Oregon marijuana oversupply driving out small farmers, lowering prices

Oregon cannabis farmers grew three times the amount of product consumers purchased last year, small cultivation operations are going out of business and dispensaries across the state are closing up shop or selling out.

That’s the scene that two dozen cannabis industry professionals painted of Oregon’s marijuana market, according to Willamette Week, a Portland-based alternative weekly.

Here’s what you need to know:

  • Persistent low prices have led to small operations downsizing staff and cultivation facilities closing.
  • Oregon regulators reported that 1.1 million pounds of marijuana were entered into the state’s traceability system in February. By contrast, Oregonians consumed only about 340,000 pounds of regulated cannabis in 2017.
  • The state is planning to double the number of licensed cultivators this summer. At the beginning of April, Oregon had 963 licensed cannabis cultivators and another 910 on the Oregon Liquor Control Commission’s desk awaiting approval.
  • One cultivator told Willamette Week he sold 60 pounds of indoor-grown cannabis at auction for $100 a pound. The farmer attributed the low prices to a flood of supply from the fall outdoor-grown harvest.

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7 comments on “Oregon marijuana oversupply driving out small farmers, lowering prices
    • Mark Henderson on

      Why the hell would the state license 900+ new cultivators/growers when many of the 960+ cultivators/growers already operating are barely profitable?
      The state should be concerned the businesses already operating are stable and profitable.

      • Hong Yoon on

        The state has to deeply concerned
        About whether permits the licensed or not afterward.unless the state didn’t pay attention on this matters then all three party will be a loser no matter what, gorverment, growers,retailers and Consumers.

  1. Aaron Venable on

    Oversupply benefits only the consumers, they can be picky about quality and even the high-end bud will fall in price. We need to see the details on the OLCC’s CTS tracker, but with February production at 3x’s annual production, Pot could fall to $0!!! It’s a pity that it’s a Federal crime to distribute to places outside the state where there is more demand, such as Europe, Canada, or other under-producing regions where it is legal; or, much worse for the industry, where it is illegal.

    This may be preview of coming attractions for the rest of the country. By having all legal pot grown in-state in every state (often indoors at very high costs of production) forces every state to produce for its own demand to avoid committing the federal crime of interstate distribution.

    However, with falling prices, like with other consumer products such as large flat-screen HD TV’s; more consumers will be able to afford pot, breaking down the barrier for an increase in users. According to a recent study by the Oregon of Economic Analysis, the % of the population that uses pot has increased from 10% in 2014 to nearly 18% of the Oregon population consuming recreational pot in 2017, it is conceivable that with more users, more regulations will fall, such as allowing people to consume cannabis at “coffee shops” like in Amsterdam, or even in public.

    It looks like Cannabis will fall in line with any other commodity that’s over produced a correction that puts most players out of business and favors only the very large and efficient producers who are vertically aligned and can, by sheer volume, operate at very low margins. This will probably mean that many producers will be selling their businesses at a loss to avoid bankruptcy or worse allowing for a quicker transition to fewer but more stable business players.

    One further concern is that some groups of producers may attempt to join together to control the production, sale, and price of Pot so as to obtain, essentially a regional Monopoly and restrict competition in the Oregon market. Cartels exist primarily in Europe and are illegal in the United States under antitrust laws, EVEN WHEN they are formed as an association having common interests, designed to prevent extreme or Unfair Competition, allocate the Oregon market, promote the interchange of knowledge resulting from scientific and technical research, exchange of patent rights, and thereby standardizing the quality of Cannabis in the Oregon market.

    To comply with current laws, they will be forced to compete. Unless the Government of Oregon can allow an increase in the quantity that people can buy, carry and also increase the number of places that they can legally consume; so as to allow the demand side of the market to increase; then we will see a major consolidation and long-term drop in prices.

    For those unprepared, this will be a scary ride.

    In war, an agreement between two hostile powers for the delivery of prisoners or deserters, or authorizing certain nonhostile intercourse between each other that would otherwise be prevented by the state of war, for example, agreements between enemies for intercommunication by post, telegraph, telephone, or railway.

    Although illegal in the United States, foreign cartels influence prices within the United States on imported and smuggled goods that they control. The United States has sued the De Beers diamond cartel several times, and works to stop the flow of illegal narcotics, whose production and distribution are largely controlled by drug cartels.

    • CDM on

      Excellent analysis, Aaron, thanks for taking the time to point out the simple logic of what the domestic future of cannabis looks like. I’ve been on a similar kick extolling the lunacy of the emerging “international cannabis market”. Simply put – it’s a commodity folks, and it’s amazing to me that Canada can safely declare as it does that Columbia will be the the world’s low cost producer when the intl rules of trade have yet to be written for cannabis.

  2. Doug on

    Here’s the truth the state works like the mob they charge all us between 1000 to $5000 a license a year. On top tax us extra, more than the normal small business. Since they money river is flowing good at there end, Why would they care? Last question why are these dispensary owners ripping off the customers still selling 200 to $300 oz. Greed

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