It’s no secret that pest control is the bane of many cultivators’ existence. An outbreak has been known to destroy entire crops, taking with it revenues in the hundreds of thousands of dollars or even more. It is the threat that has driven some to apply unapproved pesticides. So it’s not surprising that insect pest/disease was ranked by the largest number of growers (51%) as among the top three biggest challenges they face.

Next in line were humidity control (39%), temperature control (30%), maintaining consistent yields (29%), powdery mildew (28%) and maintaining consistent product (20%).

What Impacts Your Yield?

Yield and quality (along with consistency) are the holy grails of cannabis cultivation. So what factors most impact cultivators’ yields? When respondents were asked to select the three factors that most impact their operation’s yield, nearly half selected facility/structure/grow environment. Pests/diseases ranked second (37%) as a top-three yield-impacting factor, and the combination of grow media/fertilizer/irrigation technique came in at a close third (35%).

WHAT’S YOUR YIELD DRIVER?

What three factors impact your operation’s cannabis yield the most?

Keep Growing

Overall, this has been a landmark year for cannabis legalization and the market segment that drives the industry. Optimism remains strong among cultivators, who, for decades since medical cannabis was legalized in California in 1996, have been courageous pioneers in an industry that remains illegal under federal drug law. And while the fears about the new administration are impacting the plans of some cultivation businesses to a significant degree, most will continue moving forward, as evidenced in the research finding that more than three-fourths of cultivators plan to add square footage to their grow operations within the next two years.

Significant challenges also face this market, namely pests and disease. Energy consumption, not explored in this report, continues to be another major issue with which cultivators contend, both for environmental and financial reasons, especially as price pressures continue to push growers to decrease costs of production. And though warehouse cultivation still dominates the industry, the findings that 38% of cultivators who do not currently grow in greenhouses plan to do so within two years indicates that a large shift toward greenhouse production is coming.

While the fears about the new administration are impacting the plans of some cultivation businesses to a significant degree, most will continue moving forward, as evidenced in the research finding that more than three-fourths of cultivators plan to add square footage to their grow operations within the next two years.

This year promises continued expansion for this ever-growing market and more progress in medical and recreational legalization, with several states—such as Illinois, Michigan and Connecticut—currently working on new ballot initiatives and proposed legislation. And as the market accelerates, cultivators are poised for even greater success and driving further economic impact on local and state levels, creating thousands of new jobs and tax revenues, and for pushing technology and advancements as their businesses and the market matures.

ABOUT THE RESEARCH

The margin of error for percentages based on 237 respondents who currently own or work for an operation that grows cannabis is ±6.2 percentage points at the 95% confidence level.

Like most industries, cultivation businesses range fairly significantly when it comes to annual revenue. Nearly equal numbers of research respondents say their businesses generate the highest revenue levels ($2 million or more: 17%) and the lowest levels (less than $25,000: 19%).

SHOW ME THE MONEY

What was your operation’s revenue from its cannabis cultivation operations in its most recently completed fiscal year?*

WEIGHING YOUR SUCCESS

How many pounds of dried flower did your operation produce in the past 12 months?

GROWING METHODS

What techniques describe your operation’s growing style?*

AUTOMATICALLY CONTROLLED

For which systems does your operation utilize automation technology in its cannabis cultivation?

NUTRITION CLOSE-UP

How does your operation fertilize?

ABOUT THE RESEARCH

The margin of error for percentages based on 237 respondents who currently own or work for an operation that grows cannabis is ±6.2 percentage points at the 95% confidence level.

Those Entering the Market

The research also considered those who don’t currently operate or work for an operation that grows cannabis, but who plan to within the next 18 months. Among this survey group, the largest percentage (67%) said that they plan to grow indoors in a warehouse.

More than a third (35%) said they plan to grow in a greenhouse, and 24% said they plan to grow outdoors. (Again, respondents were able to select more than one option, so the responses indicate that a number of cultivators plan to grow in multiple facility/grow types.)

Is the Grass Greener in the Greenhouse?

Of those growing in greenhouses, more than half of respondents (55%) say that 50% or more of their production is in a greenhouse.

Looking ahead to the next two years, greenhouse crop production will increase: Of those who grow in a greenhouse, the number of respondents who say that 50% or more of their production will be done in a greenhouse within the next two years jumps to 72%.

One Site, Two Sites, Three Sites, More …

As existing markets expand and/or new markets come online, it’s not surprising that successful cultivators with one cultivation operation may choose to expand their operations to multiple locations.

While the majority of cultivators (64%) operate just one facility/grow site, more than 36% of respondents have multiple sites.

No data exists on this front from 2016’s report; however, it’s not a stretch of the imagination to guess that experienced cultivators’ expansion efforts will continue to significantly increase the competition for licenses in new markets as they develop.

FACILITY COUNT

How many cannabis facilities/grow sites does your operation have?

ABOUT THE RESEARCH

The margin of error for percentages based on 237 respondents who currently own or work for an operation that grows cannabis is ±6.2 percentage points at the 95% confidence level.

One trend that seems to be reflected in the data is that slightly fewer cultivators are growing in more than one facility/location type. For example, the numbers of research participants who said they grow in a greenhouse only or a warehouse only both increased this year over last year.

Likewise, the number of cultivators who said they grow in a combination of facility types/locations (e.g., greenhouse and warehouse) decreased across all but one category; those who said they grow in a combination of a greenhouse and outdoors stayed level at 3%.

Greenhouse Growing on the Upswing

As markets continue to mature and cannabis is expected to increasingly be treated (and grown) like any other agricultural crop, longer-term industry shifts are anticipated, including a move away from indoor cultivation. In the short-term, such a shift is driven largely by cost. (Many cultivators also aim to be as environmentally sustainable as possible.) Declining wholesale prices continue to force cultivators to lower production costs to maintain and/or increase profit margins. The wholesale spot price monthly average for all U.S. cannabis sales dropped from $2,018 in January 2016 to $1,532 in January this year, according to industry research firm Cannabis Benchmarks. Since greenhouses are known to be more energy efficient than indoor cultivation (generally speaking), as they utilize free sunlight as their primary light source, it’s not surprising that an increasing number of cultivators (25% in 2017 vs. 19% in 2016) who don’t currently grow in greenhouses say they will definitely grow in a greenhouse in the next two years.

FUTURE PLANS

Of those who do not currently grow in a greenhouse: How likely is your operation to grow cannabis in a greenhouse in the next two years?

Does Size Matter?

According to this year’s data, crop size stayed relatively consistent among all cultivators as compared to last year; however, the numbers do show a very slight increase. The number of cultivators with relatively larger crops (10,000 square feet and up) all increased over last year, if only slightly (anywhere from 1 percentage point to 6 percentage points). Likewise, the number reporting smaller square footage for crop production (9,999 square feet and below) decreased by a few percentage points.

The average crop square footage among research participants also increased, albeit also ever so slightly. In 2016, the average was 18,000 square feet; this year, the average crop size came in at 20,500 square feet.

SPOTLIGHT ON SIZE

What is the square footage of your operation’s cannabis crop production?

ABOUT THE RESEARCH

The margin of error for percentages based on 237 respondents who currently own or work for an operation that grows cannabis is ±6.2 percentage points at the 95% confidence level.