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Now, in Northern California, there are three counties that make up an area informally known as the Emerald Triangle. And together, these counties produce more marijuana than anywhere else in the country. For years, the war on drugs and frequent crackdowns have kept the price of pot relatively high. But ever since California voters legalized the use of so-called medical marijuana, competitors have flooded the market, so the wholesale price of marijuana is sinking.

And as Michael Montgomery now reports, it's been an economic catastrophe for the Emerald Triangle.

MICHAEL MONTGOMERY: Back in 1983, the Reagan administration launched a massive air and ground campaign to eradicate pot and lock up growers in Northern California. Charley Custer, a writer and community activist, had just arrived to Humboldt County from Chicago. With the Reagan crackdown, Custer recalls wholesale pot prices shot up to as high as $5,000 a pound. That sudden and ironic windfall for those growers willing to risk prison time transformed the community.

Mr. CHARLEY CUSTER (Writer, Community Activist): A lot of people were living on welfare and peanut butter and banana sandwiches for a long time before pot made it possible to become members of the middle class.

MONTGOMERY: Nearly 30 years later, Custer says that boom may be over.

Mr. CUSTER: Outdoor growers are having a hard time unloading their fall harvest. And when some people do move it, they don't get anything like the price they were hoping for.

MONTGOMERY: That goes for both legal growers who cultivate limited quantities of pot under California's medical marijuana laws and illegal operators who often grow larger amounts. Prices are now well under $2,000 a pound according to interviews with more than a dozen growers and dealers.

Mendocino County Sheriff, Tom Allman, says some growers can't get rid of their processed pot at any price.

Mr. TOM ALLMAN (Sheriff, Mendocino County): We arrested a guy who had, now, listen to this, 800 pounds of processed - 800 pounds of processed. And we asked him, what were you going to do with 800 pounds of processed? He said, I don't know.

Mr. TIM BLAKE (Host, Emerald Cup): Does anybody want to find out what the best pot in the world is here?

MONTGOMERY: As recently as last December, things were still pretty upbeat. At Area 101, an events and healing center near the town of Laytonville, local growers gathered to celebrate the Emerald Cup, an annual competition for the season's best pot buds.

Mr. BLAKE: Yeah. All right.

MONTGOMERY: But the host of the event, Tim Blake, says the mood has darkened since then.

Mr. BLAKE: There's a tremendous amount of concern, borderlining on fear.

MONTGOMERY: Blake is a former underground grower who now cultivates medical marijuana. He says the drop in pot prices is in part the result of more growers and a more tolerant legal landscape. But he says another factor is quality.

Indoor-grown marijuana is increasingly favored by dispensaries and consumers for its looks, consistency and potency. It costs more to produce than pot grown under the sun, but commands a higher price, as much as double. That's one reason retail prices haven't hit the skids.

Mr. BLAKE: What's happening is the people that don't have quality product aren't selling it, okay? And so they're the ones that are creating this panic, just like in every other agricultural industry. When you get too many vineyards and too many people growing vines out there, then only the good ones make it.

(Soundbite of rooster crowing)

MONTGOMERY: Matt Cohen is one of those growers who's making it. On an organic farm near Ukiah, Cohen raises chickens, grows vegetables and cultivates high-grade medical pot.

Mr. MATT COHEN: This is a secure outdoor growing area.

MONTGOMERY: He's avoided the downturn by distributing marijuana directly to patients. But other growers who rely on middlemen and dealers for legal and illegal sales are in financial trouble.

Mr. COHEN: They're living from credit card to credit card, you know? They're not even making money. It's just a lifestyle that they're in and the alternative is to go do what?

MONTGOMERY: In recent weeks, the upheaval has spurred a series of unprecedented public forums about where things are headed for the marijuana industry, especially if Californians vote to legalize pot this fall.

(Soundbite of applause)

MONTGOMERY: Local activist Anna Hamilton organized this gathering in the town of Garberville. She says the broader community is already feeling the ripple effects of falling pot prices.

Ms. ANNA HAMILTON: There has been business closures, storefronts closing. There's a lot of instability and anxiety.

MONTGOMERY: Still, amid the turmoil, Charley Custer says some locals haven't lost their sense of humor. Custer recalls a recent musical revue where three performers in miniskirts, sunglasses and spiky heels mocked the plight of local pot growers all to the beat of the '60s hit, "My Boyfriend's Back."

Mr. CUSTER: (Singing) My dealer's back and I'm gonna get ready. Hey now, hey now, my dealer's back.

And it was a song of hope in this hopeless situation. It'll happen to you too. Your dealer will come back.

MONTGOMERY: Or maybe not. California's pot economy is transforming and starting to resemble a real commodities market where only big players can compete. It's a shift that could leave some growers in this part of the state in the dust.

For NPR News, I'm Michael Montgomery.

RAZ: Our story was produced as part of a collaboration between member station KQED and the Center for Investigative Reporting's California Watch Project.

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