Update on Cannabis in Southern Oregon

Gold Rush in Cannabis

There could be huge profits to be made this year. There better be.

Planting crew.

Southern Oregon residents are seeing something strange and new: fields that had grown forage crops--grass and alfalfa--are transformed into fields of "hemp." It is being planted openly and widely. It is everywhere.

Remember: tetrahydrocannabinol--known as THC--is the chemical that makes a person "high," a mix of euphoric, dreamy, hungry, and sleepy. It is illegal under federal law but legal in some states, including Oregon. It is grown in small batches hidden behind fences in highly regulated volumes, with plants counted out, under terms like "medical grow" and "recreational grow" and those plants are bred for high THC.  

That is different from "hemp," i.e. the CBD plant we are seeing planted.

Another breed of the cannabis plant, are selected to have little or no THC, and are treated as a farm crop. They are grown openly in volume. Those plants are bred to have high phytocannabinoil- CBD--which is used as a medicine and food additive. It has a reputation as pain reducer, an anxiety reducer, and general wonder drug. We are beginning to see it advertised as an additive in food, cosmetics, pet food, and more.

Production and investment booms can only happen in a spirt of huge optimism over an opportunity. People putting in CBD grows are getting signals that this is near the beginning of a huge wave and they want in on it.

   1. Price signals. Early adopters in the past two years made huge profits, and the word got out. Growers netted a couple hundred thousand dollars an acre for their CBD crop.

   2. Growers have direct evidence that the market is growing. They see CBD being advertised in new places, e.g. CBD infused coffee. They know the market is expanding.

   3. Growers have opportunity. People who got knowledge and experience growing a near identical plant (old style THC cannabis) can transition and scale up, from growing one acre of THC to 100 acres of CBD. The physical and knowledge infrastructure is here.

   4. Third party opinion validates the huge open end market. Market research companies predict 25% per year growth in the market. The industry has well produced newsletters and market research material, addressed to both producers and potential investors, with charts like these on the size of the market. It reads like a marketing and investment report by a brokerage firm: 

BDS Analytics Webinar

Or this one, projecting spending on various kinds of cannabis products.

BDS Analytics Webinar 

   5. Social confirmation. Growers see other growers getting aboard the bandwagon. Presumably knowledgeable, prudent people are pulling out established alfalfa to grow CBD. People are buying $150,000 tractors and planting equipment. People are buying and leasing farm land at elevated prices. People know people who making decisions--building CBD oil extractors and drying facilities--based on great future demand and high prices. There is a buzz in the air: this is big and it is just the beginning, 

The fields people see in stripes of black plastic involve thousands of dollars in sunk costs. The genetically chosen, feminized seeds may cost a dollar or more each, and there are 2,000 plants to the acre. Many of those seeds don't germinate. Some plants don't thrive and need to be replaced. The plastic is expensive and it covers single-use drip irrigation lines, also expensive. The seeds need to grow into transplant-size plants, and there are losses at each level. The land has to be purchased or leased, and there are taxes and water issues to resolve.

Growers estimate a sunk cost of $4,000 an acre, significant financial risk. If the crop can be sold for a gross revenue of $50,000 an acre--a quarter of what the early adopters got previous years--then the profits are immense. Those 25 acre fields will net the grower a million dollars. 

Maybe not.

The optimism is built on a premise that the crop will grow, that the labor will be available to harvest it, that the crop will be in salable condition, and that the sale price is high enough to cover the sunk costs, plus much, much more. That hope explains what people are seeing in the land around southern Oregon. Entrepreneurs. Capitalism. Ambition. The dream of catching the wave.

Below are photos of the planting process. First, growing seeds into transplant size plants:

The planting machine. Three people putting transplant size plants into the slot which turns to punch a hole in the plastic, then inserts the plant, then tamps down the earth around the plant, all while missing the irrigation tube that is near the plant:

Close up of the three people with their trays, dropping one plant into the hole every few seconds as the wheel turns:

Action sequence: 7 seconds of video of the planting machine and 12 seconds of how the person feeds the machine.

Click: The wheel turns and plants

Click: Feed the planter

Planted field: