In the fall of 2017, the outdoor cannabis harvest was a bumper crop for growers throughout the state of Oregon. This epic weed haul was the result of two factors; weather, and bureaucracy. The weather was spectacular for growing cannabis, particularly outdoors. A wet fall, winter, and spring (nearly 220 straight days of rain) meant there was plenty of water available. And the summer was warm and dry. Conditions that are favorable for growing trees with plenty of flower on them. The sunshine helped to ensure that flower would be potent. The other cause was bureaucracy. Normally inimical to the production of any good or service of value, on occasion bureaucrats manage to step on their dicks in such a way as to help the actual productive class. Such was the case in 2017 with the OLCC (the Oregon Liquor Control Commission).
The OLCC is the regulatory pseudo agency (much like the fed it is a non-government organization with a government mandate) responsible for enforcing Oregon’s pot laws. In 2017, the OLCC declared open season for anyone with a license to grow marijuana when it announced that “due to a lack of allocated funds, enforcement efforts will primarily be focused on those growing cannabis without legal license to do so and on those with a recreational license. However, next year will see increased enforcement for medical growers.” In plain English and practical reality, this meant that as long as you had a medical license you could grow as much pot as you wanted. The statutory limits on the number of plants one could grow was out the window. Worst case, if you were caught, they’d cut down plants of your choosing until you were down to the legally allowed number. Every grower was growing as much pot as he could get in the ground that summer as cuttings are cheap.
The resulting harvest was huge. And while the left may not understand or believe it, the laws of supply and demand are iron. If supply is greater than demand, the price falls until an equilibrium is reached. And the result was The Glut. A situation where outdoor weed wholesale prices fell as low as $300 per pound. If you could find a buyer and had good enough quality weed. There were rumors of weed going as low as $100/lb but that had to have been either exaggeration or for some really ditch weed bullshit. Either way, that was the first bump in the road.
Once the harvest was in, properly dried and cured, and finally trimmed and packaged up, we had enough product that once The Glut ended we’d be able to fund our next phase. Right where we need to be to build our indoor facility and go through the process of getting the rec license that would allow us to expand. That’s where the next bump in the road occurred. We just need to wait for The Glut to recede and the price to come back up to our floor of $800 to $1000/lb. While it would put a crimp in our timeline, waiting even six months wouldn’t be catastrophic.
An aside; indoor and outdoor pot flower are of differing quality. Indoor is higher quality and fetches a relatively higher price. But outdoor is far cheaper to produce and the aforementioned conditions were conducive to outdoor pot production. In 2017 we had both indoor and outdoor operations.
My business partner was impatient to take the next steps however, so was looking to expand beyond our established channel of buyers to sell all that outdoor product. The short version is that the buyer was a scammer that my partner thought he knew but didn’t. My partner took his stepson with him to the transaction, verified the guy had a med card, and gave the stepson the cash to count, made the transaction “selling” 80% of our harvest, and the best quality at that, and they left. Only to get home and discover the money was, as he texted me, “counterfeit.” I didn’t hear from him for 3 days and when I finally got the full story I have never been closer to murder than I was at that moment.
Turns out the money wasn’t counterfeit. It was movie money that looked just this side of monopoly money for verisimilitude. I wasn’t even mad at the scammer (whom my partner didn’t even take a picture of the guy’s med card or his license plate and only had a phone number that of course turned out to be a burner). I mean, the balls to try that and get away with it? But my partner and his idiot stepson? Yeah. Them I was furious at.
As of February, we had only 20% of our harvest, The Glut was finally receding, and we were at a crossroads. We came up with a last-ditch plan of selling that final amount to finance continued expansion of existing indoor med operations of high THC plants, and to get legal for growing outdoor hemp as we did have a legit buyer for hemp flower by that point for processing for CBD products. Those funds from a large hemp harvest could then be leveraged to do the build out for a rec license grow. As described in my previous article, a rec license allows a much larger size grow operation than a med license.
Another digression: Marijuana and hemp are the same plant, save that hemp has been bred primarily for its fibers in the stalk and has only trace amounts of THC but plenty of CBDs, even in the flower. Marijuana flower contains both, and various strains have various proportions. THC is what gets you high and CBDs are the actual medicinal chemicals, especially for seizures, muscle & joint problems, pain, and anxiety. CBDs also don’t get you high and won’t, generally, show up on a piss test. Getting licensed for hemp is far less expensive than getting a rec marijuana license and you can grow as much as you like. There’s a fee for a 2-year license and you must have proof that the plants are hemp and not marijuana, and that’s it. Far easier compliance and we have enough acreage on the farm it could be quite lucrative. THC flower is usually more valuable, esp. indoor grown. But there’s potential in CBDs, especially with hemp as the input costs are way lower, the regulatory burden is lower, and the labor costs are lower offsetting the lower sales price one can get per pound.
Unfortunately, due to the remainder being lower quality and The Glut being so epic, it took a long time to move that product. The revenue hasn’t come in fast enough to buy the hemp plants needed to get the hemp license or get them in the ground for a spring or summer crop. The flow has been a trickle; just enough to keep the lights on and pay the basic bills while expanding the amount of indoor plants we can grow up to the legal limit for the number of med cards we have. There’s an outside shot that by next spring there’ll be money for hemp. But I don’t see it.
The result is that two months ago I washed my hands of it and told my partner that as long as he kept things legal and he paid the lease payments on time for the farm, he could keep going, but that I was done being actively involved. I started looking for a job and found one. I started that the last week of June and I’m enjoying it.
The saving grace, from a financial perspective, is related to the legal technicalities on having a rec license and the land we purchased for the business. The land use regulations related to marijuana are somewhat convoluted. There are both county regulations and state regulations. The state regulates the maximum square footage of flower canopy one can have per rec license. It also insists that no individual or entity may have multiple licenses on the same tax lot. The county regulates the zoning for tax lots, which determines whether you can grow indoor, outdoor or both. It also sets a minimum size for a rec license. Usually 2-5 acres. Further, to obtain a rec license, one must prove water rights. If they aren’t already registered on the deed, this isn’t as simple as digging a well. One must obtain those rights through a process that takes 1-2 years.
To give an example. If one purchases 40 acres in a county where the minimum size for a rec license is 4 acres you may not, then obtain 10 licenses from the OLCC. You can obtain one and lease out the other nine to other folks with a license. But if you want a second license you must buy another tax lot somewhere. Many of the larger operations are buying 5-10-acre plots with proper zoning building a minimum size rec grow, and then offering the rest as turnkey, then buying another parcel and repeating. That was part of our plan. But the number of parcels that are properly zoned in counties with relatively simple regulations is small. More importantly, the piece of land we bought has county water and therefore automatically has water rights.
The land is valuable in and of itself. And the land is in my wife’s name and my name. It’s appreciated about 20% in value since we purchased it. And the company is leasing it from my wife and me. So worst case we have a valuable piece of property that has a current market value that is keeping pace with the rest of the money we invested and then some. Also, it’s a good place to go shooting whenever I want. We may even just keep it and build a country house as a retreat there.
I learned my lesson. My next startup will be a side-hustle that I build until it replaces a significant portion of my income. I’ll have no partners, only employees, or minority ownership stakes if I need someone with special skills, but not a partner. And while I’m probably out $20-$40k counting lost income, it was worth the gamble as it was money I could afford to lose. I don’t regret taking the chance, though, and I learned a great deal about myself and managing people, and just how tough it is to start a business. I’ve always admired folks who run their own enterprise, but I do so even more now that I’ve taken a shot at it.
End Note: I appreciate all the interest and encouragement as well as kind words. It’s helped immensely. This place really is a community.