathan Caulkins, a public policy professor at Carnegie Mellon University and a co-author of the Rand study, there would be a "honeymoon" period of several years when production would ramp up as California product began to push out inferior Mexican pot across the country. Once that happens, you could have "a real change in industry structure," according to Caulkins. Growers would have to professionalize their operations and become even more industrial-scale to squeeze out smaller margins of profit. In such an environment, people probably won't make the $150,000 or so Jason says he clears every year, and "mom and pop" farmers will be wiped out. Jason is planning ahead. "You wanna go up top and walk through them fields of glory?" he asks. "If you can grow twice as much, you'll make the same amount of money, even if the price is half."