Are Pot Prices Dropping??
Marijuana costs are becoming cheaper due to the economic forces of cannabis supply and demand. As the legal cannabis market in the US continues to grow, weed prices are becoming cheaper and cheaper. The Cannabis Harvest Report from Leafly said that cannabis supports 13,042 licensed farms that annually harvest 2,278 metric tons of marijuana – that’s more than 5 million pounds of weed. The wholesale cannabis crop brings in $6.2 billion annually, ranking it the fifth most valuable crop in the United States. The only crops that bring in more money are corn, soybeans, hay and wheat. Cannabis economics are booming.
Colorado, California and Michigan are three example states with a pronounced drop in weed prices. However, the commoditization of cannabis means that companies need to scale their operations, invest in technology and build a strong brand that will differentiate their products from competitors.
Colorado Marijuana Costs and Sales are Dropping
The prices per pound have fallen at least 25 percent in Colorado, since 2020, according to Colorado’s Department of Revenue. However, this could be more than just an end-of-year slowdown. The Colorado Marijuana Enforcement Division has the latest average market rate (AMR) – a set of median prices for different categories of wholesale marijuana and started to see falls beginning in October through December, with the most noticeable difference between the flower categories.
According to the most recent AMR, the price per pound of weed dropped 28 percent, from $1,316 to $948. The price shift extends to marijuana trim while dispensary traffic has continued to slow and fall every month. In the AMR report at the end of 2020, the price per pound of flower was $1,721 – around 45 percent higher than the latest figures. Meanwhile, the price for flower allocated for extraction has dropped 62 percent from $901 at the end of 2020 to be $345 today.
Apparent drops in rates that many consumers may find interesting as the new year comes around. A significant aspect of keeping consumers out of the legal cannabis market is high weed prices for small quantities.
Does California Have Too Much Weed?
Although demand for fresh material could help steady the price initially, the whispers throughout California have suggested that an early harvest price bump may not happen as we move into 2022 because of the state’s inventory hangover from 2020 and this summer’s light-deprivation crops consuming the market.
Of course, no one wants to suggest that sales are maturing in some states. The cheaper, the better, right?
Not only are these companies facing slow sales, too much inventory and falling prices, but they are also getting taken for a ride by high-energy costs. For example, how much cannabis is grown in California, known only to state regulators and select elected officials? But using available data, you can get some rough estimates for cannabis economics.
According to the most recent public update, published in 2017, the state has a demand for cannabis that is about 2.3 million pounds. This research includes adult use and medical consumption. According to the most recent data, that is consistent with the amount of cannabis on which the state Department of Tax and Fee Administration reported collecting cultivation taxes between July 2020 and July 2021.
Michigan Prices Drop, Unit Sales Still Up
Michigan flower prices are down while overall unit sales are staying up. For example, while medical and adult-use flower prices dropped 24 percent and 44 percent in the last 12 months, overall monthly flower sales have been up 49 percent in the medical market and 223 percent in the adult-use market since January 2021.
According to the latest reporting from the state’s Marijuana Regulatory Agency, the price per ounce of recreational marijuana was $516.21 in December, when the sales first started and dropped to $409.76 in May, the most recent month that MRA reported. Meanwhile, medical cannabis was $267.30 per ounce in December and lowered to $251.50 in May. A significant shift in weed prices.
Wholesale prices of medical cannabis plummeted in Michigan after changing regulations that prevent caregivers from selling into the recreational market forced them to offload large amounts of flower.
Despite the higher prices, the coronavirus pandemic didn’t slow down sales in Michigan. The state’s cannabis industry was labeled as an essential industry – production continued at a consistent flow despite retail sales being diminished by physical distancing and isolation protocols.
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