With the marijuana market ablaze, who is going to haul the crop?

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Now that eight states and the District of Columbia have legalized marijuana for recreational use, and another 21 have medical marijuana laws on the books, transport of the crop from the field to the dispensary has become a sticky issue.

And since trucks that are regulated by the Department of Transportation are barred from carrying marijuana, a new strain of transporters has budded.

Companies that provide transportation for the substance and seek to ensure the safety of their customers’ cargo have now sprouted up in states where marijuana is legal. Firms like Portland-based CannaGuard provide specialized transportation services for the growing industry.

While agricultural product hauling is already one of the main sectors for carriers, comprising approximately 21% of the freight market, CannaGuard president and CEO Noah Stokes says transporting marijuana is unlike hauling anything else that has been raised from the soil.

According to Stokes, “Pound for pound, it's like transporting gold. There are no serial numbers on it, customers have to pay in cash, and it's all difficult to insure,” and the similarities to the precious metal don’t end there. Just like gold, marijuana is shipped in small quantities, is highly valuable, and crooks will do just about anything to get their hands on it.

And since FDIC-insured banks cannot accept money from companies in the cannabis industry, on their backhauls the carriers are moving large amounts of cash, creating a valuable target for potential thieves on both legs of the delivery.

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The solution? Most cannabis haulers use armored cargo vans. Think of a James Bond version of a Mercedes-Benz Sprinter or a Ford Transit. All the vans have extensive load tracking equipment that traces the route and speed of the shipment.  Any deviations from the scheduled route or abrupt changes in speed are immediately signaled to the command center. CannaGuard even has vehicles that will “fog” potential thieves inside the vehicle. The security system emits a thick vapor the contains plant DNA and does not come off the skin or out of the clothes for over a month.

And then of course there are the standard security features like bulletproof glass, armor plating, and electronic safe deposit boxes to which only the freight owners have the code. And since the firms’ vehicles are small and do not cross state lines, they are not regulated by the DOT. The haulers remain in a similar gray area to their clients.

Though tens or hundreds of thousands of pounds a year are produced in each state where cannabis is legal, dispensaries usually only take a few pounds at a time per delivery due to shelf life issues, security requirements, and volatile product demand.

According to Denver-based Canna Security America president Tom Siciliano, most dispensaries buy in small quantities of 10 pounds or less. “It's not like what you would think from a distribution point. You're not loading the full truck and just delivering it around town. It's not quite that sophisticated yet,” he said. Therefore, most loads are relatively small for the time being.

And Then There Is California

Now the biggest market of all has come online. On Jan. 1, 2018, recreational marijuana became legal in California. California’s marijuana growing business is regulated by the Department of Food and Agriculture which estimates that the state produced more that 13 million pounds of the crop last year when it was protected under medicinal marijuana laws. “We do know Colorado consumption rates given a few years of tracking experience, and it looks like it may reach $1.5 billion this year in the regulated market,” said Terry Garrett, a cannabis analyst based in California. “I estimate consumption is $10 to $12 billion in California.”

California is different that the other states that have legalized marijuana either for medicinal use or recreational use. First, California’s legalization of medical marijuana in 1996 provided a couple of decades for growers to perfect their craft and for the marijuana industry in the state to build its supply chain and distribution network. However, the traditional marijuana distribution networks are changing quickly.

Until now the marijuana business in California worked more or less like a cottage industry. Every once in a while there would be large bust on the highway that would make the news, complete with pictures of the local sheriff’s deputies burning the pile of confiscated plant material. But mostly it was individuals or small groups of growers who would transport their product in the trunks or beds of their personal vehicles. The state has now outgrown this method of marijuana carriage.

Furthermore, while marijuana production areas were traditionally concentrated in a few counties in Northern California, it is now produced statewide. Starting in the 1960s, an area called the Emerald Triangle, which is comprised of Humboldt, Mendocino, and Trinity counties, began to grow the product at a large scale to replace its disappearing lumber stands and fisheries. However, with the passage of Proposition 215 in 1996 (medical marijuana) and now full legalization, the entire state has gotten in on the growing act and production area intensity has diffused.

Whereas before there were several defined transportation “lanes” from rural production areas in the north to urban markets in the south, it is now a complex, fluid distribution matrix. A patchwork of unique county-level regulatory schemes has resulted in a wide range of local marijuana economies. For instance in Monterey County, there is only one authorized dispensary, with two more under construction. Just across the line in Santa Cruz county, dispensaries are on every corner. In Monterey County, cannabis can only be cultivated in existing greenhouse structures, with a moratorium on new greenhouse construction; most other counties allow more latitude on where the plant can be grown. Similar legal confusion applies to warehousing in counties throughout the state.

With the behemoth of the burgeoning weed economy breaking down the final state barriers to sales, the volumes moving through the distribution channels should increase greatly. Due to the sheer size of the state, there is currently no single company that can produce the capacity within the constraints of the deliveries that need to be made. Therefore, there is a huge opportunity for new transporters to enter the market.

According to Hezekiah Allen, Executive Director of the California Growers Association, the state will need a “large-scale distribution network to move product from farms and distribution centers to dispensaries around the state.” But because larger transportation companies cannot participate in hauling the product and the new marijuana haulers do not have much access to financing, it is still unclear how this will be accomplished.

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