Jackie Wellbaum: Regional Cannabis Exchanges Would Bring Stability – November 2, 2010

Tuesday, November 2, 2010

With just days remaining before Californians vote to de-criminalize, regulate and tax marijuana for adult use (Proposition 19), pot professionals are deeply concerned about their family’s ability to survive should there be so much pot on the market that prices will drop to nearly nothing.

Back in 2004 the White House released a report which contained the following sentence: “Legalizing marijuana would… saddle government with the dual burden of regulating a new legal market while continuing to pay for the negative side effects associated with an underground market whose providers have little economic incentive to disappear.” 1

This astute quote from the Presidential Office of Drug Policy released in 2004 during the Bush/Cheney reign of terror describes a situation California may already be facing. Should de-criminalization of pot cause price collapses here in California, it is already well understood that marijuana growers would simply hold back their production from the local and legal marketplace while continuing to export outside of the state to higher-priced black markets. Got duh?

For counties who are estimated to derive a significant amount of money from black-market marijuana growth and sales, we have seen that partial-legalization efforts passed by voters such as compassionate-use medical marijuana laws have encouraged only a small portion of the underground pot supply to emerge into legitimacy to find its demand.

Flooded marijuana markets could be avoided since Regional Cannabis Exchanges would allow growers to store excess herb safely while planning the release of goods onto the market in a timely and controlled manner.

There is far more marijuana coming to market in places like Humboldt, Mendocino and surrounding counties than pot smokers in those counties need—although there certainly are some pot smokers who wish they had more. Just as cotton, apple and grape farmers have done before them, marijuana growing professionals must make risk/benefit assessments regarding how large a crop to plant given their families annual financial requirements and the prices their goods will command in the marketplace.

Any such calculations made by pot farmers always include anticipated price ranges their emeralds will fetch once dried, trimmed and packaged for sale. Before cotton is even planted the grower is aware of an approximate market-price for his commodity and must decide whether or not the current price makes it worth the financial risk to plant, harvest and prepare their crop for “the market.”

The majority of marijuana grown and sold by farmers remains on the black-market and will stay there until California counties come together as “growing regions” and allow growers of all excess amounts—from one pound to one thousand pounds—to transport excess supply to legitimate “Regional Cannabis Exchanges.” As long as there exists no incentive or legal marketplace for growers to sell large quantities of their excess pot supply—and given that supply will always find its demand—black-market marijuana and its ill effects on pot workers and local communities will continue unabated.

An envisioned Regional Cannabis Exchange, perhaps created by public/private partnership between Humboldt, Mendocino, Trinity and Del Norte County governments and cannabis professionals will allow all growers in these areas the ability to transport and store excess quantities of bud until such a time as the future market price meets grower demand. The ability of pot to be packaged and stored over time without significant degradation is crucial to maintaining price stability.

We all know what happens to prices when pot grown outdoors becomes mature and hits the streets all at the same time. A flooded market tends to exist when none of the suppliers are aware of each other and all suppliers operate fearfully, selfishly in a vacuum with little or no marketplace data. Flooded marijuana markets could be avoided since Regional Cannabis Exchanges would allow growers to store excess herb safely while planning the release of goods onto the market in a timely and controlled manner.

Marijuana price stability is at the forefront of the mind of the marijuana grower, his family and ancillary industries which rely on marijuana. The average farmer will inevitably choose to sell into a marketplace offering the most money and the least risk to himself, his family and his property.

Let’s not think we are finally finished with the heavy-lifting of marijuana regulation once California voters have decided on Proposition 19 and counties have adopted their ordinances accordingly. As a powerful industry, California marijuana professionals must now take action not only to eliminate criminal penalties for growers of excess poundage but to cooperate with each other in ways that will encourage pot price stability.

Without regional cannabis exchanges operating throughout the state’s marijuana growing regions and close cooperation amongst pot-industry growers and their elected officials, the already difficult lives of California marijuana farmers will go from bad to ruin.


1 The Economic Costs of Drug Abuse in the United States, 1992-2002, Office of National Drug Control Policy, Executive Office of the President, Washington, DC: (Publication No. 207303), 2004.

Jackie Wellbaum, a resident of Arcata, is a pharmaceutical industry professional currently exploring cannabis branding, regulatory issues and public relations. Contact via e-mail at JWellbaum@Gmail.com.