Dropping Weed Prices Pose New Challenges for Cannabis Industry

~ by Trevor Phipps ~

Whereas, it’s good news for consumers, the drop of wholesale marijuana prices may cause the marijuana industry to face challenges.

During the last three years, marijuana prices have taken a very drastic plunge. In 2015, the average wholesale price per pound in Colorado was more than $2,000 per pound.  In January 2017, the price of weed plummeted down to around $1,300 per pound. According to Cannabis Benchmarks (a website that gives weekly reports on the marijuana industry), this week the average price for pot across the state is down to about $1,100 each pound.

The main factor causing these large decreases in price is the fact that supply has gone way up and consumption has not. Over the last three years, the number of legal wholesale marijuana suppliers in Colorado has been on a steady increase at a rate of about 20 percent per year. The suppliers also keep producing larger numbers of products due to improving their efficiency each year. The average amount of marijuana that suppliers sell per deal is also on the rise. Since the supply of hippie grass has been constantly rising higher than the demand of dope from the stoners, the prices on the shelves keep dropping across the board.

According to many experts, this trend is expected to continue for now. Marijuana prohibition is actually what made the price so high in the beginning. Marijuana is a plant that is easily grown in just about any climate. If you compare marijuana to many of the other easily grown and mass produced plants that are consistently found in your grocery store such as corn, almonds, roses, etc., the price for marijuana is still much higher. Some experts predict that once there is a stable legal market for selling marijuana that wholesale prices could drop under $50 per pound.

Locally, the change in wholesale marijuana prices has had little or no effect. It is state law that companies that sell medical marijuana must produce 70 percent of the weed they sell on their own. This fact makes it tough for the medical marijuana industry to over produce its product (like the recreational marijuana industry has) and has kept the wholesale prices of medical marijuana rather stable. 

According to Jake Thomas, manager of Eagle’s Nest Wellness Center, a medical marijuana dispensary located in Cascade, the medical industry has not been affected by the price drop like the recreational industry. He says that prices for good quality marijuana have stayed about the same, but that the market has been recently flooded with a lower quality product that has caused the average recreational price to drop. “Our prices for the high quality marijuana we purchase has actually gone up the last couple of months,” dispensary manager Jake Thomas said.

He said that the current prices of wholesale marijuana that are available to him are between $1,350-$1,700 per pound, and that Eagles Nest likes to stay in the $1,500 and higher price range to ensure better quality of product. He did say that the price range of recreational marijuana currently sits between $950 and $1,350 per pound, according to their supplier information.

According to Vanessa Haakenson, owner/manager of Mountain Medicals, a medical marijuana dispensary located in Divide, the wholesale price drop has been a good thing.

“I am now able to offer better pricing to my patients. I also have a wider selection of edibles and concentrates…Which I believe is where this market is headed,” said Haakenson. Therefore, locally the industry seems to be remaining stable but problems could arise within the recreational marijuana industry in other parts of the state.

One problem with the drop in prices is that in Colorado, the marijuana sales tax rate is based on a percentage of sales. So, if the prices continue to dive, the amount of tax revenue generated will also decline. This puts the state in a difficult conundrum. Since marijuana is still federally classified as a schedule 1 controlled substance, launching any statewide campaigns to increase consumption would be frowned upon. But if they don’t, the state tax revenues could fall so low that Colorado would not be able to pay to regulate the industry. It’s a safe bet to say that we won’t be seeing any more state funded programs to deter marijuana use in the near future.

So folks, the main homework from today’s lesson: Let’s smoke more weed to help support the legal marijuana industry so it does not go away in the near future!