If the cannabis industry perfectly complied with Utah’s expectations, it would grow 84,292.98 plants annually.
These perfectly obedient plants would offer 10.4 million grams of THC (marijuana’s psychoactive compound), enough to supply exactly 100,000 patients with 2 grams of cannabinoids per week for the entire year.
The supply would meet the demand, and no cannabis buds would be left over to sit in storehouses, at risk of falling into the black market’s clutches.
That, at least, is how it is supposed to work on paper. The state has calculated size limits for the cannabis-growing operations that will undergird Utah’s new medical marijuana program.
The medical cannabis law passed by legislators late last year codifies these caps — only 10 growers will be allowed at first, and each of them can cultivate no more than four acres outdoors or 100,000 square feet indoors.
But Justin Arriola, a cannabis business consultant and advocate, believes these firm constraints could set the state up for product shortages, potentially hampering patient choice when Utah’s medical marijuana pharmacies open.
Look at other medical cannabis states for example, he said. Recently, shortages have been reported in New Jersey, which has estimated it will need to increase the number of cannabis growers from six to 24 to supply a projected 180,000 patients by 2022. Connecticut, too, has dealt with a lack of inventory as it relies on four producers to grow cannabis for nearly 26,000 patients.
“The lesson there is that pretty much always, the amount of market demand is underestimated,” said Arriola, a board member with Together for Responsible Use and Cannabis Education, a medical marijuana advocacy group in Utah.
The state’s cannabis pharmacies are on track to open next year, and regulators concede that bare shelves are a possibility in the early days. But it won’t be because growers lack the requisite space to cultivate enough cannabis.
“That is plenty of product the first year. In fact, it’s going to be an oversupply if all 10 [cultivators] are growing that much product,” said Melissa Ure, a senior policy analyst with the Utah Department of Agriculture and Food.
The problems with supply would arise if there are hiccups with timing, she said, and the growers aren’t established in time to stock all the state’s new pharmacies.
With the cultivation caps, officials tried to find a sweet spot that would produce enough cannabis to supply the state’s patients while preventing excess that could end up in the illegal drug trade.
They’re anticipating the average patient each week will consume less than half the THC allowed by the new law. At the same time, their assumed patient count of 100,000 is more than double the state health department’s working estimate, mostly to allow for the program’s growth, Ure said.
Still, even the agriculture department’s liberal patient projections could end up being low, said Arriola, who believes the number could be closer to 180,000.
Adam Orens, founding partner of the Colorado-based Marijuana Policy Group, commended Utah for using data to right-size cultivation operations.
In Oklahoma, which has eschewed license limits and created something of a cannabis business free-for-all, the state has already approved more than 2,460 grower applications. That, Orens said, could lead to a glut of cheap marijuana. On the opposite end of the spectrum, imposing too many restrictions can drive up the cost of cannabis treatments until they’re only affordable to higher-income patients.
Utah’s framework looks like a “public safety motivated market” that will put cultivation into the hands of 10 corporations, kept under the watchful eye of state regulators, he said.
The state’s estimated harvest of 84,000 plants per year is only a fraction of what’s grown in recreational states, like Colorado, where cultivators were raising nearly 1 million plants at the end of 2017 to fuel the state’s adult-use and medical industries.
But, in conservative Utah, it might take awhile for cannabis treatments to catch on among medical providers and patients, another factor in predicting the demand.
“Part of the meaning of the word ‘conservative’ means they proceed cautiously to do things. But who knows?” said Orens, whose consulting firm has worked with government officials in Colorado and Canada to study cannabis markets. “Utah is going to become easily ... the most conservative state to have a medical marijuana program.”
Some of the state’s growing assumptions looked off to Bruce Bugbee, a Utah State University professor who’s studying cannabis cultivation, but he didn’t see any hidden agenda in them.
The estimates for indoor growing appeared to be on the low side; the state predicted that cultivators could raise three marijuana crops per year, while Bugbee said they could probably squeeze in five if they set their minds to it.
The permit limits as designed also probably encourage cultivators to grow indoors in greenhouses or warehouses that blast cannabis plants with electric lights, he added.
Both Arriola and Orens agree that the state cap of four acres or 100,000 square feet per license will permit relatively large operations and say it’s possible to run a successful business within those parameters.
The larger issue, in Arriola’s opinion, will be with the state’s proposed system for dispensing the cannabis.
Utah’s law only allows for seven private “cannabis pharmacies,” with a state central fill pharmacy handling the remainder of the distribution by delivering marijuana orders to local health departments for pickup by patients. That’s not difficult to do for one patient, Arriola said.
“But now do that 40,000 times," he said. "How do you do that?”