Trying to Grow Pot Right is a Real Fight [FEATURE]

The American marijuana cultivation scene grew out of back-to-the-earth hippies heading for the hills of Northern California and Southern Oregon and putting seeds into the ground. They believed in harmony with nature as well as getting high. But as marijuana legalization has taken hold in several states now, the question is whether that original ethos and the attendant values that animated early growers can survive -- and whether growers of today who inculcate those values can survive.

Small mom-and-pop operations that seek to produce state-legal marijuana in harmony with the planet face a variety of obstacles, ranging from deep-pocketed corporate competitors to unduly onerous state marijuana taxes, rules, and regulations, to a continuing federal prohibition that not only imperils their freedom (if, at this point, mostly theoretically) but also makes their businesses less profitable and more difficult to operate.

Still, some growers make a point of sticking with those original values. One of the ways they can do that is by partnering with groups such as Sun + Earth Certified, which explains on its home page: "We certify cannabis that is grown under the sun, in the soil of mother earth, without chemicals by fairly paid farmers. Sun+Earth aims to create a world where cannabis can be grown regeneratively and organically for the well-being of all people, farmers, and the planet."

To earn Sun+Earth certification, participating farms must meet standards around how they grow their crops, such as the use of mulching, crop rotation, and reduced tillage to increase regenerative capacity and boost soil fertility. The use of cover crops, composting, compost teas, and homemade plant ferments is also part of the plan.

But Sun+Earth is not just about growing methods. It has a broader orientation toward the fair treatment of workers and wants to "renew the ecosystem and the people." And it demands engagement with the community beyond the farm gate. For Sun+Earth-certified farmers, it is about more than just money; it is about establishing a harmonious, sustainable relationship with the plant, with the workers, and with the broader world, beginning with the local community.

But like other marijuana producers, Sun+Earth growers have to keep their businesses afloat in a tough, competitive market amidst the unusual conditions created by their product remaining federally illegal.

Along with her partner, Monica Ramirez runs the Sun+Earth certified Sunbright farm in Mendocino County. Theirs qualifies as a boutique operation, with Sunbright holding the smallest cultivation license available in the state, the specialty cottage outdoor farm license. Sunbright produces somewhere around 75 to 100 pounds of buds in a good year, Ramirez says, and dealing with finances is a real issue.

"We haven't been able to have banking until this year because of prohibition," she told the Chronicle. "A couple of commercial banks have sprouted up, but what we've found is that their pricing is so out of touch with small farms' ability to pay that we just couldn't afford it. They charged $420 a month just to have an account."

"We were only able to do cash, couldn't deposit it into bank accounts -- it's very challenging," Ramirez said. "When you can't show your income and get loans, that's very challenging, too," she added. "Part of going legal was to become legitimate, but we still face all these issues."

"Now we've partnered with an online banking company offering a small farm discount, but we can only do 10 transactions a month without additional fees, and we could deposit cash but that would require an armored car and all this crazy stuff. The monthly fee is $150. It's expensive but affordable. We hope the law will shift."

And then there is Provision 280E of the federal tax code, which bars tax deductions for any business that "consists of trafficking in controlled substances, which is prohibited by federal law." That means that even in pot-legal states, marijuana businesses cannot get those deductions.

"Dealing with 280E is just a nightmare," Ramirez said. "We have almost $14,000 worth of disallowed expenses that we can't show on our books. That is just so wrong. They talk about rescheduling but I think we just need to deschedule and be treated like any other legally operating business. This costs us so much."

Daniel Fink grows at Sun +Earth-certified Down OM Farms in Nevada County in the Sierra foothills and is deeply committed to the practice of sustainable, regenerative agriculture.

"Building soil and compost through the use of our small alpaca herd and worm farm we minimize our carbon footprint and implement many regenerative practices, supporting the microbiology that supports us," the farm web site explains. "Growing our food, flowers, and cannabis alongside each other was a natural evolution of our process. We desire for our gardens to not only feed our family but to enrich the ecosystem and community of which it is a part. Being such a small farm allows us to cultivate an extremely high-quality product by showering each and every plant and bud with our love and intention."

"I've been growing a long time, but I never scaled up, and this is really a family farm -- it's me, my wife, our twin kids, and the mother-in-law, and I also have a full-time job to make this work. We have the smallest license type, and we produce about 150 pounds a year. With taxes, fees, and costs, we net maybe $50,000, and that goes to rent and employees," Fink said.

Down OM Farms chafes under 280E and banking restrictions, too, Fink told the Chronicle.

"Being limited to deducting the pure cost of goods is very restrictive," he said. "If I was able to spend money on marketing and advertising and write it off, my brand would be much more effective. They want us to follow the rules, pay out taxes, and yet we have to jump through insane hoops just to do the simple function of banking, and we have to pay absurd amounts sometimes."

It's not just financial services that are affected, Ramirez said.

"We had to evacuate because of a fire, and we found that prohibition prevents us from getting grants for fire prevention on our land," she explained. "We have 45 heavily forested acres and can't capture that service because we're a cannabis business."

Adam J. Smith of the Alliance for Sensible Markets, which pushes for a legal interstate trade in state-legal marijuana, could have a solution for some of the growers' woes.

"The whole idea was to get interstate commerce laws passed in all three West Coast states, and then to get the governors to reach out to the Justice Department, which has already said it wouldn't use its resources to prosecute state-legal marijuana and ask the department if that could be extended to multiple states," Smith told the Chronicle.

[Ed: Smith initiated this newsletter in 1997, while serving as our Associate Director. -DB]

Action came first in Oregon in 2019, where the legislation required a federal trigger -- either federal legalization or if the Justice Department signals tolerance for the move. California followed in 2022, with both a federal trigger and another trigger: If the state attorney general issued an opinion that there was no legal jeopardy, commerce between consenting states could take place. (That path was foreclosed when Attorney General Rob Bonta (D) held instead that such a move risked federal legal jeopardy.) Meanwhile, Washington passed a similar bill in 2023.

Smith pointed to a line of Supreme Court jurisprudence ranging from the 1942's Wicker v. Filburn, which held that a farmer's wheat crop indeed constituted interstate commerce even if he intended to use it to feed his animals, to 2004's Gonzales v. Raich, where the court reached the same conclusion regarding medical marijuana being gifted to a patient in the same state where it was grown.

"There is no legal distinction between what the pot-legal states are regulating and what these interstate commerce laws imagine, a regulatory framework between two states," Smith continued. "It's really a political question. After the Bonta decision, we saw we could not use that pathway, so now we've circled back to our original plan, getting governors' offices to reach out to the Justice Department. I've been working with those offices, and I'm confident it will happen relatively soon," he said.

"Given the politics around this issue, I think if governors ask Justice, it will give the same answer it gave to state-level legalization: As long as the states are regulating, our concerns are diversion, money laundering, and organized crime. They won't use Justice resources to prosecute. That doesn't force markets open but allows states to choose," Smith predicted.

And that could be good for current West Coast farmers, he said.

"One of the major problems that state-legal cannabis faces is the economic absurdity of the different supply chains and production industries," Smith said. "It's easier to grow in California or Southern Oregon than, say, in New Hampshire, but we have a situation where some of the best and most efficient producers in the world are sitting on product they can't sell, while in other states there is just overpriced, mediocre product. No wonder people are staying in the black market." [Ed: This is exactly what a friend who's continued to buy on the underground market told me. -DB]

"All of this will be beneficial for small farms in states where cannabis actually grows, as well as states that are traditional consumer states -- retail, distribution, manufacturing, everyone else in the industry will have access to thousands of suppliers instead of a handful. We can move the industry. When federal legalization happens, we are mis-incentivizing production in places where it is never going to be competitive, and meanwhile, we're choking out small farmers on the West Coast."

Sunbright's Ramirez, with her small output, likes the idea but isn't so sure interstate sales is the answer for her.

"If we land one or two more accounts in California, we will run out of product. And from an environmental standpoint, it's more of a carbon footprint to get it to another state. We're committed to trying to do things as ethically and regeneratively as possible," she said.

"That interstate commerce model may be helpful for larger brands producing a lot more, and a lot of states don't have the growing conditions. It would be great to be able to offer that, to get that medicine to patients."

For Down OM's Fink, interstate sales would be a boon.

"We smaller producers need to be able to put it in the mail like a winery," said Fink. "With our online presence, we could have a direct-to-consumer business with a specific type of quality."

For all of the worries and travails of trying to run a conscientious marijuana operation in a trying environment, the upsides of the lifestyle make it all worth it.

"We moved up here to get out of the system, and we're grateful we can continue to live with the land and be stay-at-home parents and be in the garden and be with nature," Ramirez said. "When the income isn't flowing, I think about all this freedom we have and that I'm able to work for my own dream and grow this beautiful medicine and give it to people and sequester carbon and give it back to the planet -- it's just awesome. Even if we don't make a ton of money, we can still survive with growing our own food."

"I like that I'm able to raise my family and feel safe and secure from the police, but we're not safe from creditors," Fink said. "California really messed things up when they did away with the acreage cap, and the distributor model is a real failure. We don't need a mandate middleman, we shouldn't need a distributor."

Still, Fink and Down OM aren't going anywhere.

"I feel like I will not stop. I took a full-time job off-farm. One way or another, I will continue. I am intrinsically tied to this plant spiritually and emotionally. A lot of small farmers feel the same way. I find the joy in the beauty the garden brings, the hope that comes with the new growth of spring, and the compassion, joy, and release people experience from the fruits of our labors," he said.

All that and being able to make a decent living would be nice, though.