The War Over Weed and Water
“Either you bring the water to LA, or you bring LA to the water.”
That famous line was uttered by the scheming land baron Noah Cross in Chinatown (1974), the classic neo-noir about the water wars in California during the 1930s. Those wars continue to the present day, not just in California but nationwide, and they now involve cannabis.
Here’s a look at the current war over weed and water, especially in the Golden State, and how to profit from an investment standpoint.
Over the decades, the pot prohibitionists have thrown a lot of accusations against weed, nearly all of them absurd. The bill of particulars: pot causes insanity, fuels crime, encourages “miscegenation,” fosters “white slavery,” destroys families, leads to rape and murder, turns kids into vicious juvenile delinquents…the list goes on and on.
Sometimes when my friends and I want a good laugh, we re-watch the notorious anti-marijuana propaganda film Reefer Madness (1936). Now considered a camp classic, the movie shaped negative attitudes against pot that lasted for generations. (The plot concerns three teenagers who progress from reefer, to jazz music, to hysteria, to death.)
These days, the pot prohibitionists are a tad more sophisticated in their proselytizing against pot. I’ve noticed that a new narrative gaining traction in 2023 is that marijuana cultivation consumes an inordinate amount of water. Supposedly, H20-hogging cannabis is ruining the ecosystem, harming agriculture, and putting the all-American farmer out of business.
Is this criticism true? In a word, no.
Admittedly, one aspect of the water critique is true: Societies around the world are increasingly bedeviled by a global water crisis. The crisis is spawned by climate change, worsening pollution, overpopulation, poor agricultural practices, and the woefully inadequate funding of environmental agencies.
The world’s stores of groundwater, which accumulate over millennia in aquifers, are vanishing at an alarming rate. The result is persistent demand for reliable sources of clean, potable water.
But don’t scapegoat marijuana. Let’s look at California as a case study.
Water and weed in the West…
The economy of California, with a gross state product of $3.2 trillion, is the largest sub-national economy in the world. The explosive growth of the legal marijuana industry in California has made weed a common target for farmers and politicians in drought-stricken regions.
Cannabis has become California’s most lucrative cash crop. The assumption is that cannabis is stealing water from the state’s other water-hungry agricultural products. Cannabis growers increasingly face opposition when seeking irrigation rights, pitting the marijuana industry against the agricultural status quo, especially the state’s thirsty and politically powerful vineyards.
However, according to a recent report by marijuana research firm New Frontier Data, the relative value of cannabis when compared to wine, grapes, corn, or rice underscores how the cannabis economy does not equate with other large-scale crops in agricultural-rich California (see infographic).
Wholesale pounds of cotton, rice, and table grapes sell for approximately $0.60, $0.71, and $0.78, respectively, whereas a wholesale pound of smokable cannabis bud can sell for $1,500 – $3,000 or more, depending on the quality.
The market value of cannabis increases exponentially with only small increases in production. While the state produced over 7.1 million tons of grapes valued at $6.3 billion, and nearly 2.3 million tons of almonds valued at $5.5 billion, the state produced less than 10,000 tons of smokable cannabis flower (for the legal and illicit markets combined), but for a total value of nearly $25 billion.
The report states: “That comparative scale in yield to market value is a key reason why, despite longstanding conventional wisdom, cannabis comparatively uses so much less water per dollar gained than California’s other leading crops.” What’s more, marijuana is a major source of job growth in California and the rest of the nation.
The cannabis industry is in the forefront of developing water-efficient methods of cultivation, not just in bellwether California but around the country. That’s why I especially like the “pick-and-shovel” plays on the marijuana boom. They’re infrastructure stocks that can be wildly profitable.
Among marijuana infrastructure companies, some of the more promising firms deploy controlled environment agriculture systems that are designed to use as little land, water and energy as possible. They market themselves as “eco-friendly” as well as more cost-effective.
These companies have designed vertical farming solutions that use the latest pot growing techniques, including hydroponics. By investing in pick-and-shovel pot farming stocks, you can profit from the marijuana water wars.
Prospecting for green gold…
California was the epicenter of the 19th century gold rush. Welcome to the 21st century green rush.
Marijuana’s slump so far this year means that a lot of inherently strong pot stocks are now on the bargain shelf. But you need to be selective. Some pot stocks will make investors rich; others will crash and burn.
That’s why you should consider my investment service called Marijuana Profit Alert.
My publication Marijuana Profit Alert provides specific, actionable advice on the best investments in the psychotropic revolution.
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John Persinos is the chief investment strategist of Marijuana Profit Alert.