There are more Silicon Valleys than you might think.
Of course, there's the original Silicon Valley in the San Francisco Bay region. Some call Austin, Tex. "the next Silicon Valley" because of the great number of technology companies located in the area. The Irish city of Dublin has been referred to as the "Silicon Valley of Europe." And now there's a battle underway to become the "Silicon Valley of medical marijuana."
One city has already staked its claim to the title. The Los Angeles Times recently reported about efforts by Adelanto, Ca. to become a hub for medical marijuana cultivators. However, other areas are competing for marijuana growers also. Who will win the battle to become the "Silicon Valley of medical marijuana"?
As you enter Adelanto, the welcome sign states that it's the "city with unlimited possibilities." At one point, the slogan probably seemed like only wishful thinking. In 2014, Adelanto stood at the brink of bankruptcy. There was even a possibility that the city could disincorporate and simply be absorbed into the surrounding San Bernadino county as just a community.
The desert town didn't go bankrupt and didn't fade away, though. Adelanto still exists as an entity -- primarily because of its prisons. This city with a population of around 33,000 has three incarceration facilities that can hold up to 3,340 prisoners.
Now, however, Adelanto could have greater possibilities than ever before. The city has established a 360 acre marijuana cultivation zone to attract marijuana growers. Real estate developers are busy creating industrial parks for marijuana-related businesses.
These efforts have already begun to pay off for Adelanto. The city's financial status has improved, thanks in large part to development fees paid by companies hoping to prosper in California's medical marijuana market. So far, 56 businesses have obtained permits to cultivate marijuana.
Competition closer to the first Silicon Valley
At least one other area closer to the original Silicon Valley thinks that it has what it takes to become the biggest hub for marijuana growers. Property prices are soaring in the Salinas Valley, just 50 miles south of San Jose, as marijuana growers flock to the area. At least 65 applications for cultivation permits have been submitted in Monterey County, home to the Salinas Valley.
The area has an ideal climate for agriculture, with temperatures neither too hot nor too cold. The Salinas Valley also has a history that suits the marijuana-cultivation industry very well. For years, the region was home to around 130 greenhouses that supplied fresh-cut flowers to markets across the country. As more flowers were imported from South America, though, the once-flourishing flower business faded away.
Those greenhouses are now in high demand for marijuana growers. There is a backlog of at least two months for building new greenhouses because contractors are so busy. Also, new greenhouses can't be built just anywhere. The county only allows marijuana cultivation in existing structures or on land where structures used to be in an effort to restore the once-decaying infrastructure.
Business is certainly booming. Monterey County officials project that marijuana cultivation could generate as much as $80 million per year in new tax revenue.
The most likely winner
With the potential size of the marijuana market in California, it seems quite possible that both Adelanto and the Salinas Valley (and maybe other areas as well) will be successful in their efforts. Adelanto is close to the Los Angeles area, while the Salinas Valley is close to the San Francisco area. Both are heavily populated regions that should have significant demand for medical and recreational marijuana.
However, I suspect the most likely real winner of the battle to become the "Silicon Valley of medical marijuana" isn't a geographic area. I think it will be a company -- Scotts Miracle-Gro (NYSE:SMG).
The rapidly growing marijuana industry has been called a "green rush." This phrase pays homage to the famed gold rush in California during the mid-1800s. Mark Twain once said of this era that "during the gold rush, it's a good time to be in the pick and shovel business." That's pretty much the role that Scotts Miracle-Gro is filling for marijuana growers in the current "green rush."
I have previously referred to Scotts as a marijuana stock to buy if you're leery of buying marijuana stocks. The company doesn't sell any marijuana products itself, but it does market fertilizers, lighting, and hydroponic supplies that are critical for the cultivation of marijuana.
My view is that the marijuana boom will keep going for a while to come. That's potentially good news for the beleaguered city of Adelanto and for the Salinas Valley area's hopes for a resurgence. And, no matter which locale succeeds the most, it should be very good news for shareholders of Scotts Miracle-Gro, too.