Some Cannabis Growers Are Still Counting Cost of Wildfires, but Most Say the Industry Dodged a Bullet
Free Book Preview Cannabis Capital
Although the West Coast wildfire season has been over for months, some marijuana companies are still picking up the pieces from a historic wave of blazes that forced thousands to evacuate and endangered countless cannabis businesses across California, Oregon and Washington state.
California-based Indus Holdings is a case in point.
The vertically integrated company – which trades on the Canadian Securities Exchange under the ticker symbol INDS and on over-the-counter markets as INDXF – disclosed in a December regulatory filing that its greenhouse operations on the central California coast were significantly impacted by the fires and quarterly revenue could shrink by up to $4.5 million because of lower harvest yields caused by “plant stress.”
Industry insiders in all three states said that while several marijuana farmers took serious hits like those of Indus – including a handful in Northern California whose facilities burned down – the vast majority of cultivators found their crops to be relatively unaffected by smoke and ash and didn’t anticipate a rash of testing-lab failures or product shortages.
In short, most of the industry dodged a bullet from the massive fires and their fallout. (See graphic above.)
“For how big the fires were and how long they lasted and the scale of them, I think our industry came out pretty lucky,” said Alexa Wall, a board member of the Sonoma County Growers Alliance in Northern California.
“I wouldn’t say fully unscathed but not nearly as detrimental as some people were thinking it would be.”
Wall, who is an outdoor cannabis farmer and CEO of Luma California, said she does know four farms in Sonoma burned down.
But she added that most farmers’ fears of fire-related-damage – such as contamination that would cause lab-testing failures – haven’t come to pass.
Some lost millions
According to the Dec. 11 filing with Canadian securities regulators, Indus “is expecting lower harvest yields than the previous quarter due to plant stress experienced from sealing greenhouses to prevent poor air quality from entering due to wildfires in California that occurred in late summer, early fall 2020.”
That led to a company projection of a downturn in revenues for the fourth quarter of 2020, from an expected $14 million to between $9.5 million and $11.5 million.
No one from Indus was available for an interview with Marijuana Business Daily, but Indus board Chair George Allen noted in an emailed statement the wildfires were “devastating.”
“While our facilities were spared any direct damage from fire, we suffered material crop-loss from the damage caused from stress on our plants due to the excessive temperatures at the time,” Allen wrote.
“We were proactive with our efforts to avoid any impact from the fires in the region, and in turn it caused our crops to have significantly lower yields and potency levels.
“We are not alone as some of peers were impacted much more deeply. These devastating effects remain to be seen in our industry for years to come.”
Most were spared
Allen didn’t identify farms that were affected more seriously than Indus.
Wall of the growers alliance said the four farms she knows burned down are determined to rebuild – with a bit of help from industry colleagues who have helped crowdsource funding for reconstruction.
In Washington state, despite a rash of dangerous wildfires, the biggest impacts to most cannabis farms were delays in product deliveries to retail stores, said Crystal Oliver, executive director of the Washington Sungrowers Industry Association.
“A lot of our farmers are located on the eastern part of the state … so we did see some road closures during the peak of that fire season because of smoke,” Oliver said.
“So I know some deliveries were delayed, but that was probably the biggest impact we saw.”
Farmers in Oregon are still determining the after-effects of the blazes, said Nathan Howard, president of East Fork Cultivars in Takilma.
The company’s farm was threatened by the Slater Fire in September but, ultimately, was “spared,” Howard wrote on the company’s blog.
Howard said via email that there’s “certainly an impact” from the fires that’s still being quantified but noted that it’s mostly secondary – in terms of smoky scents for harvested flowers and potentially decreased yields, as Indus reported.
“We also suspect that our yield is down a bit due to lack of light caused by several weeks of smoke inversion,” Howard wrote.
“It’s hard to know what the impact will be on the Oregon cannabis trade overall but there’s certainly an impact. We’re seeing it firsthand in some ways.”
No adverse effects from smoke, ash
Fears that smoke and ash could lead to testing failures – particularly in California, which is known for some of the strictest marijuana testing standards in the nation – also haven’t materialized, according to Wall and others.
Several sources attributed that to the fact the fires mostly hit trees and vegetation, not structures, since buildings that burn usually produce more chemical-laden smoke and ash.
“We tested right after the fires to see where we were, because we weren’t going to spend the money harvesting and trimming if it wasn’t clean. So we did some R&D testing, which is basically a spot check … and everything came in clean,” said Eric Sklar, the CEO of Napa-based Fume, which has an outdoor grow in Lake County, California.
“That’s been our experience throughout the last three years, with fires and smoke in the air, that it doesn’t affect the plants,” he added.
Sklar, like others, characterized the wildfire impacts on the cannabis industry overall as “negligible to small.”
A recently published study from Oregon backs that up.
According to the research by FSOil and Iverson Family Farms, hemp plants grown within as much as 8 miles of a wildfire were still found mostly free of contamination and safe for human consumption.
Fires a warning
Joey Espinoza, a consultant based in Salinas, California – near Indus’ 225,000-square-foot greenhouse – said he hasn’t heard of any growers other than Indus that suffered an immense impact.
For him, the takeaway from the 2020 blazes – as well as wildfires in years past – are a reminder that operators need to be prepared for such natural disasters.
Espinoza said a lot of marijuana businesses learned what their options were in real time as they were figuring out options while the fires were raging.
“‘Oh, I can contact the (Bureau of Cannabis Control) and find a legal way to move my product off-site? I didn’t know I could do that,’” Espinoza, noted, saying such a realization was a surprise for many operators who scrambled to protect their inventory from the fires.
“It seems like every year is worse and worse with California fires. It’s like a way of life here,” he said. “People in Oklahoma have tornadoes, and we have wildfires.
“People just need to be more prepared, especially if you’re in one of those regions that get hit all the time. You need to have some sort of preparation and an SOP – if the fires hit, what do you do?”