Testing, supply issues ‘could be death knell’ for Oregon MJ market

oregon cannabis

By Omar Sacirbey

Strict marijuana testing standards and a dearth of labs have created a supply shortage for Oregon’s marijuana businesses, resulting in half-empty shelves, plunging revenue and possible layoffs. Many businesses are even closing.

“This could be a death knell for Oregon’s cannabis industry,” economist Beau Whitney surmised.

The supply crunch has affected retail availability of both recreational and medical marijuana, including flower and edibles. It comes on the heels of more stringent cannabis testing standards that took effect Oct. 1. Meanwhile, only a handful of labs have been accredited for testing, and many of the tested products have failed.

Whitney – founder of Whitney Economics, a cannabis-centric research and consulting firm in Portland – believes the overall situation has breathed new life into the black market, as growers who have failed tests seek new avenues to unload product and consumers who can’t find product seek new places to buy it.

Whitney, who published a survey Wednesday about the state’s cannabis supplies, pointed to the stringent state testing standards intended to weed out the use of unapproved pesticides.

“The (Oregon Health Authority) tried to address a safety issue but has created a bigger safety issue by driving consumers and product into the black market. This is a policy that has gone very, very wrong,” he said.

Oregon Health Authority (OHA) officials have acknowledged the complaints but say the changes are necessary to protect public safety.

Tough times for businesses

According to Whitney, 16 of 72 marijuana businesses that responded to his survey, or 22%, said they are failing. Those that are surviving are suffering.

Of the respondents, 81% said they were experiencing supply constraints that have forced price hikes. For example, 39% of businesses said they had to raise prices by 25%-50%, while 35% had raised prices by 10%-25%, and 26% saw price increases of less than 10%.

Lost revenue has also been a problem.

Some 43% of respondents reported losing $20,000 or more per month since Oct. 1, while 53% reported sales declines of less than $20,000 per month, according to Whitney’s survey. Another 11 out of 72 respondents plan to lay off five to 25 employees.

The problem apparently started earlier this year when state legislators passed a law requiring regulators to standardize cannabis product testing, an initiative the industry supported because it would require more accountability from the labs and boost the trade’s legitimacy.

While there are many labs that can test for some contaminants, only a smattering of the few dozen labs in operation before implementation of the new rules have received accreditation to test for pesticides. In addition, the new contamination thresholds are much stricter than before.

Because of the small number of fully accredited labs, the waiting time for results has jumped and, consequently, slowed the flow of product from growers to stores.

“What used to be a 72-hour turnaround, I have growers now waiting a month to get their results back,” said Matt Walstatter, who co-owns Portland’s Pure Green dispensary.

Whitney’s report said testing turnaround times went from about five days to 14-21 days because of the lab shortage.

More labs haven’t been certified, OHA critics said, because the agency didn’t receive the necessary funding to complete certifications.

Jonathan Modie – a spokesman for the OHA, the agency responsible for lab testing and also overseer of the medical market – countered that the existing labs have said they can handle the testing workload. But he acknowledged more facilities would help.

“I can’t speculate what a good number of labs would be … Would more labs be better? Absolutely,” Modie said.

Unreasonable testing criteria

Compounding the problem has been what many observers call unreasonable testing standards, which, Whitney said, have translated into test failures in 40%-60% of submissions.

“They’ve set standards that are almost impossible to comply with,” said Donald Morse, executive director of the Oregon Cannabis Business Council. “They’re disallowing things that they allow on everything else.”

He lauded the OHA for trying to protect public safety but noted there haven’t been any pesticide-related health problems since Oregon legalized medical cannabis in 1998.

“They’ve gone all these years and nobody has gotten sick, nobody has gone to the hospital,” Morse said.

Modie said that just because no one has reported pesticide-related illnesses doesn’t mean the cannabis people consumed was safe.

“Unfortunately, a lot of product that passed the recent tests that have failed show us it shouldn’t have passed,” he said. “I suspect there is a whole lot of product out there that had pesticides on it that shouldn’t have had pesticides on it.”

Supply and demand

The supply shortage has been exacerbated by Oregon’s decision to fully roll out its recreational market in October. The Oregon Liquor Control Commission (OLCC) oversees that market.

Under state guidelines, growers and cultivators cannot supply both recreational and medical stores. Many medical suppliers are heading to the rec market, leaving dispensaries like Walstatter’s wanting for products.

Also, only a handful of infused product makers have OLCC licenses, leaving many retailers struggling to find concentrates and infused products.

“I only have three or four edibles companies to buy from, as opposed to a couple hundred a couple months ago,” Walstatter said. He added that his store used to carry about 20 varieties of shatter but now has only five or six, and his flower selection has also declined.

Walstatter doesn’t believe these problems will sink the industry as a whole, but it will kill many companies.

“It’s an existential threat to any individual business out there unless you are incredibly well-capitalized and can ride out several months without any income. For the rest of us, it’s touch and go,” he said. “There are companies that have failed and that will fail.”

Reason for optimism?

Industry professionals don’t want the new rules thrown out; they simply would like to see them tweaked to be made more reasonable.

“We’re not advocating that there be no testing,” said Morse of the Oregon Cannabis Business Council.

There is also hope several new labs will be certified soon, which should ease the supply bottleneck.

Omar Sacirbey can be reached at [email protected]

32 comments on “Testing, supply issues ‘could be death knell’ for Oregon MJ market
    • Jennifer Martin on

      Most of the tests are failing myclobutanil, which is Eagle 20 for powdery mildew. Shatter and extracts have it at 10-20x the concentration of flower. The two OMRI options for PM control (prevention better than treatment) are Bacillus Subtillus with a wetting agent, or Procidic (a citric acid product which is much more expensive). I have also identified some PM-resistant strains that have all other necessary commercial growth qualities. You can stay under the new thresholds with the right information and expertise.

      • Bill Lifton on

        They put organic Spinosad on the list but only at .2 ppm with no research to set such an arbitrary limit. They set batch limits st 10lbs to require more tests. Let’s just have state owned labs and take the profit out of public safety with scare tactics.

    • Ty Garber on

      Colorado is still in the same position it has been in for 18 months, no labs accredited against the state’s guidelines or any other legitimate standard for that matter, maybe one or two that are attempting ISO 17025 certification. Colorado still has yet to establish testing guidelines for pesticides or residual solvents. Oregon is the first state to certify labs in pesticides, residual solvents, and potency, against a state mandated standard.

    • Adam Koh on

      I don’t know, Brett, I don’t think any part of Colorado’s testing is nearly as stringent as Oregon’s. Colorado is still not testing for any pesticides, allows samples for required testing to be pulled by the producers themselves, and there is no hard limit on the size of a batch. I think if Oregon’s rules were put in place in Colorado right now we would see a similar supply squeeze.

  1. F Michael Addams on

    “…unless you are incredibly well-capitalized and can ride out several months without any income..”…welcome to the NFL…they don’t play that college game…

  2. VTKFADE on

    As an OLCC retailer it seems this was not all drawn up with any thought about how it would play out by holding testing up. You can get BM flower with test results these days and all the oil and eatables same price as dispensary minus the taxes. Those of us who crossed over fight…no banking, no respect and now no product. Oregon who the heck is running this?? “citizens” that give a dam less because they have constant money due to the cushy state and city jobs. We had better get real voices in the talks because the Portland fat cats give a dang if the valley dries up.

  3. Gary Goodwin on

    This is the exact issue I’ve been trying to bring up with the State of Nevada. They’ve issued licenses to a few labs, but the issue of QA/QC, matrix spikes, blanks, instrument standards and proper protocol has been ignored. They’ve already recalled MME products because of bad data, but have no intention of allowing new labs (with experience in legally defensible testing) to obtain licenses. Maybe once a few people die and sue the state that is poorly regulating things might change for the better

  4. Matthew Chatham on

    Another factor making it difficult to accredit more labs is the capital expenses required to conduct the testing. Smaller labs may be unable to purchase the necessary equipment.

  5. Ty Garber on

    This is sad. I know first hand how hard certain individuals at ORELAP, as well as the OR cannabis lab community, have worked to implement lab accreditation standards in Oregon. There needs to be a distinction made here, labs accredited to an actual standard versus labs receiving some type of state license to do analyses without oversight, auditing, or proficiency testing. Oregon is the first to accredit labs, not just license. The real issues are the costs associated with lab startups capable of doing pesticide residues and residual solvents, the instrumentation and technical capabilities costs are huge. But more importantly, OHA has failed (thus far) to adequately staff ORELAP with the necessary folks capable of doing lab audits and assessments. Not only does ORELAP assess, audit and review cannabis labs, but they are also responsible for doing ALL of the environmental lab assessments as well. They have been doing this with only a few people. OHA, the state and the governor need to realize that it doesn’t just take a day or two to assess and accredit a lab, it takes days, if not weeks, to evaluate and assess a labs capability in providing accurate results using good quality procedures. Or, like other states, you could license a lab without assessment, and continue to receive spurious data containing false positive results or false negatives for that matter.

  6. 51504420 on

    These rules are in place to weed out the stupid growers … Welcome to commercial farming … Some years are much better than others …

  7. Cheryl Connolly on

    Have they ever done this extensive testing on cigarettes which were pushed on people and caused so much harm? As a matter of fact, don’t tobacco companies go out of their way to add toxic chems to cigs to make them more additive, and not go out but do go out at the same time? Not that two wrongs make a right? How much testing is done on beer and wine, etc.? What about so many chems in our prepackaged foods? etc. etc. etc.

    • John on

      They don’t test tobacco, which is why the whole argument about “health effects” of smoking pesticides is talking out of both side of their mouths. I’m all for pesticide testing, it just needs to be reasonable and work with the industry. I brought this up to the OLCC and have test results to back it up. Here is ‘organic’ American Spirits test results vs Cannabis standards:

      Imidacloprid 0.4938 – FAIL
      Acetamiprid 0.00992* -Detected but passed limits
      Metalaxyl 1.0554 – FAIL
      Chlorantraniliprole 0.403 – FAIL
      Azoxystrobin 0.411 – FAIL
      Spinosad A 0.513 – FAIL
      Spinosad D 0.0145 – -Detected but passed limits
      Piperonyl Butoxide <0.0103* – -Detected but passed limits
      Bifenthrin <0.00922* – -Detected but passed limits

      Camel, Marlboro and Newports (especially) all fail even worse.

  8. ANGEL on

    State doesn’t make any money from non-taxed MM sales. You think all these delays, testing, accreditation and designation are an accident because oops we didn’t plan ahead. Hell no! this is the states way of thinning the herd with future termination plans to get rid of MM altogether. They plan on leaving the medicinal future to the Federal government and big Pharma. If it isn’t about the money, it’s about the money!!!
    MM is not going away, it’s going black. Good job Oregon, your veiled attempts to make cannabis safer have only created a bigger stronger underground market.

    • Bill Lifton on

      They put organic Spinosad on the list but only at .2 ppm with no research to set such an arbitrary limit. They set batch limits st 10lbs to require more tests. Let’s just have state owned labs and take the profit out of public safety with scare tactics.

  9. Bill Lifton on

    It’s all complete BS. A couple labs were allowed to write their own rules because the OHA got tricked by them on the technical advisory boards. The accredited labs of course said they could handle the capacity but they lied through their teeth. The ruined many businesses. They created these rules not because they care about public safety as they never lobbied about food or cigarettes. This was about some big labs not liking competition and creating bogus regs to price out that competition. And they were supposed to do a financial impact study on how it would affect businesses. This was skirted and it’s required by statute. Lawsuits are happening. Many growers are getting failed tests for pesticides they never used. Lab equipment is tainted perhaps and labs can be sued for this. They have also been price gouging where tests costs more than the product. These weasels want a large % of people’s hard earned money over months in a few hours and they don’t deserve it. It’s exploitation. Unfortunately many of the regulators were caught up because the technical aspects went over their head and they were conned into this. 10 million in lost tax revenue and trust me our weed is safe here. Make the labs pay for the tax and profit losses.

  10. Bobby on

    This is rediculous, the testing is far to strict. If they want to get serious about testing they need to go after the tobacco companies that put toxic things into their cigs to make them go out, last longer on the shelf, taste better, etc… and yet these tobacco companies get away with everything, Why? This bull shit is going to boost the underground market as well as increase the crime rates because of it going thru the underground. I think many of the failing growers Should fail because of the unsafe products they’re using. As a grower, I use no bug sprays and I grow mold resistant strains. That is important when growing, mold, it is a serious problem. As far as bugs are concerned I use lady bugs and praying mantis. Both of which are available for a reasonable price. I’m sick of all the complaining about the rules. You need to be thankful you have permission to grow and use cannabis legally! Quit your bitching and get your shit right and you won’t have any problems. If some are passing that shows the rules aren’t to strict. If nobody was passing I’d say there’s something wrong but that’s not the case.

    • Edgar Winters on

      After 18 years of cultivating Medical Marijuana organically in Oregon, I have never used any chemicals for mold, mildew or pesticides, If we all used good farming practices, like we have, we would not need to be discussing these remedies at length. Wise up OHA/ODA/OLCC. Lets get back to basics, and let our certified growers, governed our own products, for safety and consumption. No farmer wants to sell bad products, to the general public, we can police our own products, no problem in the last 18 years, in the Medical Marijuana field. You cannot at this time, commercialize Cannabis on a large scale, without problems. “Remember Greed with win in the short term” Lets elect a Drug Czar, who knows this Cannabis Business, for all consumers, Health and Well being. Who’s on First Base again” Oregon.

      • Scott Free on

        You’re missing the message here. The tests are too expensive and tests are required for things no one uses. A test before which tested for the major pesticides was $150. Now it’s $400. For an extract it used to be $200…now it’s $3000. And they made batches limited to 10 lbs so a test is required for every 10 lbs of flower and every 1 lb of extract. This is a money grab. We grow only organically but they don’t allow many OMRI approved products. This was never about public safety. I would never use chemicals so why do I have to pay outrageous test costs to the labs. Just do spot testing and if you lie or cheat or get caught then have heavy punitive measures like the food industry. A 10 acre blueberry farm costs $200/yr to test because there is no price gouging. A 2 acre cannabis farm costs $200,000 per harvest. This is a crime so don’t lecture us about organics…we are organic but certifying that shouldn’t cost each grower hundreds of thousands of dollars a year.

  11. Tammy Bailey on

    I am affiliated with a laboratory for bulk asbestos samples and licensed in Texas and very interested in performing testing on cannibas and would like to talk to anyone that has a testing lab that would like to look to Texas for a location.

    • 51504420 on

      Talk to the Oregon Liquior Control Commission they can provide ypu with the detailes .. They would love to take your money while they tweek the rules …. We need more gun ho people from out of state to fund our rule making period …

  12. TomJ on

    The numer of samples/tests required is rediculous and onerous. Cost went from $100 to $1200 per batch; rendering many small batches unprofitable. All to solve a proble that did not exist.

  13. Anne on

    Cannabis advocates must re-frame the debate and cast it as a matter of personal autonomy and liberty. Whether or not Cannabis is a “good thing” is fundamentally irrelevant.

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