Video: State law boosts pot as a cash crop

By Anchor
CNBC
updated 1/22/2009 5:29:39 PM ET 2009-01-22T22:29:39

Two hours from San Francisco, Northern California’s Mendocino County is a world away from the urban bustle. At first glance, it’s a picture postcard of the far West. But beneath its beauty lies a controversial, profitable and increasingly violent criminal enterprise.

The marijuana trade is an exploding underground industry. Marijuana is being grown in homes, backyards, even in our national parks.

Since the 1960s, the so-called Emerald Triangle — Northern California's Mendocino, Humboldt and Trinity counties — has increasingly become the haven for people looking to make a living growing marijuana.

“This is ground zero for marijuana. Nobody produces any better marijuana than we do right here,” said Dan Offield, a helicopter pilot and agent with the U.S. Drug Enforcement Administration, as he examines the area from a bird’s-eye view.

Perhaps no one knows that better than Ukiah Morrison, a Mendocino pot grower. In most places, he would be considered an outlaw, but not in this neck of the woods.

“This is as natural as growing corn to me,” he said. “This is the lifeblood of the county. And it has been for more than 30 years.”

Morrison walks a fine line. He grows as much marijuana as he can without triggering a legal crackdown. He can do that because authorities here are overwhelmed by the sheer number of growers. They’re also hampered by conflicting state, federal and county laws governing marijuana.

Marijuana is the major cash crop here. A county-commissioned study reports pot accounts for up to two-thirds of the local economy.

“I don’t think there’s anything more important in this economy. To take this out would be a major blow,” said Morrison.

Though reliable numbers are hard to come by, marijuana growers in Mendocino County generate an estimated $1 billion a year. That makes the area home to a sizable chunk of a national market for marijuana believed to be in the tens of billions of dollars.

Mendocino local Eric Sligh took CNBC on a tour of one backyard garden.

“These marijuana plants in Mendocino County can sometimes reach 14, 15, 20 feet,” he said. A plant that yields about two pounds would be worth about $5,000, said Sligh; his crop of 20 plants is potentially worth $100,000.

Sligh’s expertise in marijuana led him to publish Grow, a magazine that represents just how far the marijuana business has come. His magazine displays photos that provide an extraordinary glimpse into a drug-based economy.

“For people who live in these areas, marijuana as a topic deserves a larger forum,” he said. “The publication that I’ve put together has definitely been referred to as ‘marijuana porn.’”

There’s a reason California is experiencing such a marijuana boom. First, state law allows anyone to grow a limited amount of marijuana for medicinal purposes. Secondly, there’s been an increase in border security since the 9/11 terror attacks, which has cut supplies from foreign sources. The result is an ever-increasing demand for Mendocino’s finest.

While California state law permits residents to grow a small number of pot plants, federal law still bans pot growing. But growers like Sligh say marijuana has become more like any legitimate agricultural commodity like grapes, wheat, even coffee.

“There’s a very developed system of brokering marijuana that exists all throughout California; it’s just like a commodities broker on Wall Street,” he said. “They’re getting it for the lowest price they can get it, and they’re bringing in the buyer and trying to get the buyer to pay the highest price they can. So, the margin in between is where they make their money.”

The economics of this drug are simple and attractive. It costs an estimated $400 to grow a pound of pot. One pound sells for $2,500 to a middle man. It then yields $6,000 on the street. With low start-up and overhead costs, marijuana is the most profitable drug of all, according to local law enforcement officials. With that kind of profit margin, marijuana is increasingly filling the gap left by other failing industries like lumber and fishing.

“If we didn’t have marijuana, what would this county be like?” said Sligh. “I think we’d all be selling Amway. I mean what else are we going to do?”

When the plants are ready to be harvested, they’re trimmed, dried and ready for sale within weeks.

“It’s hard to tell how much the marijuana is going to sell for on the open market,” he said. “Is that price going to be increased because of less supply? Is it going to be decreased because there is more supply? It’s hard to tell how much marijuana is out there.”

That basic law of supply and demand is just a part of life in Northern California’s Emerald Triangle.

“Sometimes I feel like I’m in a bubble because I just really don’t know what it’s like not to grow marijuana,” said Sligh.

© 2012 CNBC, Inc. All Rights Reserved

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