Hundreds of cannabis farms in California have stopped operating in the legal market in the past month. Furthermore, it appears the sector is shrinking further.

Data from the California Department of Cannabis Control and the Cannabis Business Times has revealed that since the start of last year, 1,766 cultivation licenses have been lost in the state. Cannabis industry insiders claim that the combination of low wholesale prices and hefty taxes have made it almost impossible for smaller operators to make a profit. Sources such as SFGate also point to decreasing marijuana prices being a major contributor to this issue.

A decrease in the number of farms has resulted in a reduction of the legal space for cultivating cannabis in California. Aaron Edelheit, an investor in the cannabis industry, has reported that since the commencement of 2022, the state has experienced a 23% decrease in the total canopy for cannabis growth, which amounts to more than 19 million square feet of cannabis farming vanishing in the last twelve months.

Max Rudsten, the top moneymaker for the Monterey's POSIBL cannabis farm, predicted that the sector will go on to experience more farm closures in the course of the year.

Rudsten stated in an email that it is anticipated that the loss will become more evident as more companies come to the conclusion that it is necessary.

Farms that have been abandoned

Data from the California Department of Cannabis Control, reported by the Cannabis Business Times, indicates that the number of active cultivation licenses in the state of California has decreased from 845 at the start of the year to 6,827. Compared to the beginning of 2022, there are 1,766 fewer licenses.

The head of business at Nabis, Brian Dewey, highlighted that the decrease in production permits was the result of an abundance of bulk flower from legal growers in the cannabis industry.

At the SPARC cannabis farm in Glen Ellen, Calif., laborers applied locally sourced bat guano fertilizer to marijuana plants grown biodynamically.

According to Edelheit, who is an investor in cannabis-related businesses in California and author of the Mindset Value newsletter, the decrease in farms is a response to an oversaturation of small farmers in the market.

My perspective is that the proliferation of cannabis farms and the surplus of product is being reined in, Edelheit communicated in an email to SFGATE. Moving forward, there will be a decrease in farms, and the majority of them will be either the highest quality craftsman farms or the most affordable producers.

According to Edelheit, most farms that are closing down are unlikely to be able to receive new licenses due to their inability to meet the environmental protection regulations, which is a feat not easily achievable for small farms.

Prices on the Upswing

Since the legalization of cannabis in California in 2016, the state's marijuana cultivators have experienced a marked decline in their wholesale prices, with some farmers reporting a 95% decrease in what their product is worth per pound. However, the recent trend suggests that the market is steadying and cultivators are able to fetch more for their crop, as reported by Rudsten.

Despite this, according to Edelheit, the current upsurge in wholesale prices will be inadequate to sustain numerous small-scale farms.

Edelheit pointed out that, despite the cost hikes, the majority of people are still at the breakeven point. This could be why many farms have had to close down over the past year, he added.

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