Future Of Legal Marijuana: Canadian Greenhouses Could Mean Cheaper, Safer Pot

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DELTA, British Columbia – The red-leafed blueberry bushes and greenhouses filled with tomatoes tell you that this small town south of Vancouver is a great place to grow things. A peculiar smell in the air tells you marijuana producers have already figured that out.

Across Canada, gleaming glass greenhouses that once grew produce for consumers are being retrofitted with air filters and light-blocking shades. Gone are the tomato plants and peppers. In their place are tens of thousands of sun-grown cannabis plants and hundreds of farm-workers transplanting, watering, trimming and packaging pot.

Experts say these highly sophisticated operations are the future of marijuana production internationally. The hope is that they will drive the price of pot so low, black marketeers give up.

“We haven’t changed the footprint,” said Rob Hill, CFO of Emerald Health Therapeutics, which is growing marijuana in Delta. “We’ve just changed the crop.”

Canada became the second and largest nation to legalize marijuana on Oct. 17. The country’s legal marijuana system requires that cannabis be grown indoors by licensed providers, so Emerald Health Therapeutics partnered with a longtime produce operation, Village Farms, in a joint venture called Pure Sunfarms capable of producing a staggering 82 tons of marijuana annually from the 1.1 million square foot greenhouse complex about 30 minutes south of Vancouver.

Canada’s decision to legalize and regulate marijuana sales is being closely watched globally by governments, regulators and cannabis investors who claim the nation’s precedent-setting move could herald broader acceptance of legal pot, particularly in the United States. The business of pot is a prime motivator. Today, wholesale marijuana sells for about $600 a pound in some U.S. states that have legalized it, making it a far more valuable crop than lettuce, almonds or tomatoes, where per-plant profit margins are usually measured in fractions of a penny.

The price of pot reflects the reality that it largely remains a boutique crop, often grown under expensive electric lights in warehouses. Illegal growers may also cut corners by growing outside on remote federal land they’ve illegally bulldozed and turned into makeshift farms, but even then, their margins reflect the potential prosecution they face.

Because cannabis – and even hemp – has been illegal to grow in most parts of the U.S., highly effective and efficient farming operations have stayed away from marijuana, mostly ceding the space to hobbyists and enthusiasts, or Mexican drug cartels.

Experts and regulators say driving down the price of legal marijuana will help drive out those cartels and black-market dealers, in part by moving cannabis growing into farmland like Delta’s, where high-value crops can be grown more cheaply. It’s already happening, to some extent: Three years ago, wholesale marijuana was selling for $2,000 a pound. Retail prices have also dropped as competition increased: In Colorado, for instance, the price of smokable “flower” has dropped 40 percent since January 2014, from $7 a gram to $4.19 a gram today, according to BDS Analytics.

“The price was always set based on risk,” said Kyle Speidell, co-founder and CEO of The Green Solution, a 17-store cannabis company based in Colorado that was paying $5,000 a pound for marijuana when it first opened four years ago.

As an increasing number of U.S. states have legalized marijuana, growers are getting more comfortable and scaling up their operations. Indoor growers of both legal and black-market marijuana consumed 4.1 million megawatt-hours of electricity last year, roughly equal to the total electricity generated annually by the Hoover Dam, according to cannabis analytics firm New Frontier Data. The company said electricity costs make up to 20 percent of indoor growing prices, compared with 8 percent for outdoor grows.

While growing outdoors is cheaper, it limits the number of crops growers can harvest a year. Growing in greenhouses, however, reduces electricity costs and the amount of water and pesticides needed for growing outdoors. It also allows growers to maintain crops year-round in the right climate.

“We’re seeing a shift away from people who were effectively hobby growers,” said Karson Humiston, 26, the founder of cannabis staffing firm Vangst in Santa Monica, California. “It’s all going to Big Ag. That’s definitely where the industry is shifting. For them, what’s the difference in growing lettuce, tomatoes or cannabis?”

Humiston’s company, Vangst, has grown rapidly by providing part-time workers to large-scale marijuana farmers. Each of her 600 temp laborers is background checked, carries worker’s compensation insurance and is banned from consuming on the job. It’s all part of the industry’s move away from the days when cannabis farmers and trimmers got high while working, and had no legal recourse if they got hurt on the job.

“You’ve got people who were paid in cash, paid in pounds of weed, and if you’ve got unlimited money and paying no taxes, who cares?” Humiston said.

Inside Pure Sunfarms’ cannabis vault, more than two tons of processed marijuana – 4,400 pounds of it – are awaiting distribution to government-sanctioned stores. At current Canadian prices, that cannabis is worth somewhere around $20 million, and Pure Sunfarms plans to harvest similar crops more than 80 times a year.

“The only guys who are going to be able to play in the game are the larger ones because they have the economies of scale,” said Matt Karnes, a cannabis analyst and founder of GreenWave Advisors in New York City. “It really doesn’t bode well for the small guy.”

At the Pure Sunfarms facility, master grower Rob Baldwin is the definition of the big guy. Once responsible for producing millions of pounds of tomatoes annually, Baldwin is now responsible for growing tens of millions of dollars worth of cannabis a year.

“There’s just one way to grow tomatoes,” Baldwin said. “Eventually, there’s only going to be one way to grow cannabis in a greenhouse. Figuring that out is interesting to me.”

Baldwin’s techniques manifest themselves in the way the cannabis plants are grown from cuttings, how workers manage the massive grow rooms and even how far apart the plants are and how much extra ventilation they get from special ceiling fans. Walking a visitor around the facility – in clean-room jackets, hairnets and booties – Baldwin beams at the healthy plants reaching toward the sun.

Karnes said Pure Sunfarms’ approach is likely to be replicated elsewhere, particularly in other places where land is cheap and farmers are struggling to stay afloat with traditional crops.

“At the end of the day, it’s no different than any other crop,” he said. “Whatever they’re doing today in Canada is going to be the eventual template for the United States.”