Tougaw: Cannabis economics 101

Ryan Tougaw

Editor’s Note: All opinion section content reflects the views of the individual author only and does not represent a stance taken by the Collegian or its editorial board.  

It seems that the complete legalization of cannabis is now a matter of when, not if, as more and more states start to pass legislation to allow the sale of the drug.

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While still federally illegal, nine states have legalized recreational cannabis with another twenty have legalized the usage of cannabis for medical reasons.

But while people argue about the merits of cannabis itself, the business and financial possibilities that legalization opens are staggering to say the least.

In 2015, legal weed sales increased by 42 percent, meaning Colorado took in quite a bit of tax revenue.

During that same year, Coloradoans purchased 996 million dollars’ worth of weed.

That’s quite a bit of green.

It’s going to be difficult for legislatures around the nation to resist an extra hundred million or so dollars in tax revenue.

Initially in Colorado at least, there was some reticence as to whether or not weed would be a worthwhile investment. Concerns were raised over driving under the influence of cannabis, and whether or not the commonality of the drug would impact youth usage rates.

While the data on all of that is foggy at best, partly due to a plurality of misinformation from both sides of a debate and partly from a lack of clearly defined standards and abilities to actually measure the drugs influence as reliably as, say alcohol for instance, what is in no way foggy at all is the raw cash flow that cannabis is bringing to both governments and businesses.

By 2019, cannabis is expected to be a $30 billion industry. For comparison, the US coffee industry also comes in around about $30 billion annually.

I’m not a betting person but were I to throw my chips anywhere in the realm of new and growing industry, it would definitely be the weed industry. However, cannabis sales are not without their downsides.

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Primarily, it’s still federally illegal. If the federal government felt like raiding a weed locker in Fort Collins for illegal growth, they could, and the prosecution would be valid.

Next, cannabis is hard to grow, especially from just a seed. In order to actually become the plant we’re all familiar with cannabis needs to flow to produce THC. In order to do this, the plant needs no more and no less than 12 hours of light and 12 hours of darkness. This is why most pot farms are indoors and locked in basements; this way, growers can control the light and temperature to get the highest yield from the plant.

Weed also needs a specific temperature to grow appropriately. If it’s too hot, the plant will grow slowly. Too humid, and the buds start to rot.

In order to get all the right equipment for the best plants, costs can get up to around about $1000 for temperature control and meters, but a normal grow box can go for about $300. Assuming everything goes well after planting, harvest is expected around about 70 days after flowering.

Bear in mind that all this is for a tiny little plot of 6 plants, the legal limit to grow according to Colorado State law. 

Swell these costs all the way up to a full building or two, and the costs and risks become apparent for commercial growers trying to sell their crop to the public. So, while cannabis is an incredibly lucrative product with a seemingly endless demand, the costs of growing, culturing and harvest and also the small matter of not getting arrested are factors that must be reckoned with.

But if Coloradoans alone can build a billion-dollar weed industry in just a few years, why not try?

 Columnist Ryan Tougaw can be reached at letters@collegian.com or online at @rjtougaw