Chart: Declines in wholesale prices hammer major recreational cannabis markets

Wholesale cannabis prices in recreational markets across the United States have fallen precipitously compared to last year, while prices in major medical markets are proving more resilient.

According to figures provided by Cannabis Benchmarks, a Connecticut-based provider of wholesale marijuana pricing data, wholesale cannabis prices in Oregon and Washington state are down more than 50% relative to the same week in October 2017, with double-digit declines also observed in California, Colorado and Nevada.

Wholesale prices in Arizona, Michigan and New Mexico, however, remain nearly unchanged from a year ago.

In Oregon, outdoor-grown cannabis prices hit an all-time low, and – according to Cannabis Benchmarks – indoor and greenhouse producers are selling product for a loss amid intense market saturation in the state – suggesting that wholesale marijuana prices may be approaching their lower limit.

This week, outdoor-grown cannabis hit a historic low in Washington state while prices for flower grown in greenhouses were the lowest ever recorded in any market.

Reporting from Cannabis Benchmarks suggests that excellent growing conditions in the state brought a bountiful harvest into an already oversupplied market, pushing wholesale prices down even further.

Despite record demand in Colorado for adult-use cannabis – cumulative sales through August 2018 were up 12% compared to 2017 – wholesale marijuana prices continued to decline.

Oversupply is still a problem for cultivators in the state, and if not for mandatory pesticide testing implemented in August, it’s likely prices would have slid even more.

Harvest conditions were good this year in California, bringing abundant supply to a market that’s severely constrained by the number of retail stores open throughout the state.

But Cannabis Benchmarks contends that the Golden State’s still-developing supply chain could delay the major fall harvest – which typically hits the market around October and pushes wholesale prices to annual lows – until November or December.

In Nevada, where the market had been on the upswing, wholesale prices appear to be tapering off as cultivators catch up to what was an unexpectedly strong start to rec sales in the state.

Patient counts in Arizona and New Mexico have continued to rise, though license caps in both states mean no additional businesses can enter the market. That’s insulated these states from the kind of oversaturation that plagues most recreational markets.

Michigan – the second-largest largest medical market behind California – is transitioning into a fully licensed and regulated MMJ industry after existing for years under a patchwork of local regulations.

After Oct. 31, all MMJ businesses in Michigan must have a permanent license. It’s likely that less than half  the state’s dispensaries currently operating with temporary authorizations will gain a permanent license by the end of October, which could have a major impact on demand for wholesale cannabis coming from licensed cultivators.

Eli McVey can be reached at [email protected]

21 comments on “Chart: Declines in wholesale prices hammer major recreational cannabis markets

    NO, “jack on October 29th, 2018 – 10:57am”, falling wholesale prices ARE NOT ALWAYS GOOD FOR THE BOTTOM LINE. THE BOTTOM LINE IS A LIE YOU WERE SOLD BY CORPORATE AMERICA.

    • Nate on

      Wow, perhaps you should learn some basic economics and then maybe you might own something someday and be less bitter. Here is a hint: focus on your credit rating and maybe someday you will qualify for a mortgage and start accumulating some wealth. Then, maybe, you will lose the chip on your shoulder and start to become financially literate.

      • Miggy on

        “Jack” was referring to the bottom line of the retailer, and yes, falling wholesale prices are good for the bottom line all things being considered like a strong location for the retailer and a loyal customer base.

        Falling wholesale prices are not good for the wholesaler or the people that hold stock in said wholesaler (or supplier) and thus why tensions can get high, no pun intended.

        There I said it. Dispute it to your own peril.

    • Bob on

      Wow. Sounds like you have been getting your ass handed to you in the industry. There’s absolutely no good reason to attack “Jack” because of a comment he made that might be inaccurate or that you disagree with. You sure are making a lot of assumptions about Jack and if you had any decency you would not attack someone like that. Please elaborate why you feel it is okay to do that. Furthermore, if you were successful you would not spend time attacking someone that you do not know. Jack is not the problem, you are the problem. Successful people overcome problems and I would bet damn good money you are not.

      • The mad Yooper on

        I say Jack is fair game. If he doesn’t like the attention his post brings why post it?

        Right at this moment the industry is frustrating to me too. I view it differently than jack. He can have his opinion I am good with that. I look at as though it were a child. A little kid has to learn how to fall down, and get up. It will change, usually for the better

  2. Beau Rillo. Owner Operator LeapFarms on

    This data is unrepresentative of internal conditions in each state and paints too broad of a stroke over several of these markets.
    Having been to most of these states and observed firsthand , not through numbers in Connecticut but in each respective market.I would infer that these data sets aren’t entirely accurate in their description of the existing inventory of each state.
    For example in Oregon last year there were approximately 1200 licensed producers. A number that has reduced to a full third. That one point alone demonstrates that market price suggestions are inaccurate in their prediction that prices will go lower.
    In California where my lab PharmLabs conducts business we have seen the few licensed producers that they have managed to get to production phase struggle to meet the states required levels of compliance .
    This would lead one to believe that even now In The largest market globally there will absolutely be a high demand for available products.
    In Michigan where I had the pleasure of accompanying a native medical grower , I was enlightened as to the production values and compliance holdups by 80% of the existing market and the demand not being met .
    Based on existing data this report is accurate but misleading as to the real conditions of the markets it speaks for .

    • Chris on

      Beau is right on the money ! In lake county as of October 25 2018 there are only two group w compliant and licensed farms – 2 that’s it . 34 more coming but for now only two. What up Beau

  3. Know Body on

    I think the data makes sense. I have been following the wholesale flower market in California for the last year. A 19% decline in wholesale price matches the trend I am seeing.

    People are going big in the cultivation space. That is also coupled with the need for all these startups to generate ANY KIND OF REVENUE.

    Sonoma county just set regulations where cultivation can only happen on parcels 10 acres or larger. The little guy is going to get crushed unless they have a really high end strain such as something with high CBD and high THC in the same plant.. . .Or something with magical colors and fruity taste.

    This will also have the effect of pushing down feed costs that extractors pay for trim.

    At the dispensary level, there is no need to get charged 50 bucks for an 1/8 . . . It should be down to about 25 or 30 for sour diesel. The people making all the money are the dispensaries because they are jacking up the prices as flower prices plummet.

    Eventually the delivery services will get big enough and challenge the stranglehold the dispensaries have on prices. Delivery license holders by quantity are 30X when compared to the number of license holders for dispensaries. The market needs that competition to drive prices down as low as they can go with taxes included. It’s the only way to drive the grey market out. And personally, I don’t think it can ever get low enough to drive away all the grey market.

  4. Steve Stark on

    I think prices in the cheap states are still 5-10x off where they’ll be once Federal legalization occurs. We’ll have the booming large (for cannabis grows) Kentucky hemp farms growing CBD and seed strains move to THC strains overnight. Then we will see a real race to the bottom.

    • guospo on

      Yeah what he said. Whats going to happen as more states get on board and finally Federal legalizations happens? If you didnt go big, have deep pocket investors and know what you are doing from the beginning your likely to go up in smoke (pun or no pun). Then you are just another farmer getting bullied by your big brother. Willie Nelson might have his own investments rolled up in the market and not have any concerts left in him to give a hand.

  5. Old Timer on

    All of the “problems” are due to regulations. Supply chain, wholesale and retail prices, transporters, brokers, taxes, license fees, revenues, packaging, ROI, lab testing, compliance, shortage, oversupply, enforcement, CEO, venture capital, CFO, mergers, mids, craft, marketing, advertising, employers, employees, growing pains, fledgling industry, local control, events, rule changes, blah blah blah.
    Enough BS. Let it be a plant again.

  6. Roland on

    Old Timer is right. Steve Stack too. I’m quoting Russ Bellville from another story on this site: “I’m trying to reimagine this worrisome text, but instead of “$40,” “ounce,” “cannabis,” “shop owners,” and “producers,” the subjects were “40c,” “gallon,” “gasoline,” “gas stations,” and “oil companies.” Then would a story about oversupply consider what customers feel? Would anybody filling their gas tank for $6 shed a tear for ExxonMobil or their local gas station? Would that be a serious problem in need of a market correction?”

    “…stoners will begin to think pot ought to cost on par with other dried vegetable matter, not what 80 years of locking up black kids made them think it should cost!”

  7. Bob on

    Big Money is taking over large stake holders in pharma liquor the boutique grows are in serious danger sad because that’s where most of the really good growers are I’m in Florida and the marijuana Cherenkov is TERRIBLE not one good dispensary not a one

  8. Otoke Horticulture on

    So 2+ years ago I presented a talk called the $500 pound at a cannabis conference that pointed to the reality of supply and demand and while the market has not reached that point yet, it will. People will figure out how to drop costs and regulations will start to lighten up. Few industries can stabilize when prices drop at 20% per year (as someone noted they were seeing in Cali).

    Where will it end? Likely when we are able to grow everything outdoors. By then the indoor world will be gone due to high cost and even greenhouses won’t be competitive compared to field grown. I will allow for some number of people still growing flower indoors for smoking… but I’m betting that market segment will continue to shrink for health reasons.

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