California pot farmers feel the heat from low prices and wildfires By Reuters

By Mrinalika Roy

(Reuters) – Small California cannabis farmers are calling it quits, crushed by crop damage from devastating wildfires and falling prices, and industry experts expect the exodus to continue in the short term in the largest U.S. pot market .

Unlike traditional crops, pot growers cannot claim government financial support for damage caused by extreme weather because cannabis remains on the federal list of controlled substances.

“These operators don’t have the ability to go to FEMA (Federal Emergency Management Agency) to get reimbursed for losses in a federal disaster area because of the federal classification,” said Anthony Coniglio of NewLake Capital Partners.

Also, in California, prices have fallen since 2021 due to oversupply.

The Golden State has seen an influx of new growers as demand peaked during the pandemic, when wholesale flower prices topped $2,000 a pound, but the buzz has subsided and prices are currently around $1,200. dollars per pound.

“The lower wholesale price doesn’t create enough of a margin for people to take the risk of bushfires. As we continue to see increased fire risk, fewer people will invest in outdoor crops,” Coniglio said.

Climate change also increases insurance costs for cannabis farmers, who are already restricted to a limited pool of insurers.

“We saw increased costs like electricity, water and labor that didn’t feed through to crop prices…squeezing margins and causing more farmers to exit,” said Morgan Paxhia, co-founder and partner leading, Poseidon. Investment management.

Many have given up their cultivation permits and left northern California’s Lake County, a once popular growing region, several farmers told Reuters.

In the first quarter of 2024, active business licenses fell more than 20% year-on-year, according to cannabis data company CRB Monitor.

California sold $5.3 billion worth of cannabis products in 2023, according to the state’s tax department, up from nearly $6 billion in 2021, losing the top spot to Colorado in the first quarter of this year.

“Industry dynamics continue to pose significant challenges for legal cannabis operators in California. As a result, other state markets are seen as more attractive,” said Verano founder and CEO George Archos.