Cannabis supply in Washington state continues to swell. More and more product is flooding the market causing both wholesale and retail marijuana prices to fall.
Lawmakers and industry leaders are discussing ways to control cannabis supply and correct marijuana prices in Washington State. After the October 2017 harvest, Jim MacRae, owner of cannabis-focused business intelligence firm Straight Line Analytics, stated that the market will have a 60% larger supply than the previous year.
His estimation looks to be accurate. An ounce of legal marijuana is now selling for as low as $40 in the state’s retail stores. This is prompting Washington’s cannabis officials to alter state regulations.
Some of the solutions lawmakers and industry leaders include:
- Reducing the amount of square footage growers are allowed
- Ending license transfers so when a business fails, its permit is no longer on the market
- Putting a moratorium on the approval of new licenses
“Bloodbath of Prices”
One thing the industry can agree on: There is too much cannabis production at the moment. Grower Steve Fuhr owns Toucan farms in Shelton. He calls the market in Washington State a “bloodbath of prices.” He says,
“Right now we have about three times more product than we have retail sales.”
Fuhr said he is having trouble getting more than $1 a gram wholesale for the cannabis grows. That is only $454 a pound. MacRae tallied the number of plants in spring to arrive at his estimate of a 60% larger supply. MacRae expects about two-thirds of the harvest will have difficulty selling through the regulated system.
Jeremy Moberg is president of the Washington Sungrowers Industry Association. He wonders if prices have gotten so low that retail businesses are cannibalizing themselves.
“You can drive a mile from the Washington State Liquor and Cannabis Board and buy a pretty good-looking ounce for $40,”
added Moberg, also CEO of Cannasol Farms, a producer/processor company in Okanogan County.
The Effects of Oversupply
“I’m going out of business competing against people going out of business,” says Morberg.
With prices at an all-time low, a whole slew of companies are going extinct. But before succumbing to bankruptcy, owners are putting their licenses up to prospective business owners. This will likely fetch a large profit.
The new owners typically have more business savvy and deeper pockets, Moberg said, so they’ll, unfortunately, they will end up adding to Washington’s marijuana surplus.