New York’s Cannabis Control Board approved a new rule that would allow legacy growers who launched the adult-use market to convert to mixed-light or indoor grows after being previously restricted to outdoors.
New York’s established hemp farmers were given the first shot at growing for the adult-use market launch. Because they were already established farmers, they were restricted to outdoor grows. Those interested in entering the market as an indoor cultivator would have to wait until the end of 2023 to apply for a license, while the hemp farmers were able to apply in the middle of 2022.
The Office of Cannabis Management made the recommendation in its 2024 market report in June. The report indicated that new retail openings are outpacing the growth of demand, and sales per store are starting to decline. OCM also anticipates that the ratio of stores to cultivators will continue to evolve as there are still many licensed operators across the supply chain who have yet to open for business.
The average amount of sales per store in June was $357,000 for the state’s 398 operational retail shops, according to OCM data. That average is down from $537,000 in November 2024.
“One important recommendation included in the report is to allow adult-use cultivators to transition to indoor facilities, which will help in addressing the limited availability of indoor grown flower and increase the stability of the supply chain,” said OCM Director of Policy John Kagia during the June 27 meeting. “And this does not increase their canopy, it just gives them an opportunity to change how they cultivate.”
The CCB approved the recommendation during its June 27 meeting. Outdoor growers must apply for a conversion, but as of its July 25 meeting, no conversions have come before the board for approval.
Aiming for more harvests per year
The state allows outdoor cannabis growers to cultivate a maximum of 43,560 square feet of canopy. Indoor conversions would be restricted to Tier 1 and Tier 2, which allow up to 5,000 and 12,500 square feet, respectively.
The report found that Registered Organizations (ROs), which are allowed to grow indoors and supply the state’s medical market, produce 19% of all of the flower in the state. ROs are allowed to grow up to 100,000 square feet in canopy.
Forty-five percent of all active adult-use cultivators and microbusinesses that grow have outdoor canopies. Indoor makes up 15%, mixed-light accounts for 19%, combination operations make up 19%, while ROs represent 2% with only five locations.
OCM is assuming that indoor cultivators would be able to produce three to five cycles per year, mixed-light could get two cycles, while outdoor grows typically get only one annual grow, according to Kagia.
“They would be transitioning from a larger outdoor canopy to a limited indoor canopy with the assumption that you’re getting more cultivation cycles,” he said. “This is not intended to reduce further cultivation opportunities for people who are still waiting in line. We expect that we will continue to issue cultivation licenses.”
There are currently 229 active cultivation licenses in the state, according to the CRB Monitor database, with 181 in the pre-license phase and eight with approvals that are not yet active, as of Aug. 8. There are still 172 cultivation applicants from December 2023 awaiting review as of July 25, according to OCM.
Applicants oppose rule change
During the last board meeting, multiple applicants decried the rule change, as they were concerned it would further delay approval of their own license applications from almost two years ago.
“In a recent June CCB meeting it was acknowledged in discussion that the supply chain needs more indoor flower for all the superior quality and steady production benefits as described. While encouraging to hear this, we were dismayed by the recommendation to allow legacy outdoor cultivators to reclassify some of their licensed canopy into indoor production,” said Jeff Emerson of Chencanna Inc., a cultivation applicant that is already licensed for processing and distribution. “Allowing legacy producers to shift into indoor production ahead of all the indoor applicants is extremely unfair.”
Margaret Nicole, another cultivation applicant, added, “When the chair poses a question about converting outdoor growers to indoors and is told that there will be little or no impact to the people who are in the December queue, it’s a misrepresentation, when the next phase jumps right into a saturation market. The statements are erroneous and a stranglehold on us continues by design.”
