The battle for survival for craft cannabis in Humboldt County continues apace. Most legacy growers in Humboldt that have taken the legal route are craft level farmers, tiny operators when compared with other much larger growers from Lake County to our south, Salinas and Santa Barbara Counties, just to name a few, where well financed growers have flaunted the supposed state 1 acre license cap by stacking licenses one on top of the other as long as there has been approval by the county, and many have approved. There are 50 acres and even larger legal grow facilities flooding the market in more suburban settings of the state with significantly reduced challenges and costs of doing business than in rural Humboldt.
The very survival of Humboldt County as a cannabis production leader in California and cannabis travel destination around the world, is in jeopardy. The ship is sinking, small craft producers cannot survive at current prices, medium size farms, like Unity, perhaps survive but are not profitable. We can't invest further into our particular project to develop infrastructure on our farm. Not in this market. This hesitancy to invest further into legal cannabis projects will have very real consequences for the small business community in Humboldt County over the medium and longer term obviously.
Why has it come to this? The answers are many... partially because of a deeply flawed Prop 64 and partially because of oversupply from the aforementioned "legal" mega licenses and giant illicit producers that have entered the market over the last 18 months. On the ground, it's overtaxation, to ridiculous levels in fact, with state cultivation taxes over 50%, before our material is even paid for the tax is taken first. Combine that with a major liquidity crunch throughout the supply chain that especially hurts the farmer, who is always the last paid. Now include generally higher costs of capital across the board, limited financing options, and craft scale legal cannabis is unprofitable in Humboldt County today.
There are green shoots however, a small glimmer of sunlight. The grower community around Humboldt and the Humboldt County Growers Alliance, HCGA have been rallying the county for creative solutions to support legal cannabis. The board of supervisors appear sympathetic to the industry's struggles and the importance of supporting a successful cannabis economy in Humboldt County over the long term. Several interesting proposals have been floated.
Here's what we like at Unity Farm and at the HCGA:
2021 Measure S taxes are due but postponed until September of 2022. Creative financing solutions or payment plans are proposed for small farms that cannot pay by then
Measure S is suspended for 2022 going forward and then reassessed collaboratively after industry has had opportunity to stabilize
Sustainability investment, into water storage or harvesting, solar, regenerative farming, qualifies for tax credits against future Humboldt County taxes.
As local farmers we are waging a dual public relations offensive currently. We need the state to repeal the cultivation tax so that we can survive. The board understands this. Like everything else for cannabis entrepreneurs, the flat cultivation tax is choking us at current market prices.
Fortunately, the message seems to be getting through, and not a moment too soon. Governor Newsom recognizes our industry is on a precipice and has committed to reducing taxes on farmers, and to opening more retail around the state, so legal farmers have outlets for our products, and consumers have access to legal, safe product. So, these are all green shoots, and they will be enough but they will take time. We won't stop advocating for a thriving legal cannabis industry in California and meanwhile we turn to our county supervisors for help.
Humboldt County is cannabis and cannabis farmers are Humboldt County. Let's thrive together!