My Two Cents Worth On The Marijuana Debate


About 45 years ago my brother and I had a tenant farmer with grade school age daughters.  A deputy sheriff visited one of their classrooms to give a talk on drugs.  He put a picture of marijuana on an over head projector and asked if anyone knew what it was.  Our farmer’s little girl raised her hand and said “I don’t know what it is, but that stuff grows all over our place!”  When I asked our farmer if he had a lot of visitors the next weekend, he just smiled… 

She was right, of course.  During the first world war hemp was imported from South America.  It was a critical war material that the navy used for rope.  German U-boats threatened to cut off the supply, so the US started growing it in the Midwest.  Not surprisingly, it became a weed and it still is very common. 

Obviously, if a plant can survive for a century without irrigation or cultivation, growing it as a crop wouldn’t be terribly difficult.  Just for fun, my brother and I did some estimates to see what kind of return we could get by growing it.  Our plan was to use a tractor, a seed drill, a hay mower, a hay rake and a hay baler (all existing technologies).  Our plan was to automate the whole production and sell it by the bale, not the kilo.  I don’t remember what the numbers were, but the crop value was astronomical. 

The only reason that marijuana is a high value crop is because it is illegal.  If you make it legal, the value and price for marijuana will fall off the end of the table.  Unlike fruits and vegetables, marijuana production is easy to automate.  This may start out as “mom and pop” boutique production and sales, but it won’t stay that way for long.  Wait until the “big boys” show up.  It’s not hard to imagine Monsanto or the big seed corn companies developing genetically modified marijuana with a THC level that is through the roof. 

How far will the price drop until it is stabilized?  My guess is that it will stabilize at about 18 cents per kilo wholesale.  That’s what corn costs, and if the price is higher than that farmers will just put more acreage into producing it until it comes down in price.  Do you really think that New Mexico where you have to irrigate everything is going to compete with Midwestern farms where you can raise it outdoors with no irrigation? 

The retail prospects don’t look a whole lot better.  If there is significant money to be made, you can bet that CVS, Walgreens and Smith’s are going to want a piece of the action.  Do you think that mom and pop boutiques are going to compete with them? 

Finally, what does the tax picture look like?  If you try to tax marijuana at a rate that is comparable to or greater than the wholesale price, people will just start selling it under the table like they do now.  After all, moonshine didn’t go away after prohibition was repealed.  New Mexico needs to take a look at the tax revenue picture if all they can get is 10 cents per kilo on the tax.  Then they should decide whether or not this is all worth it.