Legal Cannabis Markets in US Impact Profit for Mexican Cartels

With more states in the United States legalizing cannabis, trafficking profits have significantly dropped for major drug cartels south of the border in Mexico.

U.S. Farmers Cultivating a Greater Percentage of Cannabis

The illegal marijuana industry in Mexico is experiencing a huge decline in marijuana pricing and production, as was reported by a recent Los Angeles Times article. Because of the loosening of marijuana laws across the U.S., a greater volume of the cannabis consumed by Americans is thus being cultivated domestically.

This decrease in demand for Mexican marijuana appears to have subsequently dealt a blow to the drug cartels operating in the country, as is evidenced by the notable drop in the number of marijuana fields discovered and destroyed by Mexican officials. In 2015 there were about 12,000 acres of marijuana fields eradicated, which was a drastic decline from the number of fields  – over 44,000 – eradicated in 2010.

Not to mention, there has been a reduction in the amount of marijuana being intercepted at the U.S.-Mexico border. The U.S. Customs and Border Protection, an agency responsible for intercepting trafficked drugs, reports that it seized about 1,085 tons of marijuana at the border in 2014, while the average amount seized over the previous four years was around 1,500 tons.

Retired federal agent and former field level commander Terry Nelson told VICE NEWS that prior to recreational marijuana legalization in Washington and Colorado, about 10 million pounds of pot were grown in the U.S. every year with 40 million pounds imported from Mexico.

“Is it hurting the cartels? Yes,” Nelson tells VICE NEWS. “The cartels are criminal organizations that were making as much as 35 to 40 percent of their income from marijuana. They aren’t able to move as much cannabis inside the U.S. now.”

To that end, over recent years, small Mexican farmers have seen a huge decline in wholesale prices for their illegally grown marijuana. A kilogram would get them $100 four years ago, while today it earns them just $30.

In addition, the quality of marijuana cultivated by Mexican farmers simply can’t compete with the quality grown in the U.S. These pricing changes and quality discrepancies are causing established farmers in Mexico to consider other options.

“I’ve always liked this business, producing marijuana,” says a 50 year old farmer from the Mexican state of Sinaloa – home to the large and powerful Cartel del Sinaloa – to the LA Times. Though, he plans to make this his last season growing marijuana.

Subsequently, farmers and industry participants in the U.S. are experiencing a boost in profits. The legal cannabis market jumped from $1.5 billion to $2.7 billion between 2013 and 2014, a 74 percent growth rate according to this year’s report by the ArcView Group, a cannabis industry investment and research firm. The trends are likely to continue as more U.S. states loosen their laws on recreational and medical marijuana.

“In the long run, it looks like the market for illegal Mexican marijuana will keep shrinking,” says Mexican drug expert Alejandro Hope in an article on Global Post. “The logic of the legal marijuana market is that it will force prices down. This would take out the big profits from the illegal market.”

Image Credit: Wikipedia