Cannabis Knowledge & Insights

Impact of Wildfires on Cannabis Industry & Cannabis Businesses

Cannabis businesses throughout the entire country are being affected by wildfires. In this video, we cover:

  • What’s happening with cannabis fires
  • What you should do if your cannabis crop burns down for cannabis CoGS
  • How wildfires impact the cannabis industry
  • What to do as a cannabis retailer

It says throughout the entire country.

So give me 30 seconds here for anybody
that gets the notification that we’re a l

ive, you can hop in if not,
we’ll catch up with the replay,

but this is going to be a very, you know,
quick and dirty look at the wildfires.

And again,

how they’re impacting all of the
cannabis businesses throughout the entire

country. Now, as you may
know, or you’ve heard,

or you’ve seen the stories and
the crazy pictures and videos,

wildfires are devastating. The
West coast, California, Oregon,

everywhere, the smoke’s going
all the way across the country.

You can see it on satellite images.
It’s pretty, pretty impactful.

And this is going to be impacting
cannabis businesses throughout the entire

country. And this is a
record-breaking year.

It seems like we break records every
year with wildfires in California,

but we’re barely into the high season
for the wildfires in California.

Now I want to stress. This is
not just a West coast thing.

This is not just a California
thing or just an Oregon thing.

This is going to impact all legal
and illegal cannabis businesses.

And we’ll talk about that
in a moment. So again,

let’s just cover what is actually
happening. So in October,

this is when a majority of your outdoor
flower is going to be harvested.

People are waiting all season,
they put all their money into it.

They dump a lot of resources into
having a great crop-Tober October

crops. Okay. Now what we’re
seeing is a loss of crops,

whether that’s being burned down
by the fires or contaminated

with heavy metals or other things
from burning building materials,

not from the forest fires in the trees
potentially from that, but there are,

there are building materials being burned
and that Ash is falling down as well.

This could contaminate the flower.

Now this could mean a huge
loss of supply of flour for

the entire industry. Hey, it
may turn into an oil. Boom.

If you can find a remediation process
that can strip out those potential

contaminants, but you know,
that’s for another video.

And we’ll talk about that and
see how this really unfolds.

And you can get some details about the
impact of the Ash on the flower. Now,

what should you do if this is your crop
that’s burning or has been contained

emanated? So what you can do is
make sure that you document it.

It sounds right basic,

but when you’re gonna make an
insurance claim potentially,

or if you’re going to write off
a loss, especially in cannabis,

you want to have all of your financial
records in order. So paperwork,

receipts, different time cards,

things to establish in re would you
say reconstruct the records that

this is how much money got
put into this, his crop.

So make sure you have the
paperworks to back all of that.

Now make sure you take pictures,
pictures at the beginning. Yeah. Right.

You’re probably doing the video
surveillance of your space,

not the outdoor space all the way,
but things that are going in and out,

hopefully been documenting your crop
throughout the year year for your grow

journal.

You can use that as reestablishing
information and evidence of how much money

and how big the crop is and
potentially how is lost.

Make sure that you’re taking pictures
throughout the burning process.

If that’s possible, if
you’re still in the area,

when you can get back to your area safely,

make sure you document the loss before
you have any kind of cleanup happen.

All right. And then from there,

make sure that you properly
reflect the impact on your crop in

metric. Now you may not know how
to do this. So Hey, at a minimum,

you can take the impact of this loss,
right? There’s an operating loss,

you’ve lost some product and you can
take that to offset any income from this

year. Now it’s not the best scenario,

but this is probably one of the best
things that you can do is document the

whole process. Now, if you need
help with, you know, writing,

doing the write off and having the
establishing information and knowing the

documents to reconstruct
these financial records,

reach out to us via our website at
GreenGrowthCPAs.com, chat with our team,

and we can help you with that. We
can help you with the metric inputs,

and then we’ll go from
there. Now, the meat of this,

or the really the big impact,

how is this going to impact the
cannabis industry as a whole?

So a few things here where you can kind
of guess we’re going to expect prices to

jump in the legal market. Okay.
Less crop is going to pass.

CEO’s pass the COA, which
is certificate of analysis,

which means that you’re
not going to be, you know,

to have heavy metal contamination or
some other kinds of contaminants in them,

or, you know, less props it’s going to
be available. Cause it gets burned up.

Now that product that doesn’t pass
COA, what do you think is going to go?

This is going to just get
rid of it. Probably not.

That’s going to go and divert
into the illicit market.

There are ways to do this. It’s
not in the regulations obviously,

but there will be ways that this product,

a certain portion of it will
make it to the illicit market.

What that’s going to do is it
potentially drops illicit market prices.

This is crazy, right? They’re
already dealing with cheaper prices.

So what’s going to happen is that
legal retailers. We’re going to be,

they’re going to be negatively
affected and impacted the most, right?

They’re going to have higher prices for
their flour because there’s less supply,

which means demand is for the
demand, the same demand, less flour,

higher prices. That’s how that breaks out.

Now this is going to be higher
prices for you and your consumer.

If you’re going to keep your margins
in tax. So if you double your price,

every time they keep a 50% margin,

your customers are going to
feel the impact of this to now,

how does that change consumer behavior?

We have yet to see how that’s going
to impact for this year’s movement.

Cause we haven’t had any full
month data for September, October.

So won’t see this until
it actually plays out.

Now also it’s going to be
harder for the legal cannabis

dispensary’s or delivery
services to compete with
illicit shops because those of

us at shops would likely not be able to,

or have to pass on any additional
cost to their consumer. So,

you know, maybe you can’t increase
your prices. You’ve already, you know,

out priced yourself against the legal
market or the sorry, the illicit market.

So if you’re a legal retailer,

you keep adding prices on and your
consumers are pilot. Hey, why is this?

You know, $35, eighth
costing me $55 out the door.

You bring it up $5.

You’re not just bringing up that five
there’s taxes on that gross amount.

So it gets really expensive
really quickly. Now illicit shops.

They’re going to be
getting this cheaper flour.

It’s going to be a literal fire sale.

And this is the double whammy against
the legal dispensary’s and the legal

deliveries, because illegal shops there’ll
be able to keep their prices steady,

potentially even bring them down.

Probably no one’s going to bring them
down because it’s already a good sale for

the consumer, but they
don’t pay taxes either.

Now enforcement budgets getting cut
here and there throughout California and

other States who knows how that really
shakes out. But this is going to be,

you know, not so good for the illegal
cannabis. Dispensary’s now, again,

this is not a West coast,
California, Oregon. Only matter,

you may not know this and regulators
may not want to acknowledge this,

but a lot of cannabis, outdoor
cannabis and indoor that, you know,

makes its way to the Midwest markets
or to the middle of the country.

We won’t name any States particularly,
but when they turn out this for example,

and this is how we came to kind of
prove this, someone legalizes cannabis,

a state legalizes cannabis, and they
opened up the doors three months later,

how do they have so much flour? Maybe
they are transitioning to some of that,

some of that medical flower in there,

but there’s no way that it
can produce that much flour.

It gets shipped in on 52
foot trucks. It just happens.

It makes its way in
through some certain. Um,

I would just say loopholes in the way
that you can bring in market to the,

those is our brain cannabis into the
legal markets and some other States.

But at any rate,

what I want to stress is that this is
not going to only impact California and

Oregon. This is going to
impact the entire country.

So lots of that going at legal cannabis
is going to be pushed or elicit cannabis

that didn’t make it in
California or Oregon.

There may be lower requirements in other
States where that market will absorb

some of this, uh,
unpassable legal flowers.

So it could flood your market,
make your prices lower, or Hey,

it just causes a drought and all that
cannabis that you thought was going to

come on that 52 footer from
California to feed your Midwest market

is not going to happen.

This is going to expect and expect
prices to rise for these types of things.

Now, what can you do as a cannabis
dispensary at cannabis delivery,

a cannabis retailer first and foremost,

start to buy stocks soon, right?

You should have an intelligent way to
know what your run rate is every month,

how much you’re buying and selling. Okay.

So secure as much product as financially
responsible without running the risk

of creating an incredible amount
of dead inventory. 90 days later.

Now this is incredibly tough to do.

If you’re not tracking your inventory
turnover and your throughput,

and having a very sophisticated,
not even a sophisticated,

I don’t want to call it very
sophisticated. Cause this is basic.

A convenience store knows how much
Coca Cola or Pepsi they need to buy.

You should know every week we’re going
to go through ABC amount of cannabis.

So be very thoughtful.
Try stock up. If you can,

if you get a good deal
on some good product,

maybe buy a little bit
more than necessary,

or then you’re usually typically buy
because there will be some type of impact

and drop in the supply of
cannabis in the Northwest.

And the potentially that again,

floods over to the other
States now for next year,

how do we really bake in
the impact of this and

protect ourselves as retailers,
as manufacturers, as distributors,

what you can do is consider structuring
deals and setting up forward contracts

with your suppliers and what this does.

It allows you to set a pre agreed upon
price before the crop even goes into the

ground. You could potentially prepay
some of that and put a percentage down.

That’s very,

very risky because if the crop dies out
or if the person doesn’t want to sell to

you anymore, yeah, they’re
legally breaking your
contract. You’re out of cash.

You’re gonna have to go through
some legal process for that,

but probably not prepaying for that,

but potentially entering into forward
contracts with adjustable rates based on

certain Oracles that will then
say, Hey, this is the market price.

We go market price plus 15,
or set a price in lock in.

Now this can help you flatten
your curve of knowing, you know,

what the cost of flowers going
to be throughout the year,

throughout those jumpy months.

And then this can also give you a little
bit more predictable way the financials

are gonna play out. So this is kind
of what we’re seeing with the fires.

There’s massive devastation,
personally, professionally for people,

we hope the best for them.

And if you are a cannabis business that’s
been affected by the wildfires in the

Northwest, whether you’re in the Northwest
or anywhere throughout the country,

and you need help with working
on calculating this net loss,

what’s it going to be? How
do we work on, you know,

documented the entire process,
documented the entire loss,

or if you need help with anything else
financially related to your cannabis

business, then please
reach out to us via our

website@GreenGrowthCPAs.com
or give us a call at

(800) 674-9050.

You can fill out the form on our
website. Someone will contact you.

You can even schedule a time to talk
with us. That’s convenient for you.

And then we’ll walk through, alright,
this is all the documentation you need,

and this is what you need to do. And
we’ll see how we can help you out. Now.

Wish everyone much success working
through these problems. Again,

if you need any help, reach out to us
via our website at greengrowthCPAs.com

or give us a call (800) 674-9050.

All right, we’re going to see if there’s
any questions here in the live stream.

Cool. All right. So we’ve got someone
on YouTube here from Canada. Um,

no question, but will this affect Canada?

I’m not sure if it will affect you Canada.

Cause they’ve kind of got their own
supply chain and international cannabis

trafficking is not really, anybody’s
probably looking at it in a grand scale.

They’ve got their own markets.
They’ve got a lot of kids.

I’m not sure if there’s
fires up in Canada.

I’m sure any kind of forest
has some type of fire.

I don’t know if it’s going parabolic
the way that California is,

but let’s just look at, you know,

potentially if you’re seeing these impacts
in the areas that, um, your market,

Hey, reach out to us. We can help people
in Canada too. We are, um, you know,

certified in Canada as accountants as
well. So let’s see we can help you out.

But again, reach out to us via
our website at greengrowthCPAs.com

websites there on the video, click the,

get started button in
the top right corner,

and we can see how we can help
you out. All right. So again,

thank you for joining
the live stream today.

Have a great day and
we’ll talk to you soon.

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