01 Apr Corona-Cannabis Update #5: First Prisoner Death, CARES Loans Available?

Salutations and happy corona-April Fool’s Day (a seemingly serious post that New York was about to ban liquor sales made the rounds and scared a few). We continue to think positively about the world and our cannabis industry in this challenging time. Here is today’s update and comment on coronavirus news affecting marijuana and hemp.

• Prisoner dies. Louisiana prisoner Patrick Jones appears to be the first COVID-19 victim to die in a U.S. federal prison. He was 47 and serving time in a minimum-security lockup for a drug-related crime (not cannabis). Jones apparently had other long-standing medical issues. Some states have begun to look at early release of older prisoners and those with underlying immunity issues, especially those with low level or non-violent crimes or those awaiting trial that could not afford bail.
• CARES loans not prohibited. In an earlier post we noted that the SBA continues to prohibit even pandemic-related loans to be made to any business with a cannabis connection. However, loans under the Coronavirus Aid, Relief and Economic Security (CARES) Act (the big stimulus) are not technically prohibited. That said, banks still need to be willing to provide the funds, and to date even banks accepting deposits from cannabis companies had eschewed making loans.
• Contracts cancellable? A Kentucky hemp farmer, in a dispute with a processor, is claiming that the “force majeure” clause in their agreement allows them to get out of a multi-million dollar obligation because of coronavirus. These clauses often excuse failure of performance due to events beyond the control of parties. There will likely be more of these to come.
•  Demand “inelastic.” A report by Bloomberg suggests that, in a recession, including the one anticipated as a result of the coronavirus crisis, the demand for marijuana will remain strong, similar to the demand for alcohol.
• State legalization efforts struggling. The final New York budget does not include adult use legalization as hoped after Gov. Cuomo on Tuesday confirmed it was “not likely”. Parties remain hopeful that legislation can be worked on in the next few months. Also, Missouri’s effort at putting legalization on the ballot has hit a snag in getting signatures by a May deadline given challenges of the virus.

Thoughts? US Bureau of Prisons and states: PLEASE look at releasing those with non-violent drug crimes who might be at risk of the virus. I urge all to support the great work of the Last Prisoner Project providing assistance. Sadly I think it will be a tough go for plant-touching marijuana businesses to obtain CARES loans, we are researching if banks are willing. All should review “force majeure” clauses in key agreements. Frankly, most do not tend to cover things like this, but be assured they will in the future! After September 11, terrorism was added to most of these clauses that only had included acts of war. The industry appears to retain strong demand and support of state governments to at least keep medical dispensaries open (Massachusetts continues to keep adult use stores shuttered- they should reverse this as CA and NV allow these stores to continue selling). As to state legalization, it is more likely to happen now because of the likely big reduction in tax revenues and jobs that will follow this pandemic. But there will be delays getting there while everyone is distracted for the next month or two (or three?). But people. It is spring. Here in NY the sun is shining and trees are starting to bloom. We are going to get through this. #staypositive