Price for Mexico’s marijuana going down
Looser US laws create competition north of border.
BADIRAGUATO, Mexico — He started growing marijuana as a teenager and for four decades earned a modest living from his tiny plot tucked at the base of these rugged mountains of western Mexico.
He proudly shows off his illegal plants, waist-high and fragrant, strategically hidden from view by rows of corn and nearly ready to be harvested.
“I’ve always liked this business, producing marijuana,” the 50-year-old farmer said wistfully. He had decided that this season’s crop would be his last.
The reason: free-market economics.
The loosening of marijuana laws across much of the U.S. has increased competition from growers north of the border, apparently enough to drive down prices paid to Mexican farmers. Small-scale growers here in the state of Sinaloa, one of the country’s biggest production areas, said that over the last few years the amount they receive per kilogram has fallen from $100 to $30.
The price decline appears to have led to reduced marijuana production in Mexico and a drop in trafficking to the U.S., according to officials on both sides of the border and available data.
“People don’t want to abandon their illicit crops, but more and more they are realizing that it is no longer good business,” said Juan Guerra, the state’s agriculture secretary.
For decades, the U.S. and Mexican governments looked for ways to reduce marijuana cultivation. They paid farmers to grow legal crops or periodically sent Mexican soldiers to seek out and eradicate drug fields.
But those efforts failed because marijuana was still more profitable than the alternatives.
As recently as 2008, Mexico was providing as much as two-thirds of the marijuana consumed in the U.S. each year, said Beau Kilmer, co-director of the Drug Policy Research Center at the Rand Corp. think tank.
U.S. growers, however, have been spurred on by the increasing number of states that have lifted restrictions on the drug.
In 1996, California, the nation’s biggest marijuana producer, became the first state to legalize it for medical purposes. Twenty-two states have followed suit over the last two decades. Alaska, Colorado, Oregon and Washington have also allowed cultivation and sale for recreational use.
Though federal law still criminalizes production and possession, the U.S. Justice Department has backed off its enforcement efforts when they clash with state law.
The relaxed legal environment has upended the old business model.
“Changes on the other side of the border are making marijuana less profitable,” said Antonio Mazzitelli, the representative in Mexico for the United Nations Office on Drugs and Crime.
Although Mexico remains a major supplier of marijuana to the U.S., its market share is thought to have declined significantly. Alejandro Hope, a security and drug analyst in Mexico City, estimated that Mex- ican marijuana now accounts for less than a third of the total consumed in the U.S.
There is little reliable data on marijuana production in Mexico. But two key measures — how much is destroyed in the fields and how much is intercepted at the U.S. border — strongly suggest it has been in decline.
The Mexican government expected to have eradicated about 12,000 acres in 2015, down from more than 44,000 in 2010, according to the Mexican attorney general’s office.
U.S. Customs and Border Protection seized about 1,085 tons of marijuana at the border in 2014. In the previous four years, that figure hovered around 1,500 tons. Seizures are thought to represent a tiny fraction of the amount that gets successfully imported.
U.S. and Mexican growers compete not only on price but also on quality. Legalization has expanded the market for more expensive specialty strains, which are more powerful than the standard Mexican product because of a higher concentration of THC, the ingredient that delivers the high.
“Mexican marijuana is deemed lowest on the totem pole, and very few people who consider themselves aficionados or connoisseurs would admit to smoking it,” said Daniel Vinkovetsky, who writes under the name Danny Danko for High Times magazine. “It’s typically brown, pressed tightly together for transport and full of seeds.”
“Access to better quality American cannabis has led many to turn their backs on imports from Mexico and beyond,” he said.
Ethan Nadelmann, who runs Drug Policy Alliance, a nonprofit based in New York that promotes decriminalization of drugs, said he expects that Mexican exports of marijuana will continue to fall as legal cannabis proliferates. “More and more, the U.S. is going to grow marijuana here,” he said.
From 2013 to 2014, the legal market grew from $1.5 billion to $2.7 billion, according to a report last year from The ArcView Group, a cannabis industry investment and research firm based in Oakland, Calif. Illegal sales are thought to be many times that.
The shifting market has forced small-scale marijuana farmers in Mexico to look for ways to supplement their incomes.
In remote Sinaloa, 55year-old Efrain said he stopped cultivating marijuana a few years ago and now supports his family as a day laborer. The middlemen who used to purchase his crop barely come around anymore.
“If someone comes to buy it here, they want it really cheap,” he said.
But Emilio said he can’t afford to give up on marijuana.
“Even though it’s not really considered good business anymore here, there’s nothing else to do,” he said.
Mexican drug cartels are also adapting.
For one, they are moving to compete in the high-end marijuana market, according to the 2015 National Drug Threat Assessment produced by the DEA. “Law enforcement reporting indicates that Mexican cartels are attempting to produce higher-quality marijuana to keep up with U.S. demand,” it said.
Experts say the cartels are likely to shift resources away from marijuana toward other drugs that are illegal in the U.S., including heroin, methamphetamine and cocaine.
Emilio already farms a few patches of poppies used to produce heroin.
They are a more laborintensive crop than marijuana and require a bigger investment upfront. But poppies may be a safer bet than marijuana: High demand for heroin in the U.S. has been driving up prices, and there is little chance it will be legal anytime soon.