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New Book Discounts Theory of Marijuana as Top US Cash Crop

| August 14, 2012
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by Michael Montgomery, California Watch

For years, legalization advocates have argued that marijuana is America’s leading cash crop, outranking corn, wheat, soy and a host of other heartland staples produced on an industrial scale.

Mateusz Atroszko/stock.xchng

Bringing pot production above ground, the argument goes, could produce a $30 billion tax bonanza for cash-strapped governments and a huge savings for law enforcement and prisons.

But new research dumps cold water on many of these claims, concluding that far from being America’s biggest cash crop, marijuana probably isn’t even in the top five. Rather, marijuana might make the top 15, “ranking somewhere between almonds and hay and perhaps closest to potatoes and grapes,” the researchers say.

These findings are part of a new book, “Marijuana Legalization: What Everyone Needs to Know,” by a team of researchers and public policy experts from Carnegie Mellon University, Pepperdine University, UCLA and the RAND Corp. 

The authors, Jonathan Caulkins, Angela Hawken, Mark Kleiman and Beau Kilmer, analyze the costs and benefits of legalizing marijuana, challenging many commonly held assumptions on both sides of the issue.

“Non-using analysts are woefully ignorant about marijuana consumption amounts or practices,” Gettman wrote in an email.

In particular, the authors take aim at a widely cited 2006 report by Jon Gettman, a former director of the National Organization for the Reform of Marijuana Laws, that valued America’s annual marijuana production at a whopping $35.8 billion.

According to Gettman’s estimates, America’s domestic marijuana crop consists of 56.4 million marijuana plants cultivated outdoors worth $31.7 billion and 11.7 million plants cultivated indoors worth $4.1 billion.

“The domestic marijuana crop is larger than Cotton in Alabama, larger than Grapes, Vegetables and Hay combined in California, larger than Peanuts in Georgia, and larger than Tobacco in both South Carolina and North Carolina,” Gettman wrote.

His report ranked California as the nation’s top producer, responsible for more than one-third of the marijuana harvest, with an estimated output of $13.8 billion.

But these statistics are wrong, according to the new book.

The authors write: “Analyses purporting to support the claim (that marijuana is the nation’s leading cash crop) must contort the numbers, citing the retail price of marijuana but the farm-gate price of other products, or pretending that all marijuana consumed in the United States in sinsemilla, or ignoring the fact that most marijuana used in the United States is imported, or simply starting with implausible estimates of U.S. production.”

Gettman’s figure of $35.8 billion is particularly specious, the authors contend, because it comes from multiplying a weighted average price of $1,606 per pound by an inflated annual production figure of 22.3 million pounds. The resulting number “is larger than the best estimates of the retail sales value of all marijuana consumed in the United States – including the marijuana that is imported,” according to the book.

Gettman, a columnist at High Times magazine, said he stands by his research, noting “differences of opinion” with the authors on many key variables, from the size of a joint (he says that on average, it’s about 1 gram when you account for waste) to the percentage of marijuana consumed in the United States that is domestically produced (he says the figure is climbing because more people prefer home-grown, boutique weed).

“Non-using analysts are woefully ignorant about marijuana consumption amounts or practices,” Gettman wrote in an email.

According to Gettman, his 2006 estimates were based on production figures that were published in various government reports and that originated with the Drug Availability Steering Committee, an interagency group that operates under the Office of National Drug Control Policy.

However, the book authors argue that the government figures cited by Gettman were merely “hypothetical values meant only to illustrate how the arithmetic would be done if certain unknown parameters were to become known at some point in the future.”

No one can know the actual value of the domestic marijuana crop with any certainty, as most cultivation is hidden in the shadows, all the more since federal prosecutors began cracking down in states that have legalized medical marijuana. The authors’ best guess is that it’s worth about $2.1 billion to $4.3 billion.

How legalization would affect the value of domestic pot production and potential tax revenue is another complex question the authors attempt to untangle.

While legalizing marijuana could double or triple consumption, the authors point out that it also would dramatically lower the cost of production, with growers adopting highly mechanized, large-scale techniques used by big agricultural companies.

Under this scenario, marijuana could become the cheapest legal intoxicant, far cheaper than alcohol.  The authors suggest a legal market dominated by high-potency marijuana would produce annual tax revenues of a few billion dollars nationwide.

By comparison, alcohol and tobacco each bring in $10 billion or more per year, according to the book.

So what about California, where the pot industry is a fixture in some counties and growers boast of producing the most potent and most valuable strains in the country?

The authors don’t speculate. However, 2010 figures from the U.S. Department of Agriculture, the most recent available, rank grapes at the top in California, worth $3.2 billion annually, followed by almonds ($2.8 billion), strawberries ($1.8 billion) and lettuce ($1.6 billion).

That means that if one values the nation’s marijuana crop at the high end of the authors’ estimate, about $4 billion, California would need to account for more than 75 percent of domestic production in order for pot to rank as the state’s top cash crop.

Inflated valuations are not the sole domain of marijuana advocates. The authors suggest that there are incentives for law enforcement officials to pump up the potential value of marijuana to present their seizures in the most favorable light.

One recent example not covered in the book concerns marijuana eradication statistics produced by California’s Bureau of Narcotics Enforcement. In 2010, the bureau reported that drug agents destroyed about 4.3 million marijuana plants in 108 days during California’s annual Campaign Against Marijuana Planting.

By pricing each plant at $3,981, the agency determined the marijuana seized that year was worth $17.2 billion, a figure that eclipses Gettman’s estimate for the total value of California’s annual pot production.

“When you get an answer that doesn’t pass the giggle test,” the authors wrote, “you know that (at least) one of your assumptions was seriously wrong.”

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Category: Drug Policy, Economics

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  • http://www.facebook.com/people/Bill-Griggs/100000069341213 Bill Griggs

    It’s hard to know the value of America’s pot crop, but I bet it’s worth a lot more than they say in this book. Look at how much pot is seized, and know that the government is only getting a small percentage of what ends up on the market. Look, for instance, at the 4.3 million plants seized in California that the author talks about in the last three paragraphs. Yes, it may be that those plants weren’t worth $3,981 each, but the government does generally estimate that each outdoor plant produces a pound. In the real world, some plants produce several pounds and some don’t produce anywhere near a pound. If each plant was worth $1,000 they’d have eradicated 4.3 billion dollars worth of plants though, and they’re only finding a small percentage of the plants out there.

    We don’t know how much pot is seized in the US every year by every law enforcement agency out there. The feds usually seize well over two million pounds of pot every year, mostly Mexican pot near the border. Are they getting 10% of what’s out there, and what about all the pot seized in the interior by police officers, sheriff departments and state police? This 22.3 million pound figure they’re talking about doesn’t seem inflated or implausible.

    And what about the $1,606 a pound price? Is that excessive? They sell cheap seedy Mexican for $50 an ounce by the border in Texas, but if that pot travels several states north it’s going to be more like $150 an ounce. US grown product is much more expensive, often over $100 for a quarter ounce. The good stuff sells for several thousand dollars a pound, wholesale. America’s pot crop may be worth more than 35 billion.

    According to government numbers, about 25 million Americans smoke pot every year. They get this from a survey where they send government workers to people’s homes and ask them about drug use. Would it be reasonable to assume that quite a few surveyed in their homes by these government workers would be less than forthcoming about their illegal conduct? Some who smoke pot only smoke a tiny amount every year. Others smoke several pounds a year. It’s definitely not outside the realm of possibility that Americans are consuming well over 20 million pounds a year.

    It’s not outside the realm of possibility that 22.3 million pounds are being grown here. Maybe it’s less than that because a lot does come in from Mexico, but if we legalized it we could cut out most all the Mexican pot unless they legalized too and started participating in our legal market. Wholesale prices would drop through the floor when the guys growing our corn and wheat and hothouse tomatoes and so on take over production, but we could keep the prices fairly high with taxes and excises and make billions and billions in revenues and pot would still cost a few cents to a couple of bucks per person per smoking session like it does now. They’re already paying taxes at medical marijuana dispensaries. They pay big bucks for that super expensive product and those dispensaries do gangbusters business even though those medical marijuana users are allowed to grow their own.