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Study looks to quantify Nevada County’s pot economy

Liz Kellar
Staff Writer
A Nevada County Sheriff's deputy examines the cola on a marijuana plant eradicated during a compliance check in this 2013 archive photo.
The Union file photo |

The underground marijuana economy might be the most open secret in Nevada County. But figuring out exactly how big an impact cannabis has on the economic health of western Nevada County is up for debate — and nearly impossible to fully quantify.

Cornell University grad student Sara Keene spent the last two years working to answer that question — and just finished putting together a report on the business surveys she conducted, as well as an estimation of the size of the marijuana economy in Nevada County between 2008 and 2013.

Keene, who is studying development sociology, began conducting research in 2013 on the impact of the marijuana industry on rural economies in Northern California, with an emphasis on Nevada County.

After conducting several interviews with local nonprofit leaders, she said she was surprised “not only at how little attention is actually paid to the impact of this industry on the local economy, but how little conversation and planning for a post-legalization economy has been initiated by key leaders in the county … Even amongst the growers I’ve interviewed, there seems to be very little planning for the future.”

“What was surprising to me was how reluctant people are to understand the dynamic — that they are so uninformed about the impact. The (marijuana) industry contributes a lot to the local economy. The county should be having more of a dialogue.”
Sara Keene Cornell University graduate student

Keene, an Amador County native and a frequent visitor to Nevada County, became fascinated by the “vibrant” marijuana industry and the local back-to-the-land movement.

“I’m very interested in economic development, especially in rural areas,” she said. “I wanted to look at, how does Nevada County create opportunities? I spent two years in the county, on and off. I started doing ethnographic work, interviewing growers. Then I decided I wanted to try and quantify it with a survey.”

Keene got help from the Grass Valley Downtown Association and the Nevada City Chamber of Commerce, as well as the Sierra Business Council, which all distributed an online version of the survey to their members.

Other business organizations in the county, she said, were reluctant to participate.

Keene supplemented that with door-to-door surveying, and targeted visits; she also conducted anonymous cultivator surveys, and got help from the medical marijuana community through Americans for Safe Access-Nevada County.

Keene ended up with 75 complete surveys, which she acknowledged was a small sample size and thus open to interpretation.

Approximately half were retail businesses, with about 25 percent being food-related.

One survey statistic that stood out was the percentage of cash sales, which Keene said was “pretty significant.”

In 2012, 27 percent of all purchases nationwide were made in cash; that percentage was expected to drop to 23 percent by 2017, Keene’s report said.

Contrast that with Nevada County, where the majority of the businesses Keene surveyed reported far higher percentages of cash sales.

Nearly half reported at least 30 percent of their sales were in cash, and 28 percent reported that more than half of their proceeds came from cash sales.

Keene hoped to find seasonal fluctuations in sales related to harvest time, but that indicator was not clear in her surveys. According to the businesses surveyed, July and December were the most lucrative months of the year, which she surmised follows summer tourism and holiday purchasing.

The businesses did report increasing sales in October and November that could be tied to the influx of trimmers during harvest season, however.

“I expected sales to go up more in the fall,” she said.

Businesses were asked what impact a collapse of the marijuana industry would have on their business; 59 percent of the western Nevada County businesses surveyed predicted a decline in revenue.

Some of those surveyed were very direct about the financial benefit to local retail, with remarks such as: “People are very open when spending money from their harvest to support local retail business;” “The powers that be in this county are foolish to ignore the huge beneficial impact the marijuana industry has on this county;” “Although I do not get much business from the trimmers. I do get business from friends/family coming to visit the ‘farmers’ throughout the year;” “I cannot over emphasize pot $, almost 50 percent of people I know make their living in association with pot; and “The cannabis industry is a life blood (for) almost everyone I know.”

Cash crop hard to estimate

Keene also attempted to quantify the size of the local marijuana economy, using a model that extrapolates the number of plants being grown in the county through an estimate that the Nevada County Sheriff’s Narcotics Task Force is seizing 5 to 10 percent of all plants in any given year.

The amounts seized by the Sheriff’s Office have varied widely from year to year — from 2,841 plants in 2008 to 71,292 in 2010 — reportedly due to several Mexican cartel grows; Lt. Bill Smethers said they seized 15,226 plants and 1,548 pounds of processed marijuana from Jan. 1 to Dec. 1, 2014.

Is a seizure rate of 5 to 10 percent of the total crop valid? Those percentages mirror published estimation models that follow federal numbers — and Keene said a number of growers that she interviewed said they would be shocked if even 5 percent of the local crop was seized.

“That number could be low,” she said.

Smethers said those figures were “guesstimates” based on overflights by his task force and other agencies.

“It’s a safe guess,” he said.

Keene then took those two separate percentages, and calculated them with either an estimated low yield of one pound per plant or a high estimate of 3 pounds per plant.

Her low-end estimate was of one pound per plant, consistent with published models for estimating the value of marijuana production in the United States; Keene noted that the growers she surveyed estimated a yield of 1.62 pounds per plant.

On the high end, she used Narcotics Task Force figures estimating an average yield of 3 to 3 1/2 pounds per plant.

Keene multiplied the possible yield by an average price per pound based on findings from an anonymous survey of growers — which ranged from a high in 2008 of $2,000 a pound for outdoor/$4,000 a pound for indoor, to a low in 2013 of $1,400 to $2,500 per pound.

The numbers averaging the total value of pot production from 2008-2013 are startling in black and white — from a low average of $416 million to a high average of nearly $2.5 billion. Of course, Keene notes, those averages represent several years where the amount of marijuana seized was very high.

But even when Keene averaged the years when only smaller-scale seizures took place, the figures are still staggering — from a low average of $106 million to a high of $640 million being generated by marijuana in this county, between 2008 and 2013.

To put this into context, in 2013, the year with the lowest estimated revenue due to an estimated low yield and a drop in price, Keene estimated a potential low value for the county’s marijuana crop at $51.5 million.

The county’s department of agriculture reported the total value of crop production in 2013, including fruit and vegetable crops, timber and livestock, at $23.2 million.

To Keene, the most important lesson that can be taken away from her work is the need to bring the conversation about marijuana out into the open.

“What was surprising to me was how reluctant people are to understand the dynamic — that they are so uninformed about the impact,” she said.

“The (marijuana) industry contributes a lot to the local economy. The county should be having more of a dialogue.”

To contact City Editor Liz Kellar, email lkellar@theunion.com or call 530-477-4229.

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