On a warm mid-March morning, cannabis farmer Justin Merkel stands on a muddy edge overlooking the two-acre patch of grassland.
This plot makes up the farmland of his company, Lit 420.
In the summer months, about 1,800 cannabis plants dot the grassy landscape, each one carefully pruned, watered, and tended by hand. A new season is around the bend as the spring and summer months creep in, and Merkel and his cohort of friends, family, and co-workers will once again dig their hands into the soil.
But how long he can keep the farm afloat is an ever-present question in Merkel’s mind.
A combination of the state’s snail-paced roll-out of legal cannabis dispensaries, the high level of taxation on crops, costly cannabis testing and the entrance of multi-million-dollar corporations into the cannabis space has left the small farmer in crisis.
Merkel sunk about $400,000 into his cannabis operation and — two years since receiving his license to legally grow cannabis — has yet to turn a profit. Like dozens of other cannabis farmers in New York, he sees little means for survival beyond a state bailout.
“At this point it’s an uphill battle,” Merkel said. “Now, the advantage we had as the first movers is taken away from us. All we really have left is potentially this relief. If this farmer’s relief doesn’t go through, most of us will be out of the business, unfortunately.”
The relief referenced is a state aid package currently included in both the State Senate and Assembly’s budget proposals, which could give small cannabis farmers a fighting chance in New York’s legal market.
A stalled rollout
Merkel began growing cannabis well before legalization. As a teenager, he was a practitioner of “guerilla farming,” a tactic of finding pockets of untrodden public land and cultivating cannabis plants.
Cannabis was always part of his life, and when the opportunity to start planting legally popped up in 2019, he jumped on it. At that time, plants could only be grown for hemp and CBD, but Merkel saw adult-use legalization on the horizon and jumped at the chance to get a cultivation license.
In 2022, the year after the state legalized recreational cannabis, Merkel was awarded his Conditional Adult-use Cannabis Cultivator license by the state. That license allowed him to grow cannabis outdoors and provide it to dispensaries, of which the state predicted it would have a healthy network by the time the 2022 grow season ended. But a problem arose.
No dispensaries were open by the time the flowers were harvested and cured. Lawsuit after lawsuit over New York’s racial and social equity-driven Conditional Adult-Use Retail Dispensary license program had put legal bud on ice.
That left farmers sitting on thousands of pounds of cannabis that could not be legally sold due to the federal illegality of recreational cannabis, New York farmers can only sell and distribute in New York.
As farmers began to feel the squeeze, Merkel and Tess Interlicchia of Grateful Valley Farm in Corning cofounded the Cannabis Farmers Alliance (CFA) to advocate for the needs of New York’s weed farmers.
“The state assured us, saying, ‘Create, grow as much as you can, and the stores will be there,’” Interlicchia said. “They said they’d have 50 stores by the end of 2022 for us to sell to. They opened the first one close to midnight on New Year’s Eve 2022. It’s been a disaster, to say the least.”
Today, New York has 80 dispensaries statewide. Shelf-space is limited, and Merkel has received no reorders from any dispensary that initially carried his bud.
Meanwhile, the burden of cost falls largely on the farmer in the forms of costly quality testing and a state potency tax. The latter costs half-a-cent for every milligram of THC in flower.
In practice, a high-strength bud from Merkel’s farm at 31% THC was potency taxed at $10 per quarter ounce, or $640 per pound.
Estimates from the CFA state that for every $100 worth of cannabis concentrate sold at market, $37 goes to the dispensary, $21 to state taxes, and $19 each goes to the processor and distributor. The remaining $4 is the farmer’s share.
For an eighth ounce of cannabis flower, which typically retails in the $40-$50 range at a dispensary, Interlicchia estimated she profits about $2.
And if a farmer fails a quality test, the flower can no longer be sold as smokeable, leaving concentrates as the only path forward. This was the case with Interlicchia’s first crop, which did not make it through a pass-fail test for the common fungus Aspergillus.
While a necessary step to ensure safety and purity of the product, cannabis testing is a costly endeavor borne entirely by the farmer.
There are 17 laboratories authorized to test cannabis products across New York; one is in Rochester. The labs perform highly specialized testing of cannabis products, with an exhaustive checklist that include everything from THC content to the presence of multiple forms of bacteria, mold, and chemical pesticides.
“We spent about $20,000 in testing and still failed everything,” Interlicchia said.
All said and done, Interlicchia’s intake for the entire 2022 grow season — which yielded about 80 pounds of flower — was sold for $400 per pound to a processor. If that amount were sold an eighth of an ounce at a time, assuming a $50 per eighth retail price, it would generate $6,400 per pound, 16 times the value of the sale price to a processor.
Of the 200 or so farmers in the Cannabis Farmers Alliance network, 97% have yet to see a profit, Merkel and Interlicchia said.
David vs. Goliath
New York’s cannabis legalization law, the Marihuana Regulation and Taxation Act, envisioned a cannabis future led by small entrepreneurs and the people once harmed by criminalization.
But from the beginning, farmers like Interlicchia and Merkel foresaw the arrival of big business into the cannabis world.
That became a reality in December, when the Cannabis Control Board approved six medical cannabis “registered operators” to enter the recreational market. Among them are PharmaCann, RISE, CuraLeaf, and ColumbiaCare.
Registered operators have two distinct advantages over conditional cultivators: they are high-dollar operations already well-established in the cannabis space, able to charge lower, wholesale prices. And, perhaps more importantly, they are allowed by law to grow indoors.
Indoor-grown cannabis has a general reputation of being of a higher quality than outdoor or greenhouse-grown cannabis. While that is a subject of debate in the cannabis farmers’ world, they acknowledge that the average consumer sees cannabis from those suppliers as higher quality for less cost.
“They’re selling $100 ounces of indoor weed,” Merkel said. “Their marketing is insane. They buy display cases and everything for dispensaries. You go in there and their names are on the floormats and all over the walls. There’s no way we can even compete with it.”
For the small farmers, the arrival of registered operators into the market before they had a chance to get on their feet only compounded a harsh entrepreneurial environment.
A path forward
A bill before the state's Cannabis Control Board would waive the license fee for these "conditional cultivators" as they transition to full licensure or microbusinesses. The proposal acknowledges that these early-adopting farmers "suffered a sufficient need for financial assistance."
The board is scheduled to go to vote on the measure Friday.
But cannabis farmers say more relief is needed.
They saw a glimmer of hope last year in the form of so-called Cannabis Growers Showcases. That program allowed cannabis farmers to skirt court injunctions preventing the opening of dispensaries and sell directly to the public.
The program ended at the end of 2023. But, for the first time, it allowed small farmers to get some return on their investment.
“It was a struggle up until the showcases,” said Mike Dulen, owner of Geneva’s A Walk in the Pines. “That really just helped us burn through all of the product we had from 2022 in 30 days.”
With the showcases now over, cannabis farmers are seeking different means to survive.
Two programs are pointed to as potential boons for small farmers: the cannabis microbusiness program, which allows farmers to sell direct to consumers. Merkel is on the list of farmers up to participate in that program and described its provisions as potentially lifesaving for his farm.
The second hope is a farmer relief fund.
The relief fund was included in budget proposals from the state Assembly and Senate. Included in the Senate proposal is $60 million for loans to cannabis farmers, $40 million for grants, $28 million in tax credits, and a repeal and replacement of the potency tax.
State Sen. Jeremy Cooney, D-Rochester, heads up the Senate’s Cannabis Subcommittee.
“Everyone was told that hemp was the way of the future, and to start growing hemp, but that didn’t happen,” Cooney said. “So, we gave those farmers the first bite of the apple, they did everything right, and it fell flat. Now, we need to repair the harm that’s been done.”
Cooney put the onus of blame for the sputtering legal weed industry on legal injunctions and a booming black market.
Both Interlicchia and Merkel work day jobs to keep their heads above water. Interlicchia is a nurse practitioner, while Merkel is in heating, ventilation, and air conditioning.
Merkel has sunk every penny he had into his farm’s survival and nearly lost his house to foreclosure. Interlicchia had to sell her farm’s tractor just to keep the farm running, an irony that isn’t lost on her.
“When a farmer has to sell their tractor in order to survive, you’re at the end of your rope,” she said.
In their time in the CFA, they’ve seen farmers’ families crumble, investments evaporate, and some growers driven to the brink of suicide.
If relief doesn’t come soon, Merkel is unsure how long he, or any small farmer, can stick it out.
But for him, and farmers like him across the state, the passion towards cannabis drives them forward, in the hope that a brighter day will come.
Sitting atop a vintage Ford tractor, Merkel exhales a plume of smoke that drifts over his field. A dank, herbal scent fills the air.
“You know,” he said, “I don’t think there’s any industry I’d rather be in.”
