OR: Recreational Pot Expert Chimes In Over Overproduction, Other Issues

Photo Credit: Andrew Selsky

Seth Crawford, co-owner of Oregon CBD, is an acknowledged expert on the marijuana industry.

He studied the sociological and economic impact of the Southern Oregon pot business for his doctoral dissertation and he was quoted in a recent Associated Press story on overproduction in the industry. The story was published in this newspaper earlier this month.

He responded to series of questions via email. The transcript was lightly edited for clarity.

Question: How did the state establish how much pot might be grown/needed once it was legalized recreationally? In the AP story you noted that there are 900 licensed recreational growers with more than 1,100 license applications awaiting approval. Will the surplus continue to grow?

Answer: The state did little to assess how much supply was needed, outside of hearing public testimony in the legislature’s Joint Committee on Implementing Measure 91 in 2015. I was invited to present the details of my research on Oregon’s pre-existing medical cannabis production on May 20, 2015. The goal was to help frame the newly unveiled canopy limits. I told the committee that, at the time, Oregon already produced three to five times what it consumed and that total in-state demand could be met by as few as 60 of their proposed 40,000 square foot farms. Oregon has been a leading cannabis exporter for decades.

All signs are pointing towards continued growth in the total surplus inventory in 2018. I expect it will peak next fall / winter, then start declining in summer 2019 for three reasons: (1) consolidation / liquidation of existing businesses will remove many farms unable to adapt to maturing market conditions, (2) enforcement actions by OLCC and ODA against noncompliant businesses and tighter inventory tracking will make it more difficult to divert, and, therefore, end the encouragement of overproduction, and (3) savvy farmers will start focusing on quality over quantity, growing only what they can sell.

Q: From the recreational growers perspective what are the pros and cons of getting a license as opposed to staying on the black market?

A: Long term stability vs. short term profit, but more important to contextualize what the “black market” was before legalization. Pre-legalization, most marijuana was produced legally under the medical program and the majority of it was grown like a backyard zucchini crop. The excess was dealt with in similar fashion (gifting to friends and family), with some exchanges for money (average income from illicit sales was around $7,500 per respondent in my study of growers). It served as a small, but important source of supplemental income for many people living in economically marginalized areas of the state. Today, those who are establishing themselves in the regulated, adult-use market have the best chance of making a career out of cannabis farming, but only if they can entrench themselves as niche producers. Those who did not enter the OLCC system are scaling back or entering markets that allow legal export (such as industrial hemp).

Q: Is it your sense that more pot is being smuggled out of Oregon than before? This was a question posed but unanswered in the AP story.

A: I seriously doubt that there has been a major change in how much our state illicitly exports, but that’s really just an educated guess.

Q: The federal prosecutor quoted in the AP story, Billy Williams, says he is “going to do something about” the overproduction. As a practical matter what can he do?

A: It’s critical to understand how much power law enforcement and prosecutors have over all people and property, not just cannabis farmers. Federal civil forfeiture law allows enforcement agencies to literally take everything a person or business has without criminal charges even being filed. The burden of proof is then on the person or business to demonstrate that the seized capital was lawfully obtained. In that regard, the only thing separating the U.S. from lawless, authoritarian regimes today is the judicious application of such sweeping power.

Williams has a job to do, and despite his recent public proclamations threatening the cannabis industry, inciting a revolution is not one of them. It’s pretty obvious to anyone paying attention that cannabis is an entrenched, legal industry that is not going away.

Q: How big of an impact does the 2013 Cole memo, which argued in favor of federal leniency in states where pot was legal, have on the debate?

A: The Cole memo is now a historical document. Before it was rescinded, state governments treated it like a law even though it was only guidance. The more important protections have always flowed from Congress and include the Rohrabacher-Blumenauer amendment (protecting state legal medical marijuana from federal enforcement actions) and similar provisions protecting interstate commerce rights of industrial hemp farmers.

Q: How big of an issue is the cash-only aspect of the recreational market? Is that likely to change soon?

A: It is not entirely “cash-only,” but banking restrictions definitely impose far-reaching consequences. It is difficult and unnecessarily dangerous to operate in a cash-dominated industry. More importantly, the traceability and transparency that is being demanded of cannabis businesses simply cannot occur unless access to banking is allowed. No bank access also forces start-up companies to look towards unconventional funding sources and limits the ability of established businesses to expand using bank loans.

Q: In a 2014 Corvallis City Club appearance you noted that 14 percent of Oregonians used marijuana. Do you think that that number has seen much of a bump since recreational legalization?

A: THC use hasn’t markedly changed since legalization. Psychoactive cannabis is a niche market with a little less than 20% of the population using the substance in any given year. What has changed — and dramatically — is the types of products consumers are purchasing in retail shops (movement towards vape pens, concentrates, edibles, and topicals at the expense of flower sales) and the availability of cannabis that doesn’t get people high, but provides significant improvement in quality of life. More people are using cannabis than ever before, but the real growth is in non-intoxicating cannabinoids like CBD and CBG for pain and age-related degenerative conditions.