Marijuana Prices Rising After Federal Crackdown

from California Watch

A crackdown by federal prosecutors is casting a long shadow over the state’s marijuana industry, but there is one bright spot, at least for some Northern California growers willing to risk prison time: Wholesale prices appear to be on the rise.

After slumping precipitously, prices for a pound of high-grade, outdoor-grown marijuana are stabilizing and in some areas are up between 20 and 40 percent, according to interviews with growers, law enforcement agents and analysts.

“It’s been a downward thrust since 1996, but this year, prices have been up,” said Kym Kemp, a Humboldt-based blogger who closely follows Northern California’s marijuana scene.

“People are saying, ‘Maybe this isn’t our last season,’ ” she said. “I don’t think people are ready to be optimistic, but they’re less depressed.”

In recent years, California’s booming medical marijuana industry attracted a rush of new players who harvested increasingly large amounts of pot – for storefront dispensaries and the black market. Some longtime operators responded by also “growing big.”

Surging production pushed down prices for some strains to less than $1,000 per pound. This led more growers to illegally ship their marijuana out of state, where they can double or triple their profits.

But this year, production levels have dropped, in part because of rainy weather and a “bumper crop of mold,” said medical marijuana grower and activist Charley Custer. “It was a perfect storm,” he said.

It wasn’t just the weather. Stepped-up enforcement actions by local and federal law enforcement led some growers to lay low and reduce their plant counts to double digits.

“Some growers decided to keep it small this year,” said Dale Gieringer, state director for the National Organization for the Reform of Marijuana Laws.

With marijuana supplies under pressure, prices responded as they would with any other commodity.

Since the fall harvest, Northern California growers have seen prices jump to between $2,000 and $2,500 per pound for "good-quality" marijuana, according to Kemp.

Law enforcement agencies say it’s too early to get a clear read on this year’s harvest.

"Marijuana remains readily available in California, and we have not noticed a substantial change in prices,” said Casey McEnry of the Drug Enforcement Administration's San Francisco office.

But data collected by local law enforcement and a federally funded drug task force indicate street prices have nearly doubled in some parts of the state.

“Supply is down, so prices are up,” said Tommy LaNier, director of the White House-funded National Marijuana Initiative.

LaNier credited the shift in prices to new law enforcement tactics, including the use of more informants, undercover agents and wiretaps and an aggressive effort to intercept marijuana being shipped in vehicles and through commercial carriers like FedEx and UPS. He also said recent actions by the state’s four U.S. attorneys have shaken the marijuana industry.

“The market is significantly disrupted,” he said.

LaNier said creating market disruptions has been a top priority for law enforcement because it could make marijuana less affordable for minors. But law enforcement agencies are not the only groups welcoming the changes. Black market growers say rising prices mean a return to higher profits.

“This is a relief, since my margins were getting very thin,” said one Bay Area grower, who asked that his name be withheld because he is operating outside of state medical marijuana laws. Because of the profit margins, he said he had given up trying to sell his product in California. Instead, he’s been delivering it to the East Coast concealed in private vehicles.

The grower said he might return to the California market if prices continue to rise. “I’d rather not take the extra risk of shipping out of state,” he said.

But Tim Blake, a Mendocino-based medical marijuana grower, activist and impresario, said it is an outrage that illegal growers stand to benefit from the federal crackdown while medical marijuana operators are the targets of raids and forfeitures.

“Prices are going up, but the people who will cash in are the men hiding in the mountains,” he said. “If this continues, the people who are trying to follow medical marijuana laws won’t get anything because they’ll be out of business, thanks to the feds.”

Michael Montgomery is an investigative journalist for KQED News and California Watch.