Legalization and the black market are oil and water for the marijuana industry. Neither side of the law does the other side any favors. For people invested in the cannabis industry, the black market is what could ruin it all for them, by ending the federal government’s shaky approval of state legalization. For the black market, the legal industry represents a decline in sales, and in fact could be pushing Mexican drug cartels out of the marijuana business.
Cannabis entrepreneurs like Brooke Gehring are not necessarily part of the stoner culture, according to an interview she did with National Public Radio’s “Morning Edition.” The interviewer describes her as a smartly-dressed business woman.
After considering the numbers, any idea of big marijuana businesses being run by stoners disappears like a puff of smoke. That’s not to say that the business people in the cannabis industry don’t enjoy marijuana; it’s just to say that they aren’t exactly Cheech & Chong (even though the duo was successful despite its stoner branding).
Gehring runs some of her grow operations for her businesses, Patient’s Choice of Colorado and Live Green Cannabis in a neighborhood near I-70 and Holly in Denver. According to her NPR interview, Gehring converted a furniture warehouse into a grow operation, and it cost $3 million. That particular location houses roughly 5,000 marijuana plants, or about 10 percent of what the whole company needs. Beyond that, to comply with state regulations, Ghering runs sophisticated inventory tracking programs, programs that even account for the shake swept up off the ground.
For Gehring, the biggest concern, she told NPR, was that the federal government can come in and shut down the whole legal marijuana industry, since marijuana is still illegal at the federal level. Gehring said that if the black market starts taking advantage of the legal market, the backlash could spell real trouble for investors.
The legal market already has spelled trouble for the Mexican drug cartels. According to CBS News, the Mexican Competitiveness Institute in a 2012 report said that legalized marijuana would cost the cartels billions: $1.425 billion a year from Colorado legalizing, $1.372 billion from Washington and $1.839 billion from Oregon legalizing.
Times are already getting tough for the marijuana growers employed by the cartels, at least in the Mexican state of Sinaloa, according to another NPR story. One grower said that he used to sell a kilogram of marijuana (about 2.2 pounds to the non-metric user) for between $60 and $90. Now that price has dropped to between $30 and $40. The grower told NPR he makes about $150 a month growing for the cartels.
The grower also told NPR that growing marijuana is a part-time gig for him and many other campesinos (peasants) in the area. Despite the tacit approval of those who live around them, marijuana growers in Mexico live under the threat of the Mexican army raiding their operation. The grower said that once the price drops to $20 a kilo, growing marijuana will no longer be worthwhile for the cartels or the campesinos who grow it.
The cartels have already started to adapt by smuggling marijuana from Colorado into Mexico, according to a DEA spokesman in the NPR article. The main reason is that the Mexican outdoor-grown marijuana can’t compare to what comes from the laboratory-like environments in the United States. Colorado Attorney General John Suthers told NPR that Colorado is becoming a major exporter of marijuana.
According to Danny Danko of High Times in the NPR story, Mexican marijuana usually has a THC content of 6 to 8 percent, compared to the 10 to 20 percent strains cultivated in the U.S. and Canada. Furthermore, Mexican marijuana is frequently compressed into bricks for shipping; the Austin DEA said they are seeing less and less of compressed brick marijuana. When a superior product can be bought safely near home, why would anyone buy brick weed?
Perhaps the most nefarious possibility of the mixing of legal and illegal markets is the threat of criminal infiltration of the industry, and not just in terms of things like smurfing or marijuana falling off a truck. Fox News suggests that there are DEA agents concerned that the cartels may start robbing and extorting what they see as the major competition to the illegal markets they cornered for years. Still, while the DEA seems to talk to Fox like it’s a foregone conclusion that this will happen, the Denver Police Department didn’t express that there are currently any specific threats, just that they are monitoring the situation.
As Gehring pointed out to NPR, many marijuana businesses might not set up shop right across the street from a police station, but she did, seeing it as an extra layer of security. While legalization gets sorted out in the United States, the industry will have to deal with its own safety. Given that the possible enemies of legal marijuana are the U.S. government and the Mexican drug cartels, it is no wonder that companies like Blue Line Protection have sprung up, giving combat-experienced veterans the chance to protect the money, the marijuana and the people of the marijuana industry.