Sunday, May 13, 2012

Pot, Locavores, and the Farm Bill

Since the beginning, the farm bill has sought to protect farmers from price risk and weather risk, the risk of low prices through overproduction and the risk of low production from.bad weather.  The methods provided in the laws have varied, including cartels, supply management, crop insurance and disaster payments, all of which are conditioned on the basic fact that in a free market, farmers are price takers, mostly at the mercy of those who buy from them.

Because marijuana is illegal, you don't see a lot of discussion about its economics, so I've only vague impressions to go on. (See this PBS piece which looks at costs and volume.)Because pot is illegal, its dealers are insulated from market pressures: once they've established themselves in an area, they tend to have a relatively stable monopoly.  So the tendency is for basically stable networks of growers-dealers-buyers, meaning prices are pretty stable. (Can I find a parallel with contract growers of poultry, pork, etc., which also have stable networks?)  And because pot is illegal, there's a high entry cost for growers. That's what "illegal" means. But it also means that "weather risk" can extend to "law risk"--the chances of a bust.

My impression is that the importation of marijuana is down, and domestic growing is up.  In that sense, the pot industry has been moving in the direction of  locavore. As "grow houses" have proliferated, it's become more localized and more production oriented, more industrial, less organic.

Comes now the legalization of "medical marijuana" (I use quotes because I think it's really a backdoor way to semi-legalize marijuana) which seems to have disrupted the pot economy, according to an article in today's NYTimes Post, for which I can't find the url. (I'll try to add it later.)

On the one hand you have competition among the vendors, both on quality and price.  On the other you have growers having problems. Bottom line is the bottom has dropped out of the price, with big repercussions on the economy of such counties as Humboldt, CA.

One wonders when pot will make it into the farm bill?

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