As wildfires have raged across Northern California, claiming lives and scorching more than 200,000 acres, they are also taking a toll on cannabis farmers who have lost both homes and valuable crops — and have little hope of getting help from insurance or banks in an industry that remains legally hazy.
“Failed policies have left our community marginalized,” said Hezekiah Allen, executive director of the California Growers Association, adding that while the cannabis community has a strong do-it-yourself culture, “in events like this, the vulnerabilities tend to show a little more.”
Allen was referring to the complications that have arisen for cannabis growers and other industry businesses in a state where medical marijuana has been legal for more than two decades but remains federally illegal.
Even as California has moved to allow the recreational use of marijuana for adults starting in January, the normal avenues for recovering money in a disaster — federal grants, loans from banks and insurance payouts — are fraught with hurdles.
With losses that could total in the millions, the obstacles for rebuilding their businesses and crops could be insurmountable for many.
“There is no way to insure our cannabis crops, so whatever the loss is a loss,” said Susan Schindler of Potter Valley Farms in Mendocino County.
Schindler considers herself lucky. While she had to evacuate her home and farm near the Eel River as the Redwood Valley fire threatened it, her home was not destroyed. She was on her way to survey the land and her cannabis crop, which had sustained some impact from the heat, smoke and lack of water for the past week, she learned from her land partner.
“We had taken down about 10 to 15 percent of our crop already, and that looks OK. We’ll be lucky if we can use that to pay salaries, and maybe (that money) can pay us back for our nutrients and expensive red worm compost (used for growing). We hope we break even.”
Others, she said, are not so fortunate. The fire has wiped out both the crops and homes of cannabis growers, and with little recourse in the form of insurance payouts or federal assistance, the local cannabis industry will be feeling the effects for some time.
Cannabis growers are not eligible for federal disaster assistance grants, which the Federal Emergency Management Agency (FEMA) gives to individuals, tribes and some community groups, according to Frank Mansell, a mitigation outreach specialist with FEMA. He confirmed, too, that cannabis operators cannot get support from the U.S. Department of Agriculture or the Small Business Administration.
The cannabis industry has grown faster than insurance markets have adapted, said Jason Horst, a civil litigation and insurance coverage attorney who works with cannabis businesses and property owners. For outdoor cannabis crops in particular, there is no effective insurance available in the market.
The coverage offerings from those who do offer insurance policies for indoor cultivators and other cannabis businesses are limited, Horst said. “They are expensive and offer narrower coverage than other industries are able to acquire.”
The wildfires will pose a test for those insurers in providing payouts and coverage, he said.
On top of insurance coverage, many growers have trouble dealing with the finances of their everyday business operations. Many handle only cash, because banks are unwilling to work with cannabis businesses.
Allen, of the California Growers Association, said at least one operation lost the cash it kept at its site because of the fires. Even a recovery fund that the association set up to accept donations to help fire victims experienced trouble when the payments processor it was using for the fund suddenly dropped the cannabis group.
Allen said about 32 growers have reported “significant to complete” loss of their crops so far from the fires. That could rise as growers return to their farms and survey the damage.
It’s still unclear what effect the losses will have on the state’s cannabis industry, which totaled about $7 billion in 2016, said Greg Shoenfeld, the director of operations at BDS Analytics, which tracks cannabis data.
But it could drive up prices just as California is set to open up the recreational use of marijuana in January.
BDS Analytics found that in Oregon, Colorado and Washington, disruptions in supply chain — which could include anything from a backlog in product testing to a change in regulations — resulted in prices increasing 10 to 20 percent for a couple of months. The impact largely depends on how quickly an event can be resolved.
Special report: Cannabis and the environment.
“In California, if there is widespread impact to the cultivators — it could last longer,” Shoenfeld said. “We’re talking about outdoor harvests, and there won’t be another one until next year.”
Even for those whose crops did not completely burn, the smoke and ash left by the blazes could affect product quality, Shoenfeld said, and those who were forced to harvest early by the threat of the fire could have lower yields.
It is the latest in what has been a trying year for cannabis growers, said Schindler of Potter Valley Farms, a member of cannabis farmer collective Mendocino Generations.
She has invested significant time and money in making her operations compliant as the state heads toward legalization, she said. On top of that investment, Schindler’s crop — along with others in the area — was hit with russet mites earlier this year that cost her about 50 percent of it. Curbing that problem was hard, especially because her farm has to adhere to high standards for pest control in dealing with dispensaries, she said. When things finally seemed to be going right, suddenly they were not.
“The plants were just beautiful, and then the fire came up,” Schindler said.
Schindler and other cannabis industry veterans speak passionately about their industry, but even that passion won’t be enough for some to remain in the business.
With startup costs high, Schindler said, it may not just be a matter of people not wanting to take on risk and choosing to leave the business, she said. “They may be forced to.”
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