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Cornell University held its annual “hemp field day” on Thursday at the school’s AgriTech campus in Geneva, where more than 100 attendees listened to panelists discuss equity and farmers’ struggles, learned about plant biochemistry and beneficial fungi, and attended workshops in the field focused on weed and pest management.
As part of the full-day event, NY Cannabis Insider Editor and Publisher Brad Racino moderated a panel discussion that focused on the current plight of New York’s cannabis cultivators.
Panelists included Tess Interlicchia, a family nurse practitioner and cannabis cultivator at Grateful Valley Farm; Aaron Lentjes, co-founder and owner of UNIFI Cannabis, a family owned and operated cultivator located in Central New York; Brittany Carbone, founder and CEO of Tonic, co-founder of Tricolla Farms, and board member at the Cannabis Association of NY; and Curt Boshnack, CEO of Sunwalker Farms in Canandaigua and an employee of Bristol Extracts.
Following is an abbreviated Q&A from the panel discussion, edited for style and length.
Let’s start off by addressing the elephant in the room – the lawsuit filed last week by veterans that led to a temporary restraining order of the CAURD program. How did that news affect each of you?
Aaron Lentjes: So, we’re in the process of organizing a couple of growers showcase events. And obviously, when you have a growers showcase, you have to have a CAURD online. And not just any CAURD, but one that has sale approval.
Right now, there are 21 CAURDs that are active and have sale approval. So, the stop on the rollout for dispensaries has really kind of jammed up the growers showcase events, as well.
Tess Interlicchia: The lawsuit was not a huge surprise to me. The MRTA has been broken over and over and over again – the laws have been broken and continue to be broken. So it’s just inevitable.
Brittany Carbone: Yeah, that’s the unfortunate truth. A lot of people have been kind of waiting for the other shoe to drop. And it did a few months ago when the ROs filed a similar lawsuit that stopped pretty much just before calling for the CAURD program to be enjoined. This lawsuit takes it a step further.
But I actually want to detract from that a bit. I think that we are getting into a very dangerous territory by saying this is the veterans vs CAURD because it’s just a few people that filed this lawsuit. It’s so hard to get into this language, labeling groups and pitting them against each other. It’s just very unproductive towards what we’re all trying to achieve here. So I just want to put that out there first.
But I mean, look, we’re in the position that we’re in as a market because there are only 21 stores – 17 stores open and four are delivery-only services. There’s not enough shelf space, there’s not enough volume moving through the supply chain. Processors are getting kind of dragged through the mud by cultivators, getting very frustrated by the process, not getting paid on the splits and stuff like that. But the processors are trying their hardest. Even when they’re moving the volume in every store that they can, it’s still not enough to really make a dent in all of the biomass.
There’s just so much to unpack here. You can try to create these temporary solutions like the grower showcases, but is it going to solve all the problems? These Band Aid solutions are not going to solve the problem – which is that we need retail open.
The very depressing reality here that we’re all facing is that the fate of the supply chain hangs in the balance of the judge’s decision that I don’t think is going to be made on Friday. I don’t think it’s going to be a bench decision from the judge. It’s a big decision that’s going to need to be taken back and considered and during that time of deliberation, that temporary restraining order stops all approvals.
Everybody has been caught in the mess of this rollout.
Are you all angry at the vets who brought this lawsuit, or at the OCM for allowing this lawsuit to happen by creating the CAURD program the way they did?
Brittany: I would put more blame on the legislature, honestly. I think the legislature could have prevented this situation in a lot of different ways – the most basic way being codifying the CAURD program into law in the same way that the conditional cultivation and processing program is codified into law.
With the OCM, there needs to be accountability for when they’re messing things up like this. The executive office has been kind of checked out until things have gone really bad, and they’re still kind of not doing anything. The lack of action is just mind boggling. I think that, yeah, it needs to go above their heads at some point.
Aaron: I’m glad you asked if I’m angry. I’m pretty angry.
I’m not exactly sure with who, honestly. This has been a royal cluster since the beginning. We have farmers who were growing cannabinoid hemp, and legislators who went around through the Hudson Valley and through the rest of the state letting farmers know that CBD was going to save the family farm. This was going to be small agriculture in New York. This was going to be the magic touch. And it was, for the first year, maybe a little bit for the second year. The third year, not so much, and the fourth year, definitely not.
Those farmers continued to cultivate cannabinoid hemp on a small scale at a loss. One, because they’re passionate about the plant, but two, because there was a light at the end of the tunnel – New York State passed legalization, and we knew that there was a chance based on experience that we would have a shot. And then the AUCC program came out. And again, this carrot was dangled for cultivators.
I remember being told, “It doesn’t matter the quality of your product, it doesn’t matter if you’re growing indoor or outdoor – there’s going to be a place in the market for everything you can produce this year. No matter how much you produce, it will be sold. New York has a market larger than anywhere else in the world.”
And it does. But the doors are closed.
They say history repeats itself, but usually it’s not this quick. So I’m angry.
One of CANY’s legislative priorities last year was to eliminate the potency tax. Talk about how that tax works and how it trickles down to affect farmers.
Brittany: The easiest way to understand it is – we’re all authorized for an acre of cultivation. If you bring that acre to market, either as a flower product or you need to take it further down the supply chain and do extracting, they all have different tax rates based on potency.
For flower, it’s half a cent per milligram of THC. For concentrates, .008 cents per milligram of THC. For edibles, it’s three cents per milligram of THC. So an acre of cannabis pretty much equates to paying a million dollars in potency tax, or roughly about 15% of your potential revenue. That’s kind of the average, but potency is obviously a very variable factor. So let’s call it between 12% and 16% of your total revenue, depending on your prices.
Here’s how it screws the consumer: the distributor – the process or the cultivator – adds the potency tax onto the price that they’re charging the retailer. So, let’s say you’re charging the retailer $20 wholesale. They’re marking it up to $40 retail. And it’s an edible product where there’s a $3 potency tax on 100 milligrams, which means you’re really only taking home $17 as the supplier. But there’s a $3 potency tax, right, but the retailer is doubling that $20 that they’re paying because they need to make their margins. This is no fault of the retailers – they need to mark that to make their margins work.
But if that potency tax was not there, then I could charge $17 to the retailer, I’d still be taking home the same amount, and then that price on the shelf is $34 instead of $40.
Because of the incredible downward pricing pressure that we’re already feeling from the retailers – because the retailers are feeling like they have to compete with all of the illegal stores all around them that are selling very cheap, untaxed product – because there’s so such limited shelf space, and they have all of the leverage right now, and there’s no marketing that we can do, then the only option is, ‘I’ll beat that price.’ It becomes a matter of inflating the prices for the consumer.
It’s such a bonkers system to use.
It was really a big win for us last year when we were able to get a bill introduced by Senator Cooney in the Senate and introduced in the Assembly by Crystal Peoples-Stokes that would repeal the potency tax and replace it with a 20% registered tax rather than the 13% that we have now.
Related: Everything said at the Cannabis Association of New York’s lobby day in Albany on March 28, 2023
Unfortunately, that didn’t get passed, but I do think that we have a much better chance this upcoming legislative session.
If there’s one thing that we can all agree on, it’s that the potency tax sucks, and it needs to change.
Let’s talk about another OCM-related about-face, which is letting the ROs in far earlier than expected.
Tess: I have some numbers.
ROs can do indoor. They can do 100,000 square feet. Some of them can do four to five harvests a year. So that equals 500,000 square feet, times 11 ROs, which equals 5.5 million square feet. Which is nuts.
And the demand for New York is about 7 million square feet. And we still have legacy, which we think will be covering 1.5 million.
What does that leave for the rest of us? Nothing. We will be destroyed.
Brittany: And they’re the only ones that will be producing indoor flower. And we can have our individual beliefs about indoor versus outdoor, but let’s be honest: in general, consumers are looking for indoor flower.
So, they can sell indoor flower at their own dispensaries, which they can open their first on December 29 of this year and then have to wait a whole three days until their second one can open in January.
To put it in perspective, if the CAURD program stops where it is right now with 21 licenses, that means that by January, the footprint of the ROs will basically be the same as the footprint of the CAURD stores.
And those stores are going to be bigger; they’re going to be stocked with products that can be priced at a cheaper rate because they’re vertically integrated, they can stand to lose tens of millions of dollars per quarter and somehow still be alive. They don’t really operate off of profits, they operate off continuing to raise money – they’re publicly traded. That unlimited access to capital allows them to operate at a loss, when that’s not the reality for people like us.
It’s just like – how much longer can we reasonably take this?
Also, not only are they going to be able to sell into their stores, but they will be able to sell that flower into the CAURD stores.
We were promised something in New York – that we were going to build this a different way. And we did, but it was executed so poorly that this head start that they promised us was a head start running off a cliff.
Curt Boshnack: I was part of the CCTM program. And is there hope for us? I don’t know. It’s scary. I’m fortunate to work for an AUCP, Bristol Extracts – I’m learning a ton there. But it’s really scary.
This is a passion, this plant. It saved my life. But yeah, I’m nervous for what’s to come.
Speaking of the CCTM program, how did you enjoy that?
Curt: The program I thought was great. For anyone who’s ever worked for the government – that was a huge lift. The New York State Department of Labor, Cornell University, SUNY Morrisville – you had a bunch of organizations coming together to create these modules on a platform called Blackboard.
And I think it’s amazing that it even happened. And they did it in a very quick time. So I was very appreciative of it. From my understanding, the CCTM candidates, whoever completed, were supposed to be able to have a shot at entering the market. And I hope that happens. I’m gonna crush it if I’m allowed to get in.
So, yeah, I’m excited to see what the future brings. I’m not losing hope yet. I’m gonna keep pushing forward.
Jumping around here, let’s talk about marketing and advertising. The regulations for this were highly criticized when they came out for being so draconian. How are these regulations treating you and your businesses?
Aaron: The first thing that needs to be said is, I don’t think any of us want to promote cannabis use to people who are underage. That being said, black boxing any advertising option for cannabis is a bullet to anybody in the industry.
A lot of people are doing guerilla marketing through social media, and that’s really the only source of drive. It’s astounding because this isn’t treated similar to the way that alcohol is marketed.
Brittany: Exactly. It should at least be held to the same standards as alcohol.
Just having operated in the CBD space for the past six years, it’s very difficult to even get a CBD ad run on any kind of platform. You can do certain things on social media, but very easily get shadow banned, or get your account shut down.
It’s absolutely insane. The OCM is even cracking down now on in-store education from suppliers while all this is happening with the illegal stores – and God bless them, they’re trying with this enforcement thing, but it’s not working. They’re not shutting down stores at any rate that’s making any difference.
The restrictions – it almost feels like they’re setting us up to fail. To elaborate a little bit more on this latest crackdown, there were some brands and suppliers that were kind of taking advantage of the OCM being a little bit too busy to be looking closely at things, and there’s very explicit language in the regulations that prohibit giving away swag, free product, whatever – like hats, shirts, and stuff like that. That’s off the table. But there were definitely some brands that were crossing the line and doing that anyway.
But rather than just addressing those bad operators, the OCM sent out a communication to all CAURD licensees saying you can’t have the suppliers doing in-store education.
How else are we supposed to … that’s the only thing left, right? That’s the most effective way. It’s not going to necessarily drive more people into that dispensary, but it is going to make a really big difference for your conversion rate, for your brand on that shelf, when the consumer can speak to the cultivator that made the product. Nobody’s going to sell that product better than the cultivator.
Aaron: While at the same time, circling back to the growers showcase – one of the things that was specifically brought up during the OCM presentation on growers showcases is that a grower showcase can occur at a CAURD location, which allows the grower to be in the store, doing education on their product. But you can’t do that, unless I guess you organize a grower showcase at that location. So it’s very, I guess, confusing.
Brittany: I think that this is like market crafting on overdrive – driving it off a cliff.
In true regulator fashion, they took it way too far. And when you over-regulate to that degree, they’re just boxing everybody out because, as a small cultivator, you’re not going to be able to pay $5,000 to sponsor a big event that’s gonna give you a lot of visibility. Then, what other choice do you have? The cheapest thing that you can do is pay the gas money in tolls to drive to a dispensary and be there for the day. That’s the cheapest, lowest lift way to just talk to people.
It’s unfortunate that they’re always regulating according to the lowest common denominator. Just apply the enforcement actions when needed – when somebody is overstepping the boundaries – and then allow this market to be a market. They’re taking all the free market dynamics out of it.
And, like I said, with good intentions, but we are constantly being faced with the law of unintended consequences with every action that they take.
Curt: You can go into Wegman’s right now and buy peanut butter and jelly ale. There are 140,000 deaths due to alcohol every year. Zero for cannabis. Hungry, happy, sleepy: none of those things have ever really killed anyone.
Let’s talk about Aspergillus. This Cornell event was organized in part by Dr. Daniela Vergara, who just came out with a white paper on Aspergillus. How does that come into play in New York?
Aaron: New York State basically pushed us, with the AUCC program, into outdoor production.
With cultivating outdoors, you’re in the environment. And there’s a lot of things out there that float around and like to live in moist environments. And one of those is Aspergillus, and the state set a standard for Aspergillus and made it pass/fail. And there were very, very few cultivators who had products that were Aspergillus-free without some form of remediation.
And remediation is when the material is run through ‘the box,’ or a product like a rad source, which is about a $450,000 gamma radiation machine. There’s two of them in the state and they cost anywhere from $150 to $250 per pound to get your product remediated. So, the pass/fail standard has kept a lot of cultivators from being able to bring their product to market because as soon as your product tests positive for Aspergillus, especially in a limited market like this, nobody wants to buy it.
Tess: It’s an absolute nightmare. We’re looking at standards that are for medical, they should not be pass or fail. As a provider, I tell my patients, if you’re immunocompromised, don’t smoke. There are other ways to get it in your system. And the fact that they have these insane restrictions on us for recreational is crazy.
Aaron: When you’re talking about smokable cannabis, or tobacco, you would think the limits should be fairly similar. But they vary from state to state. And there’s a void in research that informs the standards.