Perhaps in a nod to the next frontier of business opportunities in organic growing, the most popular educational breakout session at the sold-out inaugural Organic Grower Summit was “Organic Disruption — Cannabis: The Next Frontier.”
Moderated by Kelly Damewood of CCOF, panelists were attorney Aaron Johnson of L +G LLP, Ben Bradley of the California Cannabis Industry Association, and Kristin Nevedal of the Patient Focused Certification program of Americans for Safe Access.
While eight states have legalized cannabis for adult recreational and medical use and 20 states have legalized its use for medical purposes, federal law stills classifies cannabis as a Schedule 1 substance (“no currently accepted medical use and a high potential for abuse”). This conflict creates some unique challenges for the industry, including organic certification of cannabis production, handling and processing.
According to attorney Johnson even without certification, cannabis growers can’t use pesticides because they won’t be able to pass state mandated residue tests. And if the product doesn’t pass the tests, it’s unsellable. “From an investor standpoint, they can’t have failure,” Johnson said. “And it’s clear this industry is big business and getting bigger.
While the USDA’s National Organic Program (NOP) standards are federally regulated and cannabis remains illegal under federal law, USDA-accredited organic certifiers are prohibited from certifying any cannabis-related producers as organic.
“However, some companies are developing private certifications,” said Damewood, “and the California Department of Food and Agriculture is required by law to create a program comparable to the national program by 2021.” Damewood said CCOF has been advocating for a certification process to be as streamlined as possible for growers that are currently certified to the federal standard for other crops.
However, without a federal organic standard, longtime organic producers see the potential for emergence of the same uneven patchwork of private and state standards that existed prior to launch of the NOP standards in 2002 – a situation that fostered consumer confusion over what “organic” meant. Nevedal argued that the best way to avoid that would be for cannabis to be moved out of its current Schedule 1 classification. In the absence of that, “As we move this forward, hopefully the states are going to take time to talk to each other,” she said.
Nevedal shared that when it comes to organic cannabis, there’s some consumer demand from more sophisticated consumers, but it’s not the primary driver. The most important reason to move cannabis production to organic is “to reduce some of the discharge and waste issues associated with cannabis production,” said Nevedal.
Synthetic fertilizer can build up in the soil or growing medium and discharging it is an environmental issue and the fertilizer is a cost issue for the farmer. “An organic regimen ultimately is a huge cost savings. It’s better for the environment, better for the consumer,” Nevedal said. “And if we’re farming in the ground, our yields will increase over the years as our ground becomes richer.”
All panelists advocated for education about the importance of organic production of cannabis. “While the organic standards were developed for substances you consume and digest, most people are combusting cannabis,” said Bradley. “And that means a whole other set of potential health issues.”
Another challenge created by the conflict between state and federal cannabis laws is banking. With cannabis becoming a large industry and operators professionalizing, it remains an all cash business because most chartered financial institutions are federally chartered.
Johnson said, “Timing wise, I remain optimistic that we’ll get this resolved in 2018. The IRS wants accountability. They want to be sure you’re paying your full tax on all the income you make.” He said there is some federal guidance that allows federally chartered banks to do business with legal cannabis operations, but it includes requirements to monitor the accounts and file suspicious activity reports. While banks are open to this, Johnson says that the Federal Deposit Insurance Corporation (FDIC) auditors make compliance with this requirement extremely difficult.