Baptism by fire for California's pot farmers

Chalk up another casualty of California's wildfires, which have scorched an area in the Northern part of the state larger than New York City. In addition to the damage and destruction to the state's vineyards, the fires have also disrupted harvest operations for California's multibillion dollar legal marijuana industry -- and that may push prices higher ahead of the state's Jan. 1 launch of legal recreational pot sales.

Fires have destroyed more than two dozen marijuana farms, and scores more were damaged in Sonoma and Mendocino Counties. These areas are part of the Emerald Triangle, home of the world's largest concentration of pot growers. As many as 7,000 of them operate in Sonoma County, while about 10,000 farm in Mendocino County, according to the Cannabist, which tracks the industry. Pot is California's largest cash crop.

Because cannabis is still illegal under federal law, people who earn a living by cultivating it often aren't able to receive assistance available to most farmers such as bank loans, federal crop insurance and disaster recovery funding, though access to these services is improving. Even so, industry observers expect many growers to be wiped out financially by the fires.

"The lack of access to federal crop insurance will be devastating and most [affected cannabis operations] will not have any safety net to fall back on to rebuild their businesses," Patrick McManamon, CEO of Ohio-based Cannasure Insurance Services, told the Cannabist.  

Moreover, as Greenstate.com noted, cannabis plants exposed to fire are prone to disease and unhealthy levels of mold, mildew and fungus that may create health problems for consumers, including cardiovascular diseases or lung infections. 

Pot farmers may be able to save some of their fire-tinged crops by converting them into other products like cannabinoid oils, according to Greg Shoenfeld, the vice president for operations for the market research firm BDS Analytics. 

But that comes at additional cost. "The more processing involved, the more expensive it is," he said

It remains unclear much of a buzzkill the wildfires will be to cannabis consumers. In other cases when the pot market has endured "supply disruptions," prices rose between 10 percent and 20 percent, according to Shoenfeld.

Even before the fires, California weed consumers paid higher prices than people in other states where it's legal, averaging $9.37 a gram, according to BDS Analytics. Prices in Colorado and Washington state, which both legalized recreational pot in 2012, average $5.14 a gram and $5.76 per gram, respectively.

"When a jurisdiction legalizes cannabis, usually the initial months come with higher-than-anticipated prices as retail stores have been slow to get through the licensing process," said Adam Orens, founding partner of the consulting firm Marijuana Policy Project. "We were expecting the same scenario to play out in California."

About $3 billion worth of medical pot is currently sold in California, a figure that forecasters say could reach as high as $7 billion when recreational weed sales begin. State and local officials, who are still crafting the industry's regulatory framework, expect to eventually collect $1 billion in yearly tax revenue.  

For now, though, Calfornia is in recovery mode.

The fires have so far killed 41 people, destroyed some 5,700 homes and businesses and scorched more than 332 miles of forest. The death toll could still rise because about 100 people remain missing.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.