Chart: Low prices, lack of investment stifle cannabis growing capacity in Washington state

Many of Washington state’s recreational cannabis cultivators are using half or less of their licensed canopy, driven in part by low wholesale prices and a dearth of available capital investment, according to a report conducted by the state’s regulators.

Over the course of a year, the Washington State Liquor and Cannabis Board (LCB) surveyed 1,155 licensees to determine capacity utilization – and why the results were so low.

Three reasons were repeatedly cited:

1. Concerns about overproduction.

Even though the canopy report shows most cultivators aren’t growing at full capacity doesn’t mean overproduction isn’t a problem, according to Jeremy Moberg, CEO of CannaSol Farms in the Okanagan Valley and president of the Washington Sungrowers Industry Association.

“The only piece of evidence you need to know that there’s overproduction is that you can buy an ounce for $40 down the street,” he said.

“Businesses are going out of business left and right.”

The LCB has the authority to change a cultivator’s license type if the business fails to use at least 50% of its allotted canopy, though regulators currently have no plans to do so.

Rather than stepping down the licenses, Moberg would like to see the LCB go after the cultivators who are growing beyond canopy limits.

Reducing canopy for companies operating at lower capacity would be “taking a meat cleaver to a scalpel problem,” he said.

2. Access to capital is problematic.

Washington state cannabis companies are barred from accessing out-of-state capital, but Aaron Pickus, spokesman for the Washington CannaBusiness Association, said his trade group is “vigorously advocating for at least a partial lift of that ban.”

A lack of capital creates a barrier to increasing the value and footprint of your business, Pickus noted.

But the low price point for flower may limit investor interest if flower is a grower’s sole focus.

“The biggest return on investment that we would see in Washington is going to be on the R&D (research and development) side, the talent-acquisition side, areas like that,” Pickus said.

3. The prohibitive cost of expanding cultivation facilities.

Fully building out a cultivation operation can prove to be a cost-prohibitive undertaking.

Alex Cooley, co-founder and vice president of Seattle-based Solstice Cannabis, estimated a cost of $100 per square foot to develop indoor grow space, but it could easily hit $250-$300 per square foot, depending on the bells and whistles in the operation.

Cooley offered a ballpark figure of up to $25 per square foot to develop an outdoor cultivation operation. He said the price for greenhouse development was somewhere between indoor and outdoor setup costs.

“If you’re developing 30,000 square feet of canopy, that runs up to a high investment very quickly,” Cooley said.

Bart Schaneman can be reached at [email protected]

Maggie Cowee can be reached at [email protected]

4 comments on “Chart: Low prices, lack of investment stifle cannabis growing capacity in Washington state
  1. Maxcatski on

    $25 per square foot to develop an outdoor cultivation operation seems awfully expensive. Even if you need a fence and irrigation, it’s still a field. Farmers have been field growing for a very long time. Cannabis farmers, too.

    And $40 an ounce is still way too high for a plant. Offer a penny a gram to tobacco farmers and they will clear the fields for cannabis. That’s ten thousand dollars a metric tonne. Compare that to $200 a tonne for wheat. Get those tractors rolling!

    • Cult-I-Vader on

      @Maxcatski…You know absolutely nothing about growing a specialty floral crop. Tobacco is a leaf and Cannabis is a very sticky flower. Cannabis is not row cropped unless you want to grow a field of schwag dirt weed that is unsellable. If you are watching this industry and commenting on this blog, study up. Grow some of your own and report your results. Then buy a farm and plant your “field”. See how marketable it is. Even field grown crops requires substantial fuel and resources to initiate. Tractors, labor, drying shed, etc. But of course, you seem to have answers that sound smart and knowledgeable. Sort of like the armchair reformers who spouted for years, “just legalize and tax the crap out of it.” See how that is working out in states with onerous taxes. I do agree on one point, cannabis should be cheap, nearly free, not because of massive GMO monoculture production. But because people, like you and I are allowed the freedom to grow as much as we please like any other garden crop. “The Industry” absolutely does not want that. With multi million investments in cannabis growing fortresses, forced by rules in many states against outdoor cultivation, burning massive kilowatts, they have a lot of investment to protect.

      • Dean on

        Ya and that’s BS we can’t grow our own or even grow it to sell because a few people see to have a right to but the next guy fosent I thought this was the USA where anyone could own any business that someone else could and if I want to smoke it it’s ok as long as you buy it from us but you can’t grow it for yourself because then who are we going to sell it to well maybe it’s time to start a different business and let people who work hard be able to enjoy there life without having to provide one for you

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