Do you plan for the end?

I'm 50 years old this year, and while that's a bit younger than the average farmer age in the united states, it's been interesting for me to note that my span on this earth as a farmer has an end, and the end is in sight.

Here's what I'm saying:  I figure that I have about 20 more years to do whatever it is that I'm doing on my farm; and that the next 20 years will include a slow decline in the things that I can do physically.  I don't have a timeline, and there's no event that I'm looking at that makes it more apparent, I'm just pretty sure that I'll age just like everyone else does, and that aging will take predictable paths.  Part of nature; something that every person on this earth will face at some point.  

So I got a comment about the trees that sparked this posting.  

October Rose said : 

"Bruce, If you're thinking fruit enterprise for the long-haul, you might consider some standard-sized trees as well. They're a little more work and take a couple extra years to come into production, but they'll serve you well 30+ years vs. 10 or 12 "

I don't think that I'll be here in 30 years, and while I like the idea of things outliving me, most of my farm plans are more immediate; in the next 5 to 10 years.  Like buying dairy cows; their useful life will be shorter than my likely stay on the farm, so I can take them on without too much concern about not being able to care for them.  I think the same way about dogs and cats or pets of any sort:  If I was unlikely to be able to care for them for their entire lives, I wouldn't take them on, either.  

I've thought about building lifespans, too.  One engineer I worked with and I were talking one day about housing; and he talked about a house design he liked, (and eventually did build).  Doug mentioned that the house had a likely lifespan of 30 years.  "Why would you want to build a house that only lasts 30 years? "   "I'm not likely to be around after that, and it suits the purpose while I'm here.  

Doug was an unconventional thinker.  One day he commented that he was getting fat, and I made the usual noises that he wasn't, and asked him what he was going to do.  "Get bigger clothes", with a completely straight face and in all earnestness.  And he did.   

So my hoop barns are an offshoot of this sort of thinking - the fabric cover has a 15 to 20 year lifespan which suits my farming lifespan, too.  By the time they need a new cover I'll be moving on.  

For some farmers, the endgame is to hand the property over to their children or heirs, for others, the sale of the farm provides money for living and care at the end of life.  Sale of farm property for development is often seen as a tradegy (for the farm) but it's often done as a way for someone to be able to afford to retire.  Farms don't offer a 401k plan.  They don't have a defined benefit pension.  And they aren't insurance policies -- the only way that the farm can support the farmer at the end is by sale or loan.  And development is often the top sale dollar, at least in urban areas.  

When I was younger the end didn't see like it would come; it was so far out there that it wasn't worth considering.  But as the years go by and it gets harder and harder to make new old friends... it's visible.   Its coming.  

The state of legal Marijuana in Washington

Background

In November of 2012 the voters of Washington state approved a citizen initiative #502 to legalize the production, processing and sale of marijuana for recreational use.   Over the next year, the Washington State Liquor Control board held a series of public comment periods and hearings and consulted experts and stakeholders in the existing medical marijuana business and formulated a set of rules and regulations which were finalized in December of 2013.

Initiative 502 provides for the licensing of three marijuana businesses; a producer, who grows the plants, a processor who packages or adds value to the plants via incorporation in food or processing into hash oil, and a retailer who provides a point of sale for Marijuana for the general public.  

The number of licenses for producers and processors is unlimited but the total size of all grows is capped at 2 million square feet of canopy space.  The number of retail outlets is capped at 334.  

The Liquor control board has stated that in the event that more retail applicants are received than there are licenses available that they will have a lottery to award the licenses.  In the event that more than 2 million square feet of canopy (leaf) space is applied for, that they will reduce the space allocated proportionally for all applicants.  

Applications vastly exceed WSLCB expectations

Using the latest data available (12-31-2013) the total number of retail applicants is  1,313; the applications are not evenly distributed; some locations are very popular, some less so, mostly corresponding to the population. 

Using the same data, the total number of producer licenses applied for is 2,114.  Each producer is required to indicate the size of their grow in "tiers".  Tier 1 is less than 2000 square feet.  Tier 2 is 2000 to 10000, tier 3 is 10000 to 30000.  

If each license applicant applies for the maximum space in their tier, the total canopy space that has been applied for exceeds 2 million square feet substantially.   Here's the totals for each tier:  

Tier 1:   503 licenses applied for, 1.06 million square feet

Tier 2:   794 licenses applied for, 7.94 million square feet

Tier 3:   815 licenses applied for, 24.45 million square feet

Total canopy space applied for:  33.39 million square feet, and this number will probably increase as the license backlog is processed and added to the publicly available list.   Canopy space authorized:  2 million square feet.  

If the liquor control board allocates space as they've described each applicants proposed share will be reduced proportionally.  Since more than 16.5 times the allocated canopy has been applied for, it would seem reasonable for people to get 1/16.5 of the space they've applied for, or roughly 6%.  

So if you applied for a 2000 square foot grow, you'll get an allocation of 120 square feet -- about the size of a small bedroom, 12x10.  If you applied for a 10000 square foot grow you'll get 600 square feet.  A 30,000 square foot grow will get 1800 square feet.  

Grower requirements expensive

Each grower will be required to have cameras and security system which allows law enforcement or regulatory access 24x7, a  sight-obscuring 8 foot fence, a shipping quarantine area, signage and security plan.  In addition growers will have to carry commercial liability insurance, undergo background check and fingerprinting, prove the source of the funds they use to finance their operation and maintain an inventory system that is accessible to law enforcement at all times.   They will also pay a 25% tax on the gross amount of each sale, which will be at a minimum 25% from producer to retailer.  The retailers collect a 25% tax on sales to the public.   Growers will also be required to test their production with an independent lab and to conform to various requirements related to fertilizer, herbicides and pesticides used.  

Using these figures, I don't think that tier 1 growers (limited to 120 square feet) will pencil out; it is difficult to contemplate making enough profit on that small a grow to pay for all of the costs involved in operating.  

Tier 2 growers at 600 square feet have a shot at producing enough Marijuana to support a full time person, but again it becomes difficult to see how they'll actually make enough profit to cover the operating costs and taxes.  

Tier 3 growers at 1800 square feet will provide enough revenue to run a 2-3 person business.  

Prices expected to fall substantially

Marijuana prices in Washington state for medical marijuana have been steady at $11/gram.  The liquor control board's expert expects that price to fall to $5 a gram next fall.  At $5/gram, that's a retail price of $2,165/lb.  I would expect wholesale prices to be less than half of that, or $1080/lb.  Production costs/lb for indoor grown marijuana are between $650 and $800 a pound.   Indoor production is estimated at 2lbs per 1000 watt light and optimum conditions and no crop failures (mold, mites, human error), 3 crops per year.

Maximum gross revenue per tier:

Tier 1, 160 square feet, 10 lights produces 60lbs/year, $64,800

Tier 2, 600 square feet, 38 lights, produces 228lbs/year $246,240

Tier 3 1800 square feet,  112 lights, produces 675lbs/year $729,000

Projected profit per tier ($800/lb production cost)

Tier 1:  $16,800

Tier 2:  $63,840

Tier 3:  $189,000

In terms of gross revenue, even the largest Marijuana producer has less revenue than an average fast food restaurant, and by most business standards would be considered a very small business.  

Risks that producers face

As with any farming venture, you run a substantial risk of crop failure or human error that costs you either all or some portion of your crop.  You also have regulatory risks in this industry; the federal government, changes in state law and the producers will be forced to plant crops without having any idea who of the 800 applicants for retail will actually receive licenses.  Once the licenses have been awarded it will take some time to figure out which of those people will be successful, and how much marijuana they can sell, so there's a pretty substantial risk of substantial price fluctuations, both up and down.  

Authorities relied on for this post

WSLCB draft rules at a glance, December 6th 2013

WSLCB List of Marijuana License applications 12-31-2013 

Honeybees in winter

I keep a few hives of bees on my farm because I like the honey, and I like having the bees around to pollinate stuff that needs it.  Having a few of my own hives means that I don't have to rent bees, and I enjoy them; most of the year they're just out quietly doing their thing, with occasional bits of excitement when they swarm.  

What you don't want to see when a hive is open.  

 I entered the fall with four hives; and one of them didn't survive; it looks like it swarmed early in the year, the new queen didn't get fertilized, and the bees eventually just died out, leaving a hive full of honey and dead bees, but nothing else.  It's a shame, but it does happen.  After careful examination, I extracted the honey and ended up with 18 pints of honey.

Full combs of capped honey, but no bees

 A month or so later, I was looking at another hive, this one had done really well this year, and noticed a fair number of dead bees outside.  There is usually some loss of bees in the winter; the colony reaches its smallest numbers around now, but it's worth investigating; I pulled the dead bees out and washed them in alchohol and then looked for varoa mites, a common problem.  I didn't see unusual numbers, and a quick peek inside showed a good mass of bees that were buzzing at the intrusion, so the jurys out.  this hive may or may not survive.  they're sitting on 60lbs of honey, so it won't be from lack of available food.

dead bees at entrance to hive; inspection time

flecks of bees wax from consumed honeycomb

The final hive I checked looked good.  These little brown flecks are the wax from the top of honey that's been consumed.  There's a few mites there; you can see them as little black specs, and so I may have to do some mite control with this hive, but they're balled up and buzzing, with plenty of food, so I'll leave them be for now.

Varoa mites are a common problem, and usually can't be completely eliminated from honeybees because they breed in the bee larvae.  I control them by having the bees raise combs of drones (I supply drone wax, which has holes larger than standard bee holes) and then remove those combs for inspection after the larvae is capped.  If it shows varoa infestation on inspection, I'll freeze that comb and then return it to the hive; the bees will remove the dead larvae and clean the comb and raise another set.

If the drone comb inspects clean, I'll return it to the hive; hoping that this particular strain of bees is more varoa-resistant, and to ensure that there are plenty of drones to fertilize any queens that need it.

Treatment for varoa in the winter that I use is to shake all the bees into a "package" box in late winter, and then liberally coat the bees with powdered sugar.  The sugar causes the mites to lose footing and the bees to groom each other, and the result of this powdering means that most of the adult varoa are removed.  This only works at times when there are no brood in the hive, such as when you get a new package of bees to establish a hive, or in late winter before the queen starts laying for the new year.