THE CANNABIS CONVERSATION: The economic outlook for Humboldt County right now looks bleak | Lost Coast Outpost
Cannabis has long been the economic backbone of Humboldt County. While efforts to accurately quantify the size of cannabis’s contribution to the local economy are difficult, a recent estimate from the Humboldt County Sheriff’s Office says about 4,000 illegal pot farms are still operating in the county. Including licensed crops, the total is around 5,000 farms. Assuming just 500 pounds of production each and a price of $ 500 per pound, these farms would generate around $ 1.25 billion per year. Additionally, Humboldt has a large number of commercial-sized indoor crops that are not included in these numbers. Regardless of the exact numbers, cannabis plays a huge role in the local economy and has since the demise of the logging and fishing industries.
For those who don’t know, the price of outdoor and sun-grown cannabis has slumped this year, down more than 50% from a year ago. Humboldt County, like the state of California, produces a lot of outdoor weed, and because 70 percent of towns in the state have banned commercial cannabis activity, there are relatively few dispensaries for to sell products. With oversupply and limited distribution opportunities, prices are falling rapidly. Add to that the fact that Oregon and Oklahoma are now moving huge amounts of cannabis into the black market, Humboldt’s pot growers in both legal and underground markets are in a hurry.
Much to the dismay of many in our local industry, we find that there is simply not much demand in the market for the outdoor cannabis we produce. Indoor and mixed light flowers, which tend to have a tighter bud structure and tend to be more visually appealing, mostly fill dispensary shelves and charge better prices. Admittedly, to say this is almost heretical here in the county, given our historic reputation for producing “premium” organic produce grown in the sun. Regardless of our beliefs or historical dominance in the market, transaction data shows the same thing – that Humboldt ganja is not what it once was.
Cannabis Benchmarks aggregates reported sales data from states with medical and adult use markets and produces price and transaction data on a weekly basis. The most recent report, dated December 10, shows that outdoor flowers represent only 8 percent of legal transactions, compared to 65 percent for products grown indoors. In terms of the volume of overall product sold, the exterior represents 13% and the interior, 53%. A mixed light or greenhouse flower does the rest. In other words, the numbers (not our opinions) show that cannabis grown outdoors appears to be losing its luster, with prices and market action reflecting this new reality. While many believe that sun-grown cannabis is better for the environment and for your body because it contains a higher percentage of medicinal compounds like terpenes, the market is just not on board in today’s times, and therefore, our local economy is at risk.
I know of many producers across Humboldt and neighboring counties who cannot move their product to the legal or underground market at this time. Desperation is growing within the farming community and, unfortunately, it was noted that suicides are on the increase among producers. Some of us have already lost friends and it is terribly sad to see.
With the price collapse we’ve seen in wholesale or wholesale prices for outdoor flowers this year, Humboldt’s economy faces significant risk. According to the Federal Reserve Bank of St. Louis, county-wide GDP or economic output slowed in 2020 (likely due to COVID). One would expect this year to show a further decline in formal economic activity given the dynamics we are discussing. While much of the income from cannabis production goes unreported, as the majority of farms still operate in the unregulated market, consumption of goods and services will undoubtedly take a hit as producers find it difficult to move their products or sell at very low prices and have less to spend.
As cannabis prices fall and sales stagnate, economic activity in the county will be negatively affected. Inefficient farms and those with moderate-quality produce are already bankrupt, tailors are offered much less or are completely stiffened on their wages, laborers lose their jobs, and cannabis brokers are in a hurry and disappear. Retailers and other service providers to these groups will likely be hit hard in the coming months. Sadly, we’re probably at the start of what promises to be an extremely uncomfortable and disruptive adjustment for the local economy.
Remember that economic activity is primarily a function of two things: how much people need to spend and, most importantly, what they think about their future economic prospects. With greater economic uncertainty, people tend to spend less. Without another pony show our county could be in big trouble. Suppliers of luxury goods and services will likely be the first to feel the pain, other industry groups will follow as global economic activity declines and people tighten their belts, spending less on things like clothing, cars and recreation.
You might recall that jar prices similarly slumped in 2017. During this time, some local businesses like retailers reported a 25-30% drop in sales and some circles were really concerned that Humboldt face an economic collapse. This never materialized as corporate interests, outsiders and successful local growers built cannabis infrastructure and invested significant sums in engineering, compliance, construction and legal services. as part of the regulatory clearance process. Humboldt and other areas have started to aggressively curtail illegal operations, and statewide demand for legal cannabis has grown rapidly with the start of adult consumption or recreational sales in 2018. New dispensaries opened their doors and many manufacturers went online who needed cannabis to create value-added products. such as extracts, edibles, tinctures and topicals such as lotions and ointments. Pot prices, after cratering just a year ago, have increased significantly in 2019 and 2020. The upward price dynamics, coupled with the construction of infrastructure and permit spending just mentioned, boosted Humboldt’s economic growth again and helped us avoid economic catastrophe.
I’m not sure we’re getting such a quick rebound this time around. While things like cannabis tourism and the potential of domestic and international cannabis markets bode well for the county’s economic future, neither will happen overnight. Instead, industry insiders believe it could take years. Mark Lovelace, our former supervisor who now works as a cannabis consultant for municipalities and counties, recently noted in The Humboldt Chronicles that it could be about five years before a fully functioning national market takes hold. Others think even longer. By then, many farmers in Humboldt County will have gone out of business. In fact, within the cannabis industry, people now estimate that 50% or more of small operators will fail in California this year and the current environment has been called an extinction event.
The ramifications of widespread agricultural failure will be severe for Humboldt. Right now we boast moderate unemployment rates and record home values. With the collapse of the cannabis industry, we can all feel some economic pain given the interdependence. Mountain properties are currently experiencing huge declines in value and residential home values could eventually follow suit, as they also collapsed in the last recession in 2007-08. A local recession (or depression) will hamper consumption and spending and force many to re-evaluate their lifestyle. Depending on how long the downturn lasts and how the domestic and international cannabis markets evolve, the county may need to redefine its economic paradigm once again. Only time will tell.
Jesse Duncan is a longtime Humboldt County resident, father of six, retired financial advisor and full-time commercial cannabis producer. He is also the creator of NorCal Financial and Cannabis Consulting, a free platform that helps smallholder farmers improve their culture, business and financial skills. Please check out his blog on, his Instagram at jesse_duncann, and connect with him on Linkedin.