“For your throat’s sake.” “Far less irritating.” “More doctors smoke Camels.”
Those are advertisements from the tobacco industry almost 70 years ago. In 2018, they earned $35.1 billion from three major producers. Their cigarettes produced 6 million deaths annually at a cost of about $6,000 per death, a total of $6 billion in social costs.
As the big cannabis producers — and there are only a few of them — make similar claims, they have invested a projected $2 billion in 2019 ads celebrating the medical benefits of cannabis. They will take in over $2 billion in sales.
Investment advisors are tripping over themselves recommending cannabis investments. Several cite gains of over 1,200%. Recently, investors got fleeced by the cannabis High Times IPO even though the company was debt-laden and losing money.
Pharmas who synthesize benefits from cannabis will take growers and processors out of business.
In Colorado, producers got stuck with 1.3 million pounds of cannabis, because consumers took less than 375,000 pounds each year.
Medical cannabis, a supposed cure for many ailments that require harsh treatment and/or are chronic, comes at us with hardly any reliable research. Available research indicates many severe health and social issues are being overlooked.
The cost to employers is huge. Social Security Disability Insurance escalated by almost 10%. Worker compensation claims and SSDI claims will cost employers and the government $208 billion annually. It is anticipated this number will increase exponentially due to cannabis. In addition to SDDI and worker’s comp, this expense is increased by poor work quality, lack of focus, lower productivity, absenteeism, jobsite disappearances, errors in judgment, risk-taking, on and off the job accidents and increased driving accidents.
In Santa Barbara County, the state’s largest cultivator, the Board of Supervisors hopes substantial taxes from cannabis will offset the dangerous accrued deferred pension liability, plus $438 million in deferred maintenance. Before legalization, it was assumed California would pull $1 billion in taxes. To date, that revenue is less than a third of expectations, which makes the national legalization benefit questionable. The same impact is likely to show up in Santa Barbara County.
High taxes and fees drive up the price of legal cannabis, which makes illegal stuff more price-appealing.
Santa Barbara County taxes on cannabis include 1% on nurseries; 1% on distributors; 3% on manufacturers; 4% on cultivators; 6% on retailers and micro startups. Farmers are facing $1 per square foot planted, or $90,000 for two acres, plus growing costs, odor control costing $200,000 to install and $10,000 each month to operate. Then there is testing, with no facilities for testing yet permitted in Santa Barbara County, transport, pest control, etc. Thus, the retail price point ranges from $850 to $1,600 a pound.
It is likely the county will be covered with hoop structures and dozens of other expenses for law enforcement, administration, health cost liabilities and legal costs.
Concentrations of growing in the county’s 1st and 3rd Districts are no surprise. Political contributions so far from cannabis folks to the 1st District to Das Williams, the most permissive supervisor, are around $50,000, and the 3rd District’s Joan Hartmann is approaching $20,000. This explicit pressure on politicians to get chummy with growers is manifest throughout the country. Hartmann and Williams voted in lockstep on cannabis issues.
It appears it would take hundreds of thousands of acres to supply the state. Santa Barbara County has applications for permits to grow 1,415.
Cannabis is appealing. Own 20 acres, make $20 million. But remember crashes of tulips, tech stocks and bitcoin. If you’d rather, I have a bridge in Brooklyn for sale.