May 4, 2020
Was Quarantine Made for Cannabis?
Late last month, while President Trump flirted with solutions to the coronavirus—sunbathing with a “very powerful light,” injecting Lysol to clean the lungs—others elected to smoke pot. In Los Angeles, as a queue of cars crept slowly in a two-hour In-N-Out Burger drive-through line, in Hollywood, a string of people, standing six feet apart, snaked down the block outside the MMD cannabis dispensary. Mishka Ashbel, who co-owns the dispensary with his brother, Slava, said, “We get to provide a little relief to a stressed society.” Los Angeles, which shuttered its beaches and hiking trails, has deemed weed an essential service, critical to residents’ health and well-being. “On 4/20, a lot of people used coming to a dispensary as an excuse to get out of the house, to feel normal again,” Ashbel said. “To stand in that line was like a special occasion. People placed online orders for delivery starting at 4 a.m.” (Seniors get their gummies, organic pre-rolled joints, and edibles delivered free.) “Vice industries,” such as the liquor business, do well during recessions and crises; in the first days of the shutdown, marijuana stocks outperformed the crashing S. & P. Ashbel does not consider cannabis a vice product. “This is a health product,” he said. “You feel this responsibility to the public here—we’re on the front lines. It’s uncharted territory.” A former N.F.L. player was reprimanded by the F.D.A. for advocating cannabis as a cure for covid-19, but many have found it crucial in coping with the pandemic. David Lonsdale, the C.E.O. of a hemp-cultivation company called CanaFarma, weighed in by phone from his Manhattan apartment. “People are looking at an over-all wellness program,” he said. “Cannabis becomes part of your daily routine, like blood-pressure medicine.” “People are used to self-medicating, and it’s medical, yeah,” a Broadway actor who works part time as a budtender said. “But people are also just bored.” Rudy Schreier, a cannabis consultant, said, “You wake up, you have a good breakfast, you maybe take some vitamins, you do work, you have lunch, do more work, smoke a joint, eat an edible. It’s becoming the norm since we’ve been on lockdown.” Schreier works with dispensaries to help them secure licenses. “A lot of people working from home have more time on their hands now,” he said. “In a world that’s so hectic, everyone’s wish was to have more time, and now that that wish has been granted people are, like, ‘I don’t know what to do.’ That’s where cannabis comes into play.” He went on, “I live in a house with seven other people, and during the quarantine we’ve had a couple of girlfriends here, too, so it’s like twelve of us, and pretty much everyone is smoking every day. People finish whatever they have to do for their job at, like, 2 p.m., and they’re, like, ‘What are we going to do for the rest of the day?’ ”
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The COVID-19 crisis has packed a big wallop to the legal cannabis industry that will likely unleash repercussions in the months and years to come. Recently, six leading cannabis professionals shared their thoughts on how the pandemic has affected their industry and weighed in on where they would like to see their business moving forward. The participants in this virtual roundtable are as follows: Morris Beegle, co-founder and president of WAFBA (We Are For Better Alternatives), a Colorado hemp company; Andrew DeAngelo, cannabis industry consultant and co-founder of California-based dispensary chain Harborside; Katie Stem, CEO of Peak Extracts, a edibles and cannabis chocolate manufacturer in Oregon; Sam Ludwig, president of Oakland, California-based Aster Farms, a sustainable cannabis company; and Mike Glazer and Mary Jane Gibson of cannabis podcast Weed+Grub. This group Q&A has been edited for conciseness and clarity Dorbian: How has coronavirus changed the cannabis industry? Morris Beegle: Cannabis is a very social industry with networking events, conferences, trade shows and parties. A large portion of companies and organizations rely on these events to market products, connect with clients and potential clients, and do business face-to-face. The current situation with coronavirus has had a severe impact on this part of the industry. Andrew DeAngelo: We don't yet know how COVID-19 will change the cannabis industry. The impacts will be significant. What I do know is that people need more weed in a crisis, not less. Someone will get it to them, one way or another.Katie Stem: Coronavirus seems to have had less of an impact on the cannabis industry than nearly any other facet of our economy. Not only do people rely on cannabis in times of isolation, stress and crisis, but it is by nature a more solitary drug than alcohol (which people are also consuming at higher rates). Because of state regulation, there were already protocols for sale of cannabis that closely resemble social distancing measures, such as limiting the number of people in a store, etc. In many ways adapting to the new standards has been an easy transition. Unfortunately, I have seen a number of smaller businesses suffer during this downturn, as they have less buffer and fewer resources to weather the chaos—and of course federal relief funds are unavailable.
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The U.S. Department of Agriculture (USDA) recently released guidelines for processing federal loans for the hemp industry. Since hemp was federally legalized under the 2018 Farm Bill, it is now considered an agricultural commodity like any other crop, and USDA has taken several steps to sync the market with its various programs and services. And the department’s new memo to state and county offices provides clarity on how to process direct or guaranteed loan applications for hemp producers. The seven-page document, which was released last month, describes the various requirements a hemp business must satisfy in order to access USDA’s lending services. Chief among those requirements is for a prospective borrower to be licensed under a USDA-approved state or tribal hemp program, or under USDA’s basic regulations if the jurisdiction the business operates in has not submitted its own rules. “While it’s understood that this new commodity will likely produce some servicing challenges because of State and Federal regulations, it should be treated as closely as possible to any other agricultural commodity and serviced in the same manner,” the memo states. “Hemp will be considered like any other borrower produced commodity, if the hemp was produced under a license authorized by the 2014 or 2018 farm bills, and provided the crop is not abandoned or destroyed.” Borrowers who are not licensed to grow hemp will be considered in non-monetary default and any losses will not be covered. While the document emphasizes that hemp should generally be treated the same as other crops, it also acknowledges unique requirements and challenges that the market continues to face. For example, hemp that contains more than 0.3 percent THC must be disposed of under the department’s rules. And, the memo says, USDA’s Farm Service Agency (FSA) “will not pay for these services for direct loans and FSA will not cover a lender’s advance to the borrower to cover the cost as part of any guaranteed loan loss claim.” Officials should also be cognizant of ongoing problems with banking access for the industry, as some financial institutions still decline to service businesses that produce the crop despite its federal legalization. “Applicants should ensure the availability of a banking institution authorizing these financial transactions to ensure availability of proceeds to support payment of expenses and debts,” USDA said. “Additionally, producers will be required to assign their sale proceeds to FSA in an amount not to exceed their annual payment.” For direct and guaranteed loans, hemp businesses must have a contract with FSA laying out termination policies and their ability to repay the loans. Part of that calculus should involve looking at the “intended use of hemp being produced,” whether that’s fiber, seed or CBD oil. The Farm Bill doesn’t allow for hemp licenses to be transferred, which also has some lending service implications, USDA wrote. The memo says that “if the borrower defaults on the loan, dies, or abandons the operation, under no circumstance could another legal individual, lender, or FSA Agency official obtain the right to the commodity and attempt to liquidate it as a full or partial income recovery attempt.” This latest document seems to build off the establishment of loan programs for hemp businesses that was described in a memo released in February. The purpose of that notice, which itself was an update to one published last October, was to provide “updated guidance on the analysis and evaluation of Direct Loan applications and/or requests for guaranteed loans for industrial hemp growers, especially as it relates to contracts.”
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There's been a lot of progress in recent the years when it comes to the legalization of cannabis. In 2018, Canada became just the second country in the world (after Uruguay) to legalize recreational marijuana. In the U.S., more than 30 states permit the medical use of marijuana, and a farm bill was passed over a year ago that made hemp legal federally. Even conservative countries in Asia such as South Korea and Thailand now permit marijuana for medical use. The latest milestone for the industry comes from the Middle East, where Lebanon has become the first Arab country to permit medical marijuana. New law could make Lebanon a major supplier of cannabis in the world. In Lebanon, farmers can now grow cannabis for medicinal and industrial purposes. Cannabis can also be exported, which could pave the way for more competition in North America and other parts of the world that rely on foreign supply. Lebanon has a warm climate that can make it easy to grow cannabis year-round. And with more than 100 years of cultivation experience with cannabis, the country knows how to grow pot. Data from the United Nations indicates that after Moroccoand Afghanistan, Lebanon is the largest supplier of cannabis resin (hashish) in the world. Now that it's legal to export pot out of the country, farmers in Lebanon have an opportunity to take advantage of the industry's growth in many different parts of the world. And while that may be good for the global cannabis market, it could spell trouble for North American cannabis companies -- especially those involved with hemp, such as Charlotte's Web (OTC:CWBHF). Is this bad news for hemp producers? Although Lebanon legalized medical marijuana, the law effectively addressed hemp, as it limited the plants' tetrahydrocannabinol (THC) content to less than 1%. And with hemp legal federally in the U.S., foreign producers in Lebanon could potentially import hemp into the country, driving down prices and margins in the process. According to industry experts, there's already an oversupply of hemp in the U.S.; more coming online may only make matters worse. Charlotte's Web, which produces products using cannabidiol (or CBD, a non-psychoactive compound found in the hemp plant), is already facing challenges in moving its goods. The company wrote off $13.9 millionof inventory, including $12 million of finished goods, in its most recent quarterly results. That's not something you expect to see, especially in a growing industry. But many companies are growing hemp because that's the easiest way to tap into the cannabis industry's growth in the U.S. And if there are more hemp suppliers in the future, generating sales growth will be even more difficult for Charlotte's Web. In the company's fourth-quarter results, sales were up by just 6% from the prior-year quarter and down 9% from the third quarter.
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Early last month, voters in Wisconsin navigated a dizzying number of rule changes governing the state’s spring elections as officials tussled over the risks of the novel coronavirus, prompting a backlog of absentee ballot requests and fears that many would not be able to participate. But in the end, tens of thousands of mail ballots that arrived after the April 7 presidential primaries and spring elections were counted by local officials, a review by The Washington Post has found — the unexpected result of last-minute intervention by the U.S. Supreme Court. In Milwaukee and Madison alone, the state’s two largest cities, more than 10 percent of all votes counted, nearly 21,000 ballots, arrived by mail after April 7, according to data provided by local election officials. The surprising outcome after warnings that many Wisconsinites would be disenfranchised amid the pandemic was the result of a largely unexamined aspect of the court’s decision that temporarily changed which ballots were counted. Because of the order, election officials for the first time tallied absentee ballots postmarked by Election Day, rather than just those received by then — underscoring the power of narrow court decisions to significantly shape which votes are counted. What happened in Wisconsin has potentially far-reaching implications as the two parties square off in courtrooms across the country, hoping to notch legal victories that will shape the electorate in their favor before November.
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New Zealand’s government has revealed the final details of a marijuana legalization proposal that will appear on the September general election ballot. Voters will decide on the policy change through a referendum, where they will be asked “yes” or “no” to approving the “Cannabis Legalisation and Control Bill.” Early details about the measure were released in December. And on Friday, the government shared the full proposal, which would make it legal for adults 20 and older to purchase and possess cannabis, cultivate two plants for personal use and visit marijuana “coffee shops” where on-site consumption would be allowed. Individuals would be able to purchase up to 14 grams of cannabis from licensed retailers and also gift up to 14 grams to another adult. At the beginning of implementation if voters approve the measure, retailers could only sell cannabis plants and seeds. But a regulatory body established under the bill called the Cannabis Regulatory Authority would later be able to approve “the introduction of other licensed products for sale, including concentrates and cannabis edibles, through regulations,” according to a summary. “Medicinal cannabis and hemp will not be affected by the outcome of the referendum,” a summary says. “Medicinal use of cannabis will still be allowed if prescribed by a doctor, and hemp will still be legal.” The government explained that the purpose of the legislation is to mitigate the illicit market, promote public health and ensure quality control on marijuana products. Cannabis businesses would be banned from advertising under the measure. If more than 50 percent of voters approve the ballot question, cannabis wouldn’t be immediately legalized. Rather, it would then be incumbent on the legislature to pass the bill that is the subject of the referendum, which would come after legislators gathered public input on the reform move. While some wanted the referendum to be self-executing, meaning the law would take effect as soon as it was approved by voters, this version is “binding” in the sense that lawmakers are effectively required to pass the bill—but it could still be amended, and it’s not clear how significant those changes could end up being. According to a report released this week by the New Zealand Institute of Economic Research, the country stands to generate $490 million in tax revenue annually from legal cannabis sales—though that projection is dependent on illicit sales being largely replaced by the regulated market.
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Starting May 1, cannabis dispensaries will be allowed to begin curbside pickup due to Governor Steve Sisolak loosening restrictions on the industry. “I think as everybody moves into this new phase, if we continue to be responsible operators and abide by the rules – making sure safety is the top priority – that we will be able to move to the next phase more comfortably and gradually and hopefully get things back to normal very soon," Cultivate Dispensary COO Matt McClure said. McClure is eager to see how this will help out his dispensary's bottom line, as the coronavirus pandemic has created serious challenges for his industry. One of those challenges: having to change up business on the fly, in order to stay in business per the Governor's directives. “A lot of were, not forced, but made the decision to in-house our delivery services, which meant developing, essentially, a new business," he said. “It’ll be a wait and see approach. We’ll staff up as needed to be ready for any level of demand, but we’ll adjust accordingly.”
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Backers are circulating a petition to put a measure on the November ballot allowing limited indoor commercial production of marijuana in unincorporated areas of Ventura County. The petition containing 30,912 valid signatures must be turned in by May 15 to be placed on the ballot, county elections officials said. Passage would require a simple majority from voters countywide although the areas where production would be allowed lie in agricultural and certain industrial zones in the unincorporated territory. Growers could produce the cannabis for both medical and recreational adult use. Spokeswoman Jeanette Lombardo said polling indicates voters will support what's being called the Ventura County Pilot Cannabis Cultivation Program. "I think it's time," Lombardo said this week. Commercial production of marijuana in the unincorporated area has repeatedly been rebuffed by the Ventura County Board of Supervisors, but the initiative would allow voters to make the decision. If approved, the initiative would allow up to 500 acres of plants to be cultivated in existing permanent greenhouses or other indoor facilities in the unincorporated area. No planting would be allowed outdoors or in hoop houses, the tent-like plastic structures used to cover raspberries. Another 100 acres of nursery cultivation would be allowed in the same type of facilities for propagation of seedlings. The seedlings would have to be non-flowering and cannot emit odors, according to the text of the initiative. The acreage figures are totals countywide, not for each greenhouse, Lombardo said. Also permitted would be commercial processing and distribution of the products. No sales will be made to the general public from the facilities, Lombardo said. A political committee called Ventura County Citizens for Responsible Cannabis — which is generally composed of owners of glass greenhouses — is sponsoring the initiative. Lombardo said the main purpose of the pilot project is to help the county's struggling agricultural industry.
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While the COVID-19 pandemic continues to wreak havoc across the economy, small businesses are paying a heavy price. A record number of unemployment applications and bankruptcies are being filed weekly, and officials say the worse is yet to come. With so many industries absorbing the shock and strain of the financial crisis, public officials and leaders should seek every solution to help protect and lift business owners. For hemp farmers and small business owners in Kentucky and across the land, one simple solution exists, and it costs nothing. What the industry needs is for the FDA to take action and classify cannabidiol, better known as CBD derived from hemp, as a food additive or supplement enabling it to be included in food, beverages and supplements. The market for oils, capsules, body lotions and other products containing CBD has been rapidly growing, but there’s room for further expansion with ingestibles. Downstream demand is strong but the only ingestible products sold are outside the regulated system. Last year across America the number of acres of hemp quadrupled to more than 500,000, and the number of licenses issued grew by 476% to nearly 17,000. The growth trajectory remains strong long term including here in Kentucky, where the industry already employs hundreds of workers. Yet it could be even greater if CBD ingestibles were allowed to be sold in mainstream retailers and online stores. This would allow companies like Walmart, Target and Kroger to get fully behind CBD products. Industry experts estimate the potential associated market with CBD edibles, beverages and other products could exceed $23 billion by 2023. There’s already support from several members of Congress including many in the Kentucky delegation. Rep. Collin Peterson of Minnesota has also introduced a bipartisan Bill HR 5587, co-sponsored by both Reps. James Comer and Thomas Massie of Kentucky, that would allow FDA-regulated, hemp-derived CBD to be marketed in dietary supplements and as food and beverage additives. It would provide a boost to the multi-billion-dollar industry and help keep current hemp businesses thriving. If the FDA had taken action several companies here in Kentucky, like Atalo Holdings and GenCanna, and elsewhere in America might have avoided declaring bankruptcy. Those companies, at least in part, blamed the FDA’s inaction on ingestibles for their decline. This one policy change would have saved hundreds of jobs and kept revenue streaming into local restaurants, shops, stores and communities.
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House Democrats' latest round of legislation for economic relief from the coronavirus pandemic released on Tuesday included a provision that would allow the financial sector to serve cannabis businesses. The House is expected to pass the $3 trillion bill Friday and it includes the House-passed Secure and Fair Enforcement (SAFE) Banking Act, which would allow banks and financial institutions to work with cannabis businesses. Smart Approaches to Marijuana (SAM), a group opposing marijuana legalization, said in response that including this provision “makes no sense.” “Numerous industries have been forced to completely shut down and have made great sacrifices to comply with shutdowns and limitations on their business operations. The marijuana industry has been a painfully obvious exception to this. This industry has used its lobbying arm to force state officials to keep their storefronts open, sued leaders who shut them down, and bragged incessantly about their revenues,” CEO Kevin Sabet said in a statement. Twenty states, the District of Columbia and Puerto Rico are allowing medical cannabis dispensaries to remain open during the pandemic, and several allow both licensed recreational and medical cannabis dispensaries to operate. Speaker Nancy Pelosi’s (D-Calif.) office in a statement to The Hill responded to SAM by noting that the SAFE Banking Act already passed the House overwhelmingly in September. The bill, however, faces an uphill battle in the GOP-controlled Senate. The provision in the coronavirus relief package stated, “the purpose of this section is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.” Sabet said that coronavirus relief should be for those suffering during the pandemic, not industries making money.
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