By John Schroyer
In early 2015, a number of Colorado’s longtime marijuana industry insiders predicted an impending price crash for wholesale cannabis.
But the crash failed to materialize this summer as feared. In fact, the opposite trend is playing out: prices have skyrocketed in recent months.
In October, the online marijuana wholesale marketplace Cannabase saw recreational product being moved for as much as $3,000 per pound at one point. That’s up from a maximum price point of $2,200 per pound in January and February, Cannabase CEO Jennifer Beck said, and an average sale of about $1,900 early this year.
“To see product sell out in a matter of hours for $2,800 a pound is unbelievable,” Beck said in October. “Even eight weeks ago, we were seeing bidding wars.”
Cecelia Gilboy, a longtime wholesale operation based in Boulder, said she’s seen the exact same trend. She chalks it up mainly to a new microbial testing requirement that went into effect Oct. 9 for recreational cannabis.
“The day that that went into effect, I was at a client’s warehouse in Denver, and we both started getting calls,” Gilboy said. “Over the course of a few hours, we saw prices jump from $2,600 to even $3,000 a pound.”
Retailers that rely primarily – or completely – on wholesale cannabis instead of growing their own could therefore be desperate for inventory.
But the supply and pricing issues really began well before the new testing requirements took effect in October, and the medical side of the market has experienced supply issues too.
There was a medical cannabis shortage in Colorado Springs – one of the state’s largest MMJ markets – over the summer, Beck said. Faced with that challenge, a lot of dispensaries in the region bought up most of the wholesale product that was available at the time.
When the standard “dry season” of August to October hit in Denver, there was even less product available than usual.
“In July, we had record high consumer sales,” Beck pointed out. Since then, she said, prices on average have increased 35% for recreational cannabis and 33% for medical.
Beck and Gilboy said it looks as though prices may be on the verge of stabilizing in the near future and dropping back down to a more normal level, but it’s still hard to predict how it will all play out.
Don’t rule out a price crash just yet, said Luke Ramirez, the owner of Pete’s Premium Cultivation and a recreational/medical cannabis store in Denver.
“The price crash is still coming. There are cultivation warehouses and greenhouses being built as we speak,” Ramirez said.
He forecast that over the next 10 months to a year, prices will drop slowly but steadily as more wholesale growers get up and running and can pass the new microbial testing standards.
“It’s not going to happen overnight,” Ramirez said. “It’s not going to be a panic button per se. It’s just going to be, every single month, the price is going to go down a little bit.”
He expects top-quality flower at some point next year to drop back down to $1,700-$1,800 per pound, and lower-quality flower to be priced at $1,400-$1,500.
If that happens, the fallout could vary.
It may mean that larger wholesalers that have the ability to produce on a larger scale will be able to undercut smaller boutique growers on price and take control of the market.
But there are still a lot of vertically integrated retailers that have their own grows, said Tim Cullen, co-owner of the retail chain Colorado Harvest Company.
He does expect there will be a downturn in wholesale prices, but how that may play out and what it might mean for businesses will probably depend on what’s really in demand.
For example, Cullen said the quality of cannabis grown outdoors near Pueblo that has already hit the market is “pretty mediocre.”
“It’s not going to rock the market,” he said.
If that continues to be the case with a lot of new wholesale growers, there will likely be a further evolution of the dynamic among Colorado’s growers, retailers and consumers.
John Schroyer can be reached at email@example.com