GREENERY, ROBOTS and TAXES

That is not a drug; it’s a leaf. ~ Arnold Schwarzenegger 

Aside from offering a slight helping of food for thought, is my first vegan blog. I’ll verbally taste a plateful of two quite dissimilar and sometimes organic green plants that made the news recently. The first one I’ll examine, asparagus, is fairly distinctive but lacks public awareness. It remains an enduring but minor contributor to our overall agricultural output. The second green plant, marijuana, has a polemic history and far more community standing.

Asparagus is also called sparrow grass. Humans have cultivated it for several millennia. Its origins are shrouded in the mists of horticultural history, but include temperate, often maritime climes in most of Europe and western Asia. Some agronomists believe an Egyptian hieroglyph from 3000 BCE shows asparagus being grown. Ancient Greeks ate wild asparagus’ tender shoots. In the West it was the Romans who first began farming asparagus more than 2000 years ago. Cultivators spread this triffid throughout their empire. The Sun King, Louis XIV was a big fan, calling asparagus the king of all vegetables. He had several greenhouses built so he could eat it throughout the year.

Asparagus has been cultivated in America since the late 17th century. Hoping to entice travelers to move to his part of the new world, William Penn advertised that asparagus grew well in Pennsylvania’s climate.

Growing up in Philadelphia, my parents apparently were not enticed by Penn’s ancient advert. They did not ever grow any asparagus in their gardens. But I do remember eating spring asparagus shoots, shown below, on a semi-regular basis at dinnertime. Yum.

 

Young asparagus shoots doing their version of the hula.

I also remember one of asparagus’ signature post-consumption effects, my urine smelled strange. Asparagus contains aptly-named asparagusic acid which during digestion produces sulfur compounds in one’s intestinal tract. Hence the pungent smell. Benjamin Franklin, among many others, characterized this odor as “disagreeable.”

Only four (4) states account for the entire US asparagus production. It is a very minor crop in America, just 37,200 tons most recently, which accounts for a trifling 0.09% of all US vegetables produced. In contrast, China grows about 900 thousand tons of asparagus every year.

Unlike many other veges, California isn’t the largest producer of asparagus. Michigan produces 40% of the total crop, followed by Washington, then California and finally New Jersey. However, asparagus’ growing season in California is the longest of any state, from January (in far southern valleys) through mid-June (on the central coast).

Because of dire shortages of agricultural workers in the US, growers are eagerly hoping that viable, robotic harvesting machines can take up the slack. As the supply of seasonal agricultural labor has withered, crops have been plowed under. The reduced farm worker supply has been caused by multiple reasons. One of which is that exclusions for using temporary, nonimmigrant H-2A workers principally from Mexico have increased. In 2019 there were 442,000 H-2A admissions; in 2021, just 258,000.

First attempts at automating crop harvesting began in the 1950s and 1960s. Abundant challenges have slowed expected progress in making autonomous, robotic harvesters for commercial produce like almonds, apples, grapes, oranges, strawberries and tomatoes. For these crops, robotic harvesting still remains on thin ground.

 

The Sprout asparagus harvester

But asparagus’ distinctive and unusual physical shape may make it a shoe-in for fully-automated harvesting, hence its recent newsworthiness. Asparagus consists of a single stalk without any confusing foliage that can styme robotic harvesters. A single plant can produce up to 20 stalks during its 2-month growing season. It is also fast growing – up to 0.8 inches in an hour – so the robot can return in a couple of days in peak season for another go at the same field, rather than wait for a reappearance next season. One prototype robotic harvester, shown above, is the Sprout, made specifically for asparagus. It’s been successfully tested at several locations in the UK. More US farmers continue to face conditions that lead to giving up and leaving their fields behind. Could the Sprout help asparagus growers provide a more sustainable supply? Let’s hope so.

The second green plant under consideration is marijuana. For at least 2500 years it has been grown for its psychoactive effects. Originally native to Central and South Asia, its use spans recreational, medicinal and spiritual purposes. It is the most commonly used illegal drug in the world, including America.

No matter whether you call it cannabis, kush, bud, herb, dope, reefer, tea, ganja, grass, weed, head, mary jane, doobie, hash, bhang or, if you must, pot, it has a far higher public profile than asparagus. Currently, 19 states have legalized the sale of recreational and medicinal marijuana; 21 states allow only medicinal marijuana to be sold. Eleven hold-out states, you know who you are, do not allow marijuana of any sort to be legally sold or grown.

California voters approved Proposition 64 in 2016 that legalized recreational cannabis; its medicinal use was permitted 2 decades earlier. Legal recreational cannabis sales began in 2018.

 

 This bud’s perhaps for you.

     Prop 64 was heralded at the time as a fine way to shrink the state’s large, illicit, black market weed, and give people harmed by the war on drugs and other historical events a chance to join the licit economy. They could become cannabis growers or distributors. However, local and state politicians soon dismissed any real interest in reducing black market “street” weed when they imposed significant, multi-jurisdiction taxes on legal cannabis.

California’s system of reeferegulation that attempts to control the cultivation, processing and sale of cannabis is exceedingly byzantine and ultimately based on politicians’ fiscal greed. California’s taxes on cannabis may mount to 50% of the retail price for consumers, which can make legal weed a harder sell on the street against some of the world’s best (and illegal) kush from the Emerald Triangle.

A recent guestimate of the total size of California’s cannabis market states that the legal market is merely 35% as large as the black market. Doesn’t sound like California’s legalization has crushed the mature, well-established unlawful market, does it.

The legal framework established by Prop 64, together with California’s flawed implementation, have contributed to continuing problems for legal producers and distributors. One predominant reason for such problems is centered on Prop 64’s requirement that local governments must opt in to allow recreational sales to adults. Sizeable portions of California officialdom have prohibited recreational cannabis sales; 67% of the state’s jurisdictions still block sales.

At last count, there are only 866 licensed cannabis dispensaries in the state or 1.6 per 100,000 residents. This low number puts California far behind other states in terms of dispensaries per capita, one-tenth as many as Oregon. When and where there are no legal dispensaries, black market cannabis rules at far lower prices.

Experts believe the street price of an ounce of weed is 50% lower than the taxed, legal weed. No wonder growers are unhappy, although they’ve known since the very beginning of California’s legalized cannabis that their products cannot compete purely on price with street weed.

But cannabis spot-prices have steadily dropped over the past 3 years and more so in 2022, in part because legal production had increased. Over just the past 2 months, national spot-prices fell 17%. In California, statements of a legal weed “glut” are commonplace.

Nevertheless, legal weed has found a valuable niche in California’s cannabis firmament. We’re not talking penny-ante change here. The state is now the largest legal cannabis market in the world, the biggest Kahuna, raking in $5.2 billion (B) of taxable sales in 2021, a 17.1% increase from 2020. Last year, $1.5B in cannabis-related tax revenues were provided to selected localities and the state. California politicians may be happy. But other actors in the legal market are not and have made their complaints clear in Sacramento.

Governor Newsom and the Legislature’s Democrat leaders finally reached a deal to restructure the state’s oppressive taxes on legal cannabis. He signed the legislation into law on June 30 that will eliminate the growers’ cultivation tax. In addition, the new law provides $150 million from the state’s seemingly huge budget surplus to recipients of this tax’s revenues over the next 3 years as a back-stop for the resulting tax revenue reductions.

Beyond growers, another key group of market participants are dispensary owners, including what’s known in liberal nomenclature as social equity operators (SEOs). SEOs are folks who have received their dispensary licenses through local programs, like in Oakland, San Francisco and LA, intended to diversify the industry with more people of color, formerly incarcerated people and residents of neighborhoods with historically disproportionate marijuana arrest rates. SEOs represent about 23% of all cannabis dispensaries in California.

SEOs have been vociferous in their displeasure with the tax restructuring legislation. After all, issues surrounding the numerous facets of equity have established a prominent place in the hearts and minds of true blue Californians, include legislators. The new law provides SEOs with a $10,000 tax credit and allows them to keep 20% of the excise tax revenue they collect for the next several years.

SEOs dismissed this benefit as “crumbs.” They wanted much more, including a complete elimination of the sizeable excise tax. They thought they would get it, given their cause and the cobalt blueness of much policy-making in Sacramento. They did not.

The retail price of California’s legal weed may be reduced a bit due to the new law, but wholesale cannabis prices have already rebounded from last year’s slump because of increased demand. Meanwhile the price of asparagus has dropped, due to decreased demand and increased supply. A plate of asparagus spears and a pre-roll thus offers mixed fiscal blessings, depending on your taste. What will it be?