Mom-and-pop pot growers cut cartels’ profits

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ARCATA, Calif. - Stiff competition from thousands of mom-and-pop marijuana farmers in the United States threatens the bottom line for powerful Mexican drug organizations in a way that decades of arrests and seizures have not, according to law enforcement officials and pot growers in the United States and Mexico.

Illicit pot production in the United States has been increasing steadily for decades. But recent changes in state laws that allow the use and cultivation of marijuana for medical purposes are giving U.S. growers a competitive advantage, challenging the traditional dominance of the Mexican traffickers, who once made brands such as Acapulco Gold the standard for quality.

Almost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications for Mexico's war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.

New business model
While the trafficking of cocaine, heroin and methamphetamine is the main focus of U.S. law enforcement, it is marijuana that has long provided most of the revenue for Mexican drug cartels. More than 60 percent of the cartels' revenue — $8.6 billion out of $13.8 billion in 2006 — came from U.S. marijuana sales, according to the White House Office of National Drug Control Policy.

Now, to stay competitive, Mexican traffickers are changing their business model to improve their product and streamline delivery. Well-organized Mexican cartels have also moved to increasingly cultivate marijuana on public lands in the United States, according to the National Drug Intelligence Center and local authorities. This strategy gives the Mexicans direct access to U.S. markets, avoids the risk of seizure at the border and reduces transportation costs.

Unlike cocaine, which the traffickers must buy and transport from South America, driving up costs, marijuana has been especially lucrative for the cartels because they control the business all the way from clandestine fields in the Mexican mountains to the wholesale dealers in U.S. cities such as Washington.

"It's pure profit," said Jorge Chabat, an expert on the drug trade at the Center for Research and Teaching in Economics in Mexico City.

The exact dimensions of the U.S. marijuana market are unknown. The 2007 National Survey on Drug Use and Health estimated that 14.4 million Americans age 12 and over had used marijuana in the past month. More than 10 percent of the U.S. population reported smoking pot once in the past year.

Mexico produced 35 million pounds of marijuana last year, according to government estimates. On a hidden hilltop field in Mexico's Sinaloa state, reachable by donkey, a pound of pot might earn a farmer $25. The wholesale price for the same pound in Phoenix is $550, and so the Mexican cartels could be selling $20 billion worth of marijuana in the U.S. market each year.

"Marijuana created the drug trafficking organizations you see today. The founding families of the cartels got their start with pot. And marijuana remains a highly profitable business they will fight to protect," said Luis Astorga, a leading authority on the drug cartels at the National Autonomous University of Mexico, who grew up in Sinaloa in 1960s and recalls seeing major growers at social functions in the state capital, Culiacan.

License to grow money
Led by California, 13 U.S. states now permit some use of marijuana; Maryland is considering such a law. In many cities, marijuana is one of the lowest priorities for police.

To some authorities, the new laws are essentially licenses to grow money. With a $100 investment in enriched soil and nutrients, almost anyone can cultivate a plant that will produce two pounds of marijuana that can sell for $9,000 in hundreds of medical marijuana clubs or on the street, according to growers.

High-end marijuana grown under such special conditions often fetches 10 times the price of poor-quality Mexican pot grown in abandoned cornfields and stored for months in damp conditions that erode its quality further.

"What's happened in the last five years, it's just gotten totally, totally out of hand, as far as a green rush of people coming from all kinds of different states and realizing the kind of money you can make," Jack Nelsen, commander of the Humboldt County Drug Task Force in Northern California. County residents who have a doctor's recommendation can legally grow as many as 99 plants.

Authorities found and destroyed about 8 million marijuana plants in the United States last year, compared with about 3 million plants in 2004. Asked to estimate how much of the overall marijuana crop was being caught in his area, Wayne Hanson, who heads the marijuana unit of the Humboldt County Sheriff's Office, said: "I would truthfully say we're lucky if we're getting 1 percent."

The Mexican traffickers' illegal use of public lands is a response to the dramatic increase in U.S. production, according to authorities and growers. In the northern woods of California, illegal immigrants hired by well-heeled Mexican "patrons," or bosses, lay miles of plastic pipe and install oscillating sprinkler systems for clandestine fields that produce a cheaper, faster-growing "commercial grade" of marijuana. Eric Sligh, the editor and publisher of Grow magazine in Northern California's Mendocino County, said the Mexicans use a fast-growing variety of marijuana and time their harvests to periods of low domestic production in the United States.

After establishing sophisticated farming networks in California, Washington and Oregon, the Mexican traffickers are shifting operations eastward to Michigan, Arkansas and North Carolina, federal agents say.

Like wily commodity traders, Mexican traffickers time their shipments to exploit growing cycles in the United States. They warehouse tons of pot south of the border to ship north during periods when demand peaks and domestic supplies are scarce, Mexican anti-narcotics officials said.

The traffickers are also engaged in an escalating race to achieve higher levels of tetrahydrocannabinol, or THC, the chemical ingredient that gives pot its potency. The THC content of Mexican marijuana seized at the southwest border jumped from 4.8 percent in 2003 to 7.3 percent in 2007, according to U.S. officials. Those levels are still less than half that of the highly potent marijuana found in places such as Arcata, where THC content often tops 20 percent.

Giant greenhouse
Although most Mexican marijuana is still grown outdoors, Mexican security forces have begun to discover greenhouse operations, similar to those found in the United States and Canada. A Mexican army unit on routine patrol in Sinaloa arrested two men in a greenhouse the size of an American football field with more than 20,000 marijuana plants inside. The greenhouse was equipped with modern, highly sophisticated refrigeration, heating and lighting systems.

In the national forests and public timberlands of Northern California, Mexican growers shoot at U.S. law enforcement agents with growing frequency and use fertilizers and pesticides that pollute watersheds and start fires. A 90,000-acre blaze in Southern California's Los Padres National Forest in August began on a marijuana farm run by Mexican traffickers, according to authorities. The fields are so inaccessible that helicopters are needed to insert agents, who cut the plants with pruning shears, machetes and even chain saws before airlifting them to be destroyed.

This season, five teams from the Bureau of Narcotic Enforcement in California have seized 4.2 million plants worth an estimated $1.5 billion, a 576 percent jump since 2004.

Ralph Reyes, chief of operations for Mexico and Central America for the U.S. Drug Enforcement Administration, said intelligence suggests that the major cartels are directly behind much of the marijuana growth that is taking place on public lands. "The casual consumer in the U.S. — the kid or adult that smokes a joint — will never in their mind associate smoking that joint with the severing of people's heads in Mexico," he said.

But it has been difficult for U.S. authorities to prove the connection, partly because the individuals who cultivate the plants have no idea who they are working for and are able to give little information when arrested.

A Mexican grower in Humboldt County, who recently harvested 800 plants and asked not to be identified, said the pot farmers are usually approached by an anonymous boss, who puts up the money — sometimes as much as $50,000 — for the seed, fertilizer, hoses, camping equipment and food needed to live in the woods for three months growing "Maribel," as the Mexicans refer to the plants.

The grower said the patron pays the growers in cash or product, which they can then sell on their own.

"The mountain can eat you up," the grower said. "You're only thinking about the next day. You have to get up at 4 in the morning to water the marijuana, because the helicopter might come by when the sun is up, and if you water too late, he'll see the mist coming off the plants. You do this every day. There's no church on Sunday or anything like that. You have to be focused. You have to give everything for them."


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So if it's legalized, less money goes into cartels and the black market? WHO WOULDA THUNK IT!!??!??!?!?:evil:

sounds like my parents

Its amazing to think that 60% of their profits still come from this but, looking at the fact that prices haven't fallen much in the U.S. I can see where it still would hold a profit. I think if California does lead the charge in experimenting more with the idea of legalization likely many other states will follow one by one. Many other drugs of course are highly debatable on whether they should ever be legalized, marijuana though seems like a textbook case of illegality through stigma. If legalizing it could strike that much of a blow to the Mexican cartels it would be a great idea.

As a long-time Humboldt county resident, I can testify that the article has it somewhat backwards. The small growers have always been there, remnants of the hippie culture; prop.215 just allowed some of them to come into the light. On the other hand, we have been having *increasing* problems with giant grows on public lands. Not all of the pollution comes from the giant grows, though; one of the worst cases recently was an enormous diesel spill from a mid-size, American-run grow.

my favorite 'Humboldt County' blog: http://kymk.wordpress.com/

Cartels are interested in meth and coke, as that is where the money is. It is mainly moving towards meth because this has a wider and easier distribution. Crack is mainly used in inner cities, where as meth is used in suburbs, and all over. It also means the Mexican cartels don't have to use the South American cartels and growing areas, so it is more profit for them.

MJ can be grown by anyone so it is almost a false economy.

It's not 'almost.'
It's probably the biggest industry in Humboldt county, though of course it's pretty difficult to actually measure. I almost think that we could solve the California budget crisis if we could just legalize pot and then tax the hell out of it.

Anything that you can grow in your own home is not very taxable.

So it only relies on the fact that people mightn't want to grown their own. In that case they can start to use proper green houses, or just continue to use illegal electricity supply.

Ridiculous to presume that everyone growing weed doesn't pay for electricity. People who grow in their own home don't abstract electricity as it's the number 1 way to get caught, the power co knows how much electricity is being used and how much money is being paid, any discrepancy will be investigated.

nah it's he illegality that makes drugs dangerous so why not legalize them all, it's the only thing that makes sense.

Yet more proof that the best way to get rid of organized crime and violent regimes is to legalize all drugs. The violent mobs of the 20's were created by alcohol prohibition, and the drug cartels exist only because of drug prohibition. They're the only ones who can afford the high cost of risk.

Yes, drugs have their problems. All forms of recreation do. But those problems are not so bad as those caused by prohibition, including not just violent organized crime but corruption of the justice system and diversion of resources better used to contain other violence.

Nah, something like methamphetamine carves holes in people's brains, that's a problem as in it doesn't just harm them necessarily when their actions are taken into account. Also, smack, people need a fix too bad not to go to insane lengths to get it - they only luck out of they can stay financially viable enough not to need to go to drastic measures, any legalized form of it used in maintenance is only enough to keep equilibrium rather than get high - too clean. The fight against these items looking more evil than the addiction is likely just by availability heuristic.

The stuff becomes dirt cheap once you take the risk of criminalization out of the equation. If the addicts still can't afford it and get so desperate that they commit crimes to pay for it, then I'll be happy to subsidize it. That's a lot cheaper than paying for interdiction and their prosecution, capture, and incarceration. Even sticking them in a sanitarium forever on an IV drip (in a padded room for the violent ones) would be cheaper than that.

We should get out of the business of punishing people for doing things we just don't like, and only punishing them for what they willfully do to others. If someone is a threat to others, lock them up for the duration of the threat, and release them when they come out of it. Make the padded rooms free, with free delivery to and from home. Again, that's a lot cheaper than the current situation.

@ 0 equals true: you're right. If someone wants to grow pot in their house (or in their yard, which is possible here in Humboldt Co.), there's little that the government can do to tax it. But people can brew beer, wine, and applejack in their homes, and that doesn't leave the government without any funds from taxing alcohol.

Some possibilities:

1. overtly and pay tax
2. covertly and pay tax
3. overtly and don't pay tax
4. covertly and don't pay tax
5. under artificial conditions and pay for tax and energy
6. under artificial conditions and pay for energy but not tax
7. under artificial conditions and pay for tax but not energy
8. under artificial conditions and pay neither tax nor energy

People might be interested in number 1 and 2 for legitimacy, however if they are undercut they could loose business. 3 is pretty much impossible, unless it is fully legalised with not tax. 4 is a tough one, if you are not growing in doors,
you need a large wilderness with relative lawlessness to hide it. It does suit central and South American countries, but it need the distribution network to go with it. I saw it in Jamaica (I lived there), as whilst is a small island, much of it is subtropical forest in very hilly and inaccessible. The road infrastructure is poor, and resources for policing it aren’t there. However due to being compact place it isn’t too far about from the customers. On the whole it was very ma and pa operation on the whole, if you are talking about weed. If you are talking about drugs in general Jamaica used to get all the crap that they wouldn’t be able to sell in the states, offloaded on route. 5-7 are really realistic because if you fiddle one thing you have to go the whole nine yards if you stand a realist chance of not getting caught.

I agree that you can make some tax, but frankly those that claim mj tax is going to solve all the economic woes are as unrealistic that assert it can solve every problem. You have to be realistic.

Well, I've always supported small businesses like the ones which helped make our country, so way to go ma and pa potheads!!

There's no lack of other illegal drugs to market. Oregon banned the sale of makings for meth. Net result? The Mexican cartels moved in. Fewer meth labs blowing up, but more meth on the streets.

I don't know if you really mean this the way it sounds.
If these gangsters found they couldn't make any money from drugs anymore, they'd most likely move into protection rackets, human organ trafficking, money laundering, fraud etc.