It’s good news for consumer and not-so-good-news for growers: The price of marijuana is falling exponentially. And the forecast calls for the trend to continue.
Why? It’s Economics 101: Supply and demand.
“Wholesale marijuana prices declined in 2016 from $2,500 to $1,000 per pound, with some dispensaries offering recreational ounces as low as $65 on CannaSaver.com,” Brian Shapiro, CEO of CannaSaver, told Forbes.
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Shapiro told Forbes that grow houses flooded the market with cheap marijuana and subsequently drove prices down. Only concentrated cannabis products like oils remained fairly unchanged in pricing.
In Colorado and Washington, the two most mature legal markets in the U.S., the average price of a gram of cannabis is now $6. In August of 2015, a legal gram in Washington was $25 (although $1o grams were abundant in the black market and the then quasi-legal medical market.
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Douglas Brown of Contact High Communications told Forbes that he believes the mega-growers in the legal states have glutted the market with product. “At some point — and we are probably there now — flower becomes a commodity, like soybeans or corn. And then only the biggest players make any money selling it. Margins are thin, but they grow a lot of flower,” Brown told Forbes.
And Carter Laren, of Gateway, a cannabis incubator group said, “When marijuana sells for $750 a pound it starts to become difficult to make a profit. When it gets somewhere below $500 a pound, it becomes impossible.”
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The Forbes report highlighted one sector of the cannabis industry that, for now, is not feeling the pinch: The illegal black market. According to ArcView Research, 87 percent of marijuana sales — or about $46 billion — occur in the illegal market.
But even California black market growers are seeing a gradual drop in illegal wholesale prices. “For many of us here in Humboldt County, the glut of product out there makes it harder for us to operate,” said one grower in northern California who wishes to remain anonymous. “Three years ago, a single harvest for me — and my operation is modest compared to most — would bring in $300,000. Those days are over.”