Each year, more U.S. states are legalizing adult-use cannabis sales and opening new markets for growing businesses to engage. But what about the international scene? We may be a long way off from international cannabis commerce—in any meaningful way for a high-demand agricultural crop like Cannabis sativa L. and its chemical compounds. But, like everything else in the cannabis industry, the future tends to come pretty fast.
We spoke with Mojave Richmond, a founding member of BioAgronomics Group, who helped us think about how to consider the global cannabis marketplace from the vantage point of a business in the U.S. What should the savvy business owner be thinking about as cannabis markets begin to gel around the world? What would international commerce really look like?
Cannabis Business Times: What sorts of high-level trends are you keeping an eye on outside of the U.S.?
Mojave Richmond: Variety development is something that I'm focused most on, in that the CBD market has created an API-driven production model. The flower market is still tied to specific varieties and which varieties work for which particular regions, and understanding which particular markets seems to be the holy grail of figuring out the cannabis supply chain. Especially once international commerce is in full swing, it's going to be a matter of [knowing] which varieties produce which compounds for which markets at the most affordable cost and with the least impact.
In other agricultural commodities, the farmer generally wants to know what the market is for that crop. With cannabis, we've got the issue of having so many different varieties on the market that picking the right one really dictates your success rate. Here in California, we're definitely seeing that already: where fairly large groups might attach themselves to a particular set of varieties, and the success on sales really depends on whether they're competitive with someone who produced it at a lower cost.
CBT: How much should smaller growers be thinking about things like competition in international markets?
MR: Well, following trends is key. Most of the varieties available in the international market today were developed in California for the California market. So, understanding where these critical “petri dish” markets are that really dictate what the consumer desires is going to be critical.
Now, we're bound by international law. And I imagine that once the laws relax, the first wave will just be mass distribution of cannabis varieties internationally. That’s going to create even more competition because people will have access to everything that they didn't have access to before. So—similar to other crops—it's a matter of the industry self-regulating alongside universities and government bodies to help assist in picking the appropriate varieties for the appropriate market. That’s the challenge with cannabis, because cannabis is so diverse and there are so many cultivars and varieties available; it's not as simple as grapes or apples or wheat or corn, where a group can just say, “Hey, we're thinking about growing 1,000 acres of corn for ethanol. Which varieties should we produce?” It’s not that difficult for them to navigate through that way. With cannabis, nobody has the answer to that question at this point. The market has to dictate that. And the only way for that to happen is that there has to be an effective feedback loop between the consumer, the commercial suppliers and regulators.
CBT: Could you elaborate on the state of international law and what sorts of obstacles stand in the way of opening those markets and borders for commerce?
MR: The Controlled Substances Act is going to change, and when that changes, it opens the floodgates for varieties to move freely. The challenge is that it has to come with a phytosanitary certificate to show that [the cannabis is] clean of pests and pathogens. That means that those varieties have to be in the hands of larger commercial groups. Right now, most of the diversity in the cannabis genome is in the hands of just everyday cultivators and small-scale clandestine breeders.
Canada is a perfect example, where they have a limited amount of cultivars that they can pick from. They have limitations on what they can do. Regardless of what the market might demand, they're limited by what their regulatory structure allows. When plants can freely move around the world, they have to still do it in the same fashion that other plants do, which is showing that they're free of pests and pathogens. So, getting ahead of that game and ahead of that curve, that seems to be the challenge.
CBT: Is that gap between small-scale breeders and larger cannabis companies the type of place where licensing agreements and intellectual property rights might then come into play?
MR: Yeah, exactly. That's the whole challenge right now: The diversity is in the hands of the small breeder, and their ability to even commercialize their products is pretty much challenged by the ability to access markets. For larger commercial groups to work with smaller breeders, there's a bunch of nuances involved in that, [including] just finding them, for one. We've seen groups that have tried to assess what attributes are most desirable,but nobody really knows that at this point. A commercial grower in the tropics might have a completely different set of traits that they're seeking, compared to a commercial grower in a temperate zone. Aligning [those traits] with the right genetics and being able to ship and transport those—it all comes down to the fact that there needs to be a lot of research done on viability and the specific compounds and traits that are unique to each particular variety so that they can find a place in the market somewhere in the world. Right now, OG Kush and Sour Diesel have dominated the genetic makeup of most varieties of cannabis that are available. That was a selection process made during prohibition—not during the industrial commercial cannabis market
CBT: That opens up the conversation to minor cannabinoids. Do you see minor cannabinoid development as another front line as we talk about international commerce?
MR: Absolutely: minor cannabinoids and their relationship with the with the major cannabinoids as well. And terpene profiles and other aromatics—cannabis is just chock full of chemicals. What makes a variety unique? A lot of those terpenes are not cannabis-specific, you know. So, figuring out what compounds within the plant are specific to the plant, or are best extracted from a cannabis crop as opposed to a citrus crop, for instance, is critical. Whether some of those can be sourced from cannabis or can be sourced from other crops is one part of it, and then understanding their relationship with one another in what we call the entourage effect [is another question]. People are investing heavily into bioreactors to produce cannabinoids and sourcing terpenesfrom other crops. It really comes down to research, research, research. Before we jump into a fully robust international market, there's a considerable amount of research that should be done in order to protect farmers, consumers and the industry as a whole.
CBT: What do you hope attendees will bring back to their business from your session at Cannabis Conference 2020?
MR: The main thing is that things are moving really quickly. Going from a local, regional approach to the market to an international, global approach to the market is going to become ever more critical. We have people building cultivation facilities in markets that are in regions that aren't appropriate if there was international commerce, and the only reason that they're there is because there's not international commerce. We're quickly moving out of that. That model is going to be paramount to anyone's business model in the future. We don't grow bananas in California, we don't grow coffee in California; we import those products. Having an understanding about what the value is in your business model is all going to be based on the price point per pound. We're still looking at states here in the U.S., for instance, that are putting a lot of money into infrastructure in regions that if there were interstate commerce would never survive. That in that itself is a shame. We all we want interstate commerce and we want international laws, but it definitely means a lot of business models won't survive—or at least will have to pivot rapidly.
That’s been a concern that we had all along. In California, a big part of our state’s income comes from agriculture, and a large portion of that agriculture is exported. That’s how we survived. We grow broccoli for states that can't, and we grow tomatoes for states that can't—or can't do it as cheaply as we can. Understanding that dynamic is what agriculture is. It used to be that cannabis sold itself because it was kind of an insular industry. And now we don't have that luxury. You're competing with every other market around the world. Right now, people in Florida and people in Michigan are not competing with each other. If they were, it would be difficult. And if they were competing against California, they wouldn't stand a chance. It's something to just be aware of—that this is a business. This is the cannabis business that we're all in. Approach it like a business, an agricultural business. That takes a little bit more understanding and also a lot more vulnerability, because agriculture is always vulnerable to the whims of Mother Nature and the whims of the market. That's something that we should all be focusing on.
Editor’s Note: This interview has been edited for style, length and clarity.