Cartels Face an Economic Battle

Discussion in 'Marijuana News' started by claygooding, Jul 7, 2013.

  1. \tCartels Face an Economic Battle 
    \nIllicit pot production in the United States has been increasing steadily for decades. But recent changes in state laws that allow the use and cultivation of marijuana for medical purposes are giving U.S. growers a competitive advantage, challenging the traditional dominance of the Mexican traffickers, who once made brands such as Acapulco Gold the standard for quality.
    \nAlmost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.
    \nThe shifting economics of the marijuana trade have broad implications for Mexico's war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.
     
    While the trafficking of cocaine, heroin and methamphetamine is the main focus of U.S. law enforcement, it is marijuana that has long provided most of the revenue for Mexican drug cartels. More than 60 percent of the cartels' revenue -- $8.6 billion out of $13.8 billion in 2006 -- came from U.S. marijuana sales, according to the White House Office of National Drug Control Policy.
    \nNow, to stay competitive, Mexican traffickers are changing their business model to improve their product and streamline delivery. Well-organized Mexican cartels have also moved to increasingly cultivate marijuana on public lands in the United States, according to the National Drug Intelligence Center and local authorities. This strategy gives the Mexicans direct access to U.S. markets, avoids the risk of seizure at the border and reduces transportation costs.
    \nUnlike cocaine, which the traffickers must buy and transport from South America, driving up costs, marijuana has been especially lucrative for the cartels because they control the business all the way from clandestine fields in the Mexican mountains to the wholesale dealers in U.S. cities such as Washington.
    \n"It's pure profit," said Jorge Chabat, an expert on the drug trade at the Center for Research and Teaching in Economics in Mexico City.
    \nThe exact dimensions of the U.S. marijuana market are unknown. The 2007 National Survey on Drug Use and Health estimated that 14.4 million Americans age 12 and over had used marijuana in the past month. More than 10 percent of the U.S. population reported smoking pot once in the past year.
    \nMexico produced 35 million pounds of marijuana last year, according to government estimates. On a hidden hilltop field in Mexico's Sinaloa state, reachable by donkey, a pound of pot might earn a farmer $25. The wholesale price for the same pound in Phoenix is $550, and so the Mexican cartels could be selling $20 billion worth of marijuana in the U.S. market each year.
    \n"Marijuana created the drug trafficking organizations you see today. The founding families of the cartels got their start with pot. And marijuana remains a highly profitable business they will fight to protect," said Luis Astorga, a leading authority on the drug cartels at the National Autonomous University of Mexico, who grew up in Sinaloa in 1960s and recalls seeing major growers at social functions in the state capital, Culiacan.
    \nLed by California, 13 U.S. states now permit some use of marijuana; Maryland is considering such a law. In many cities, marijuana is one of the lowest priorities for police.
     
    To some authorities, the new laws are essentially licenses to grow money. With a $100 investment in enriched soil and nutrients, almost anyone can cultivate a plant that will produce two pounds of marijuana that can sell for $9,000 in hundreds of medical marijuana clubs or on the street, according to growers.
     
    High-end marijuana grown under such special conditions often fetches 10 times the price of poor-quality Mexican pot grown in abandoned cornfields and stored for months in damp conditions that erode its quality further.
    \n"What's happened in the last five years, it's just gotten totally, totally out of hand, as far as a green rush of people coming from all kinds of different states and realizing the kind of money you can make," Jack Nelsen, commander of the Humboldt County Drug Task Force in Northern California. County residents who have a doctor's recommendation can legally grow as many as 99 plants.
    \nAuthorities found and destroyed about 8 million marijuana plants in the United States last year, compared with about 3 million plants in 2004. Asked to estimate how much of the overall marijuana crop was being caught in his area, Wayne Hanson, who heads the marijuana unit of the Humboldt County Sheriff's Office, said: "I would truthfully say we're lucky if we're getting 1 percent."
    \nThe Mexican traffickers' illegal use of public lands is a response to the dramatic increase in U.S. production, according to authorities and growers. In the northern woods of California, illegal immigrants hired by well-heeled Mexican "patrons," or bosses, lay miles of plastic pipe and install oscillating sprinkler systems for clandestine fields that produce a cheaper, faster-growing "commercial grade" of marijuana. Eric Sligh, the editor and publisher of Grow magazine in Northern California's Mendocino County, said the Mexicans use a fast-growing variety of marijuana and time their harvests to periods of low domestic production in the United States.
     
    After establishing sophisticated farming networks in California, Washington and Oregon, the Mexican traffickers are shifting operations eastward to Michigan, Arkansas and North Carolina, federal agents say.
    \nLike wily commodity traders, Mexican traffickers time their shipments to exploit growing cycles in the United States. They warehouse tons of pot south of the border to ship north during periods when demand peaks and domestic supplies are scarce, Mexican anti-narcotics officials said.
    \nThe traffickers are also engaged in an escalating race to achieve higher levels of tetrahydrocannabinol, or THC, the chemical ingredient that gives pot its potency. The THC content of Mexican marijuana seized at the southwest border jumped from 4.8 percent in 2003 to 7.3 percent in 2007, according to U.S. officials. Those levels are still less than half that of the highly potent marijuana found in places such as Arcata, where THC content often tops 20 percent.
    \nAlthough most Mexican marijuana is still grown outdoors, Mexican security forces have begun to discover greenhouse operations, similar to those found in the United States and Canada. A Mexican army unit on routine patrol in Sinaloa arrested two men in a greenhouse the size of an American football field with more than 20,000 marijuana plants inside. The greenhouse was equipped with modern, highly sophisticated refrigeration, heating and lighting systems.
    \nIn the national forests and public timberlands of Northern California, Mexican growers shoot at U.S. law enforcement agents with growing frequency and use fertilizers and pesticides that pollute watersheds and start fires. A 90,000-acre blaze in Southern California's Los Padres National Forest in August began on a marijuana farm run by Mexican traffickers, according to authorities. The fields are so inaccessible that helicopters are needed to insert agents, who cut the plants with pruning shears, machetes and even chain saws before airlifting them to be destroyed.
    \nThis season, five teams from the Bureau of Narcotic Enforcement in California have seized 4.2 million plants worth an estimated $1.5 billion, a 576 percent jump since 2004.
    \nRalph Reyes, chief of operations for Mexico and Central America for the U.S. Drug Enforcement Administration, said intelligence suggests that the major cartels are directly behind much of the marijuana growth that is taking place on public lands. "The casual consumer in the U.S. -- the kid or adult that smokes a joint -- will never in their mind associate smoking that joint with the severing of people's heads in Mexico," he said.
    \nBecause it isn't,,the reason people are cutting peoples heads of is because Mr Reyes is trying to kill or imprison them.
    \nBut it has been difficult for U.S. authorities to prove the connection, partly because the individuals who cultivate the plants have no idea who they are working for and are able to give little information when arrested.
    \nA Mexican grower in Humboldt County, who recently harvested 800 plants and asked not to be identified, said the pot farmers are usually approached by an anonymous boss, who puts up the money -- sometimes as much as $50,000 -- for the seed, fertilizer, hoses, camping equipment and food needed to live in the woods for three months growing "Maribel," as the Mexicans refer to the plants.
    \nThe grower said the patron pays the growers in cash or product, which they can then sell on their own.
    \n"The mountain can eat you up," the grower said. "You're only thinking about the next day. You have to get up at 4 in the morning to water the marijuana, because the helicopter might come by when the sun is up, and if you water too late, he'll see the mist coming off the plants. You do this every day. There's no church on Sunday or anything like that. You have to be focused. You have to give everything for them."
     

     
  2. In July of 2010 the drug czar and FBI reported to congress in a live session that marijuana was 60% of the cartels cash flow and placed it at $30>$40 billion dollars a year,,many drug policy experts called that a conservative estimate.
     
    In Sept 2010 the Rand Group,a nonprofit research group that depends on government as their main customer and chaired by a Pharmaceutical corporate board member reduced the amount of cash by $27>$37 billion dollars and reduced the cartels profits from marijuana to being less than 15% of they're cash flow,,a 45% drop in 4 months or less.
     
    If they have Rand do the same research again they will probably find the cartels don't sell marijuana anymore.
     
  3. The problem is, especially in Cali, is that the cartels are become ingrained in the mmj industry.  They now have a "legal" way to distribute their product and by growing in the US reduces the risk of large seizures that border crossings and smuggling have.  This makes it look like the cartels are moving away from the marijuana business when in actual reality their are just moving away from the marijuana smuggling business.
     
  4. #4 claygooding, Jul 7, 2013
    Last edited by a moderator: Jul 7, 2013
    If you listen most American growers they claim Mexican growers can't grow as good as they can however that is an empty cup,,the brick has few seeds in it now as opposed too 2 years ago and seems like about 2% more thc(guesstimate),,they are improving their products. 
    And any grower that thinks they don't know how to produce White Widow and Afghan Kush is only fooling themselves,,the seed companies sell to anyone.
     
    follow me on Facebook: https://www.facebook.com/norman.gooding
     
  5. I am sure the cartels are not accepting of free enterprise.  If the cartel can compete with the mom and pop shops.. So be it..
    It would more likely turn into a Soprano's type of business arrangement...
    Cartels beating down mom and pop shops for a cut of something they had no part of...
    I would think that this form of business would be difficult to manage on a long term basis...
    If people get hassled, they could move to another part of the state or find other business opportunities until uncle sam is onto the cartel  for not paying taxes.
     
     
     
  6. Beef up border security, nip it in the bud. Start deporting them when you find them as opposed to assimilating them...and granting amnesty.
     
  7. James Shively and Vincente Fox have a plan for that already. Shively will lure the dispensaries and stores into joining him and Fox will coordinate the growing in Mexico with the cartels. Given a legal opportunity, Mexico could produce some killer bud for a fraction of what US growers do. Basically the same game as when illegal, just under new management. BIG Marijuana. BIG Greed.
     
  8. Meh...even though it is a "legal" mmj market, it's under constant FED attack, making it a pseudo-legal market. If mmj shops were truly legal and laws not arbitrarily enforced, the best growers would be able to provide quality medicine. Left alone, the mmj market would sort itself out via supply and demand. Someone truly worried about quality meds will pay $10 more to insure they are receiving the highest quality free of chemicals, versus taking a chace on shady mexican-produced. Just as there is a legal produce market, where you can buy American-grown organics, or mexican-grown monsanto shit. People will pay a little more for quality and some assurance of safety.
     
  9. Funny. Article in the paper today about Mexican auto workers making Cadillacs for $3.20 an hour too.
    Viva, la NAFTA! Fucking globalists.
     
  10. #10 Mikeyak, Jul 7, 2013
    Last edited by a moderator: Jul 7, 2013
    But contrary to many beliefs, Mexican weed is no longer the schwag it used to be. With the access to mmj, cartels can almost equal the quality of american grown marijuana, especially in California where the mmj industry is loosely regulated. The techniques used to grow are being used by the cartels to compete with the booming market. They won't be letting their cash cow go without a fight.Sent from my HTC VLE_U using Grasscity Forum mobile app
     
  11. If Mexican weed is the black market and American weed is the green market does that mean in order to get a good cheap grower he must have a Green Card?
    Somehow that all balances out.
     
  12. Why would the cartels take on the mmj industry if other states with total prohibition still exist? Profits are greater in states with harsher laws. If I were a criminal, I'd go where the profit potential was highest, and the competition lowest. Bible belt. The article mentioned Arkansas & Carolinas I believe. Bingo.
     
    As to competing with the dispensary growers: cartels often use pesticides and other chemicals which are banned in the US for their chemical contents. Equal potency does not mean it is "equal." Are the cartels going to certify their "mmj" weed as organically grown somehow? Again, just because the law doesn't absolutely require testing of the cannabis for contaminants, don't think there aren't patient consumers which are demanding this testing already for safe meds, and legitimate dispensaries providing it in response from legit labs.
     
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