Will the Rise of Outdoor Cannabis Cultivation Create More Opportunities for Small Farmers?

Thanks to marijuana's history of prohibition, and growers' need to hide their crop, many people think of cannabis cultivation as an indoor operation with bright lights, in a nondescript location. While it's true that a lot of cannabis is grown this way, the plant also has a long history of outdoor cultivation, including and especially mom-and-pop farms in places like northern California. 

Outdoor cultivation is making a comeback in the legal market, but tough regulations and a lack of capital, among other things, are making it hard for small-scale outdoor farmers to get licensed and be profitable.

On the other hand, however, larger operators who want to grow outdoors may not have the experience, or even the farmland, necessary to do it. So in an ideal world, smaller scale and larger operators would partner to grow cannabis outdoors — and in fact, we're already beginning to see, on occasion, that these partnerships are forming

Why is outdoor cultivation increasing?

Outdoor cultivation is making a comeback as three factors come together: a reduction in the price of cannabis, a rising demand for extracts, and the fact that outdoor cultivation is more cost-efficient than growing indoors.  

As the price of wholesale cannabis drops in response to an increasing number of producers, it will be hard to justify the higher energy costs inherent in indoor cultivation. Indeed, many industry analysts, like Kris Krane, see large-scale indoor grows as doomed. 

“Simply put, in the long term it will be simply untenable for large-scale indoor cannabis producers in the United States and Canada to survive," he said. "Even greenhouse producers in most regions of the country will struggle to compete with low-cost production on the west coast and Latin America.”   

The market for cannabis extract — the oil used for things like edibles, vape pens, and dabs — is increasing at a faster rate than the market for flower. According to BDS Analytics, in 2018 prices for flower in Colorado dropped more than the prices for concentrates: 20 percent and 7 percent, respectively. Yet the price of edibles actually rose half a percent. Outdoor cannabis is primarily grown for extracts. 

And outdoor cultivation costs are much cheaper than their indoor counterparts. The Canadian government calculates outdoor cannabis growing to be 80 percent cheaper than indoor growing and is encouraging it. To save money, Canadian companies are already cultivating cannabis outdoors and in greenhouses in Colombia, where a gram costs half a cent to produce, versus $1.50 at home. The fact that Canadian cannabis corporations like Aleafia, CannTrust, and 48North in partnership with Canopy, are growing outdoors shows that the benefits are starting to outweigh the odds.    

So what does this have to do with small-scale farmers? 

Brandon Pollock, CEO of Theory Wellness, a company with an indoor grow and dispensary in Bridgewater and Great Barrington, Massachusetts, knows indoor cultivation expends a lot of energy. He sees outdoors as a way to reduce Theory’s carbon footprint, which in cannabis can be substantial. 

According to a 2011 study done by researcher Evan Mills at the Lawrence Berkeley National Laboratory, cannabis growing, both illicit and legal, consumes around one percent of U.S. electricity output. 

So Theory has added an outdoor grow in Sheffield, Massachusetts. “Outdoors can’t be relied on to supply all your products because it is seasonal, but it does reduce your environmental impact significantly,” Pollock says.

According to Pollock’s calculations, growing outdoors costs only ten percent of what it costs to grow indoors, between investment and operating expenses. Adding an outdoor farm to grow primarily for extracts seemed, to him, like a practical solution. 

In need of outdoor growing expertise and farmland, Theory partnered with small-scale farmer Ted Dobson, former owner of the outdoor, organic Equinox Farm in Sheffield. For thirty-six years he grew mesclun greens, but always dreamt of growing cannabis outdoors. He just didn't have the funds to do it. “Outdoor or not, it’s still very expensive to get into this business," he says. 

Outdoor cannabis cultivation requires a lot more capital and services than, say, fruits and vegetable crops. Challenges in this highly regulated industry include the cost of security measures (cameras, security service, visibility obstruction such as a wall), local zoning regulations that don't allow cannabis in agricultural/residential areas, legal fees, cultivation licensing fees, data tracking equipment, and municipal approval that sometimes requires additional “donations.” (In Massachusetts for instance, municipalities are asking for more money on top of the three percent "community impact fee" that companies are obliged to pay. As what's essentially extortion, this screens out small businesses who can't afford the extra costs.) 

The costs of operating an outdoor grow in compliance with government regulations were beyond Dobson's reach: A security system comprised of 30 cameras with data collection, greenhouses, and a nine foot surrounding fence all came to about $300,000 as of June, 2019. Theory, however, was able to absorb these costs.

Unfortunately, this ideal partnership, such as that between Theory and Dobson, is rare. Small-scale farmers need investors, but don’t usually find themselves in the same social and business circles as the big players. Theory Wellness only heard about Dobson speak out on the news about regulations and requirements that he felt were going to hurt small-scale farmers. 

Theory, the license holder, is now leasing two acres of private farmland from Dobson and bought the startup equipment to get the outdoor cultivation site and greenhouse set up and ready for planting. Dobson is a subcontractor for Theory and is the hands-on consultant spearheading cultivation. The crop is owned by Theory. 

Dobson says that investors who want to get their feet wet in the outdoor game usually hire a cultivation specialist who does not own a farm, is not necessarily from the town the company wants to enter, and has not necessarily grown cannabis outdoors. 

If legal cannabis were treated more as an agricultural crop rather than an industrial commodity, it might be reflected in regulations that encourage more diversity in cultivation. Municipalities could allow for outdoor growing in agricultural and residential areas (not just industrial zones), small farmers could apply for low interest loans, security requirements that demand cultivators go above and beyond in preparing their properties could instead be based on evidence of security breaches, not assumptions, and there could be more partnerships among large companies who want to grow outdoors, local outdoor cultivators, and retailers.

If and when the federal government finally legalizes cannabis, small-scale farmers will be under less of a stranglehold because they’ll finally be able to take out bank loans. (Right now, banks don’t want to work with cannabis because it remains illegal under federal law and they are federally funded.) Also, if the trend in Canada is any indication, to save money larger players will increasingly grow outdoors in regions with lower labor costs. Therefore, it is possible that if licenses are still available this could give local cannabis growers room to breathe.

The partnership between Theory and Dobson is rare but not impossible to recreate. It takes a recognition that collaboration is more economically sound for businesses and communities than cut-throat competition where somebody has to lose. 

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