Farmers mull growing marijuana as potential for market grows

Farmers mull growing marijuana as potential for market grows

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Trevor Sherman stands in a barn, filled to the rafters with hemp, drying on lines as it is prepared for market.

If he can grow hemp — and he grew 40 acres of it last year — he can grow marijuana just as well. And maybe he will, although he hasn’t decided. The growing part is easy, but finding secure space to dry it until it’s ready for processing can be a challenge. It needs to be climate-controlled, at least to a degree, and large enough for whatever acreage he plans to plant.

Farmers like Sherman in the greater Cortland County area are debating whether they would get into the adult-use market if New York becomes the 11th state to legalize recreational adult-use marijuana in the 2021 budget.

Some farmers, such as Sherman, are already growing hemp and wouldn’t need to change much to begin processing marijuana as well, but find the current law could hinder smaller farm operations from getting into the market.

But a push to open up the recreational industry in the state could mean millions, if not billions of dollars in revenue for the state.

In 2016, marijuana generated $7.6 billion for its second legal crop in America. Industry consultant GreenWave predicts $30.3 billion in legal sales by 2021. New York farmers could take a share of that.

What farmers think

The marijuana industry could be a new avenue for Allan Gandelman, an owner and operator of Main Street Farms, which grows hemp and vegetables, but he won’t move into only growing marijuana if it becomes legal.

“We’re never going to get away from growing hemp and making CBD oil,” he said. “The thing we really like about the hemp is it’s accessible to everyone, you know people of all ages, because it doesn’t get you high.”

But Gandelman, president of the New York Cannabis Growers and Processors Association, said he knows of farmers, although not nearby, who will switch exclusively to growing marijuana.

Gandelman also operates a processing facility on Main Street in Cortland and said the equipment he uses there can also be used for adult-use marijuana.

“If the state allowed it — it’s all the same processing equipment — so we could do both CBD and the adult-use processing in the same facility,” he said.

But those answers are still up in the air, as the state isn’t likely to vote on the Cannabis Regulation and Taxation Act until April, Gandelman said.

“Hopefully, you know, if it does get legalized we will have a decent amount of income save because we’ll definitely have to do some expanding,” said Sherman, the owner of Ithaca Organics in Freeville and Dryden. He, too, sells hemp and is looking to get into the market of selling both hemp and adult-use marijuana.

He’s got enough land, but he would need more greenhouse space.

Gandelman also said if he wanted to he would be able to grow the marijuana in fields next to the hemp he grows.

“Traditional hemp that you’re growing for fiber or grain you can’t grow next to the marijuana because it will pollinate it outdoors and cause the crop to have seeds, which you don’t want,” he said. “The hemp that we grow for CBD, though, is all female plants so they have no seeds or pollen, so we could actually grow side-by-side our CBD hemp and marijuana.”

Economic revival

Legal marijuana could bring an economic revival to areas of the state — if the area is prepared to accept it.

Norman Birenbaum, the state’s recently appointed director of cannabis programs, sees legal marijuana as a potential economic boom for communities.

The example has already been provided by other states, including New York’s next-door neighbor, Massachusetts, where old vacant industrial buildings have been repurposed for growing and processing cannabis.

“We’ve seen local mayors across the country come out to say, ‘This is exactly the type of revitalization that we need,’” Birenbaum said. “It’s not coming from any other sector. So really standing with arms wide open to embrace the industry.”

Birenbaum cited Alex Morse, the mayor of Holyoke, Massachusetts.

“He said, ‘We’re going to embrace this. We have a lot of manufacturing and textile facilities that have been dormant, and this is a need we can fill, and we’re going to reap the economic benefits here,’” Birenbaum said.

Today, old shoe-manufacturing plants in Lowell, Massachusetts, now house some of the biggest cannabis cultivation and processing facilities on the East Coast, he said. That’s the type of economic growth that legal marijuana could bring to Cortland.

“So we’re looking at an increase in terms of local employment … we’re looking at investment into these properties, we’re looking at increased property taxes and collections by municipalities that will host these licenses,” Birenbaum said.

Federal illegality means that marijuana can’t be brought in from outside the state. So if New York legalizes marijuana, the state will have to grow its own.

Homegrown

“So this is something where there are extreme benefits to state economies because you can’t engage in interstate commerce,” he said. “Everything needs to be grown here, everything needs to be manufactured here, it needs to be supplied here and distributed here, and so we see the benefits of all the ancillary industries that that requires.”

Those ancillary industries would include processing, packaging, labeling and distributing, as well as the construction, electrical and other work necessary to get growing and processing facilities up and running.

While the state will aim to heavily regulate marijuana, it will also make it easier for entrepreneurs to get involved in marijuana production — the requirements will not be as strict as the laws governing medical marijuana.

“We want to promote and facilitate access to anyone and everyone who wants to get involved …” Birenbaum said. “It will be much more accessible than the existing medical program is. …The governor’s proposal has mechanisms for disadvantaged farmers, for people who qualify for being economic equity applicants. We want to make sure that the market is not consolidated in the hands of just a few operators.”

Because of upstate New York’s weather, Birenbaum said much of the growing will likely be done indoors. That means that post-industrial cities, with whole areas of the city filled with abandoned factories, empty warehouses and vacant stores, stand to benefit the most from legal marijuana.

Ready for legal weed?

Whether the community is ready to be home to pot farmers remains unclear, said Garry VanGorder, executive director of the Cortland County Business Development Corp. and Industrial Development Agency.

“Some may be more welcoming than others,” VanGorder said.

VanGorder thinks it’s likely that state regulations will favor indoor growing, and Cortland has the buildings for that purpose.

“I think the benefits to the community are obvious,” he said. “Certainly it’s a new industrial opportunity. … It’s not too far a leap from what’s happening with hemp.”

“So we’ve got Al Gandelman and his operation here, really with a leg up on the hemp industry and in developing facilities that will allow them to grow it and manufacture it and sell it,” VanGorder added. “So I think that’s good news. We have some local knowledge with respect to that.”

But even if all the right elements are present, would-be marijuana growers may run into local opposition.

“Because it’s a real departure from what we grew up with,” VanGorder said. “For people my age, legalized marijuana is something that we probably never imagined in our youth. But it’s a different world.”

The smell that surrounds you

The smell could be objectionable, said Bob Rhea, the city of Cortland’s zoning enforcement officer, especially if growers try to set up operations near residential neighborhoods.

“There’s an odor issue,” Rhea said.

He could see marijuana operations being opposed for this reason. Yet industrial manufacturers in the city have had to mitigate odors emanating from their buildings in order to gain city approval for projects, so cannabis operation would potentially be no different.

“If it meets the criteria, if they can do it without a negative impact on the area, it should be fine,” Rhea said.

But VanGorder said Cortland County should keep an open mind regarding marijuana.

“I think it would be shortsighted to just dismiss it out of hand as something that we shouldn’t consider if we get those opportunities,” he said.

It’s not just hurdles locally farmers could face. As the bill stands now there are sections that could deter small farmers from getting into the market.

The hurdles

However, the way the bill now stands, it likely wouldn’t be a market Gandelman could get into and still make money, he said. One of the biggest hurdles to get past is the taxing.

Under the bill the cultivator, who would sell to a distributor, would be taxed $1 per gram of dry weight.

“So basically it’s like $500 a pound,” Gandelman said.

Then there’s a 20% tax from the distributor to the retailer, then any sales taxes.

“It’s basically about a 50% to 55% total tax on the cannabis once you add up the tax on the whole supply chain,” he said, noting it would be one of the highest taxing rates in the country.

For smaller farmers and businesses, that model would not work, he said.

“The way taxes are structured right now it wouldn’t really work for a small farmer or a small business to get involved in the THC industry because the taxes on the grower are so high, so to stay and make money would be difficult,” Gandelman said. “It would make it harder for smaller farms to thrive.”

It certainly wouldn’t work for Gandelman either, he said, noting he sees his company as small- or medium-sized.

“We would have to grow at such a large facility and grow such a large amount to hit those economies of scale,” he said. “That would be really difficult.”

Big companies benefit

Larger companies, those already involved in medical marijuana, would be the ones able to enter the adult-use industry under the current structure, Gandelman said. Those companies includes one on which former Speaker of the House John Boehner sits on the board: Acreage Holdings.

Gandelman, as head of the cannabis growers group, is lobbying to have the tax structure changed so smaller farmers have a fair shot.

“We want the small businesses to be able to operate in the adult-use market and we look at it more as the craft beer model, so that the smaller craft producers in cannabis are able to grow and sell off the farm and be able to compete in their own territory,” he said. “You could still have your big Budweiser-type companies, but then you could have your small farm craft businesses doing the adult-use cannabis.”

Counties could opt out

The other potential problem is the county opt-out portion of the law.

“Any county in New York state could say we don’t want a dispensary, we don’t want cultivation and just opt out,” Gandelman said, noting Nassau, Suffolk and Westchester counties are already discussing opting out.

How many licenses will be issued could also pose a problem, as the state hasn’t put any numbers in the bill.

“If they only give out 10 or 20 licenses to really small businesses that’s a huge negative than if they gave out 500,” he said.

Sherman said his biggest hurdle is making sure everything stays within this state.

“I would like the power to be with the farmers that are in the state,” he said.

In the end, though, farmers are just waiting to see if the bill passes before making any decisions, Gandelman said. “I think there are just too many questions that are up in the air for anyone to kind of have a hard yes or no.”

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