Business
Opinion: How to boost cannabis cultivation revenue with young-plant sales
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Cannabis cultivation businesses can buffer themselves against fluctuating wholesale flower prices by producing and selling young plants.
Seedlings, tissue-culture plantlets and rooted cuttings (clones) are all considered young plants.
There is an increasing need for trusted suppliers of vegetative plant material in the cannabis industry, but few companies have seized the opportunity to meet this demand.
Crop contamination and production bottlenecks
Cultivators that outsource their propagation free up more space for flowering plants, and they eliminate the two most significant risks of in-house propagation programs: crop contamination and production bottlenecks.
Young-plant suppliers can also be a source of trusted starter plants for companies launching new cultivation programs.
The longer a plant stays in production, the more likely it is to get attacked by something.
Stock plants – or moms – can become infected with plant-damaging insects, diseases or viruses.
Once this happens, growers unwittingly duplicate infected plants and fill their grow rooms with compromised plant material, resulting in reduced yields, increased production costs and an elevated risk of infection to the entire facility.
Not all cultivation teams are adept at propagating plants.
A 50% rooting success rate forces cultivators to run their flower rooms half full, which indirectly increases the cost of production.
If they retake more cuttings to meet their required numbers, they’ll delay production by several weeks, which will have ripple effects on crop scheduling.
Young-plant suppliers can also help startups with one of their most pressing needs: identifying a trusted source of clean, desirable genetics.
For entrepreneurs new to cannabis without inside connections, this is a challenging task that directly affects their ability to come to market quickly.
No need for a crystal ball
Young-plant production will play a vital role in the future of the regulated cannabis industry.
Don’t believe me? Look around.
Very few commercial growers of conventional crops are vertically integrated. Stock plant production, propagation, vegetative growth and flowering production rarely occur under the same roof.
Instead, plant material moves between several players in the plant supply chain, where each grower specializes in only one stage of production.
The best part? Each player in that supply chain makes money.
There isn’t much profit in a pound of hydroponic tomatoes or a tray of flowering poinsettias.
But growers of these low-margin crops have found a way to make money by breaking up the plant supply chain.
If it works for ornamental plants – where profits are sometimes calculated in pennies per plant – it can certainly work for cannabis.
Running the numbers
Simple arithmetic will demonstrate how young-plant production has the potential to be a lucrative supplement to cannabis flower cultivation, or a profitable replacement for it altogether.
Most growers propagate on 2-feet by 4-feet wire racks.
Since cuttings are short, they don’t require much head space, so these racks typically hold four to five shelves of cuttings.
Most growers stick cuttings into 10-inch by 20-inch propagation trays that hold an average of 50 plants per tray.
A single shelf on a wire rack will hold four trays – or 200 cuttings – so five shelves will hold 1,000.
That’s 1,000 cuttings on an 8-square-foot wire rack.
The going rate for rooted cannabis cuttings ranges from $10 to $25 per plant. This includes traditional clonal propagation from stock plants and micropropagation performed inside tissue-culture labs.
The production cycle for rooted cuttings is about three weeks. At just $10 per cutting, that’s $10,000 from 8 square feet of space in only three weeks.
If a propagator can land enough clients to fill this rack 10 times throughout the year – only 30 of a possible 52 weeks – that’s $100,000 from an 8-square-f00t wire rack.
If a company makes a concerted effort to market itself as the premier supplier of young cannabis plants, this business model becomes quite exciting.
A propagation room filled with multiple racks turned over several times a year could generate millions of dollars in annual revenue without selling 1 gram of cannabis flower.
Cannabis flower versus young plants
A look at young-plant requirements helps to reemphasize the potential of this opportunity.
Because cuttings don’t have roots for most of their life, they don’t require intense grow lights or the HVAC equipment to cool such lights.
Rooting works best in humid environments, so growers can also skip the industrial dehumidifiers.
All the other expenses associated with flowering cannabis production – fertilizer, water, labor and pest control – are minimized or eliminated during the rooting of cuttings.
This low-input, three-week process consumes far less energy and resources than the typical eight-week, energy-intensive production period for flowering cannabis.
On a square-foot basis, this opportunity gets even more appealing.
Every square foot of single-level flower canopy should yield $500-$1,000 in gross revenue annually.
That’s based on a per-harvest yield of 50 grams of dry flower per square foot, with five harvests per year, at a wholesale value of $1,000 to $2,000 per pound.
A cloning rack with five shelves, utilized only 30 weeks of the year, would yield $12,500 in gross revenue per square foot per year – more than 10 times that of a square foot of flower canopy.
Do I have your attention yet?
Shipping
Rooted cuttings can be shipped by truck or courier.
When shipping by mail, growers use boxes with strategically positioned cardboard tabs to prevent trays from jostling around during transit.
As an extra measure, netting can be placed around each tray to help secure plants.
Shipping by truck makes sense within a certain radius of your business. Beyond that, shipping boxes work best for both the supplier and the customer.
If you’re interested in pursuing this ancillary business, start practicing now.
Try rooting plant species that aren’t cannabis, and practice shipping cases of rooted cuttings across the country.
Devise a way to ensure plants won’t melt when shipped in the heat of the summer and won’t freeze when shipped in the dead of winter.
Iron out shipping logistics now while you ramp up your selection of genetic offerings and perfect your propagation techniques.
To sum up, the fluctuating price of wholesale cannabis flower is causing many commercial growers to lose sleep.
Operators can drive down their costs only to a certain point, and the going rate for wholesale flower seems to change daily.
Through young-plant production, licensed cannabis growers might find that their best defense against fluctuating flower prices is not to play the flower game at all.
Source: https://mjbizdaily.com/how-to-boost-cannabis-cultivation-revenue-with-young-plant-sales/
Business
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
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New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Business
Marijuana companies suing US attorney general in federal prohibition challenge
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Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Business
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
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Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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