Massive Grows Drive Down Cost of Legal Weed

The Business of Marijuana

Good news for recreational marijuana consumers: weed is getting cheaper.

According to new industry analyses, 2016 saw a flood of growers getting their bud to market, significantly driving down the price of legal retail flower in the U.S.

“Wholesale marijuana prices declined in 2016 from $2,500 to $1,000 per pound, with some dispensaries offering recreational ounces as low as $65,” Brian Shapiro, CEO of CannaSaver.com, told Forbes.

Denver, Colorado residents know the $99 ounce is to be found at many a dispensary, while an ounce can sell for as much as $400 in places such as Miami where recreational marijuana is yet to be legalized.

Concentrates aren’t experiencing the same effect, however. The price of oils has remained fairly unchanged, likely due to the costly, highly-technical, potentially dangerous, and tightly-regulated process of extraction.

In Washington state, where bud prices were reaching a whopping $25 per gram in August of 2015, the price has plummeted to $6 per gram. (Washington state legalized adult possession on Dec. 6, 2012.)

In Colorado, where the herb was legalized just one month before, the price has fallen from around $8 a gram to just under $6 a gram.

Industry analysts such as Douglas Brown of cannabis marketing firm Contact High Communications point to the large new firms launching sizable grows.

“At some point — and we are probably there now — flower becomes a commodity, like soybeans or corn. And then only the biggest players make any money selling it,” Brown told Forbes. “Margins are thin, but they grow a lot of flower.”

It’s then not surprising that entire real estate firms are popping up all over newly legal states, such as Oregon’s Grow Condos, which deal solely in scouting warehouse space for marijuana grows.

And those grows aren’t cheap.

Water and lighting equipment is immensely costly, and staff has to track every step from seed to sale in accordance with state laws, or risk losing their license, in addition to the logistics and danger involved in a cash business which still can’t even legally use the banking system in the United States.

The solution for growers facing plummeting weed prices in a flooded market: make growing cheaper.

Companies which produce high-yield lighting and indoor automated irrigation and feeding systems are clamoring to lay a green thumb on the pulse of the legal weed market. In addition, many companies are looking at getting out of the warehouse and moving towards highly-efficient greenhouse production.

“Growing inside is definitely an antiquated concept,” Leif Olsen, managing partner at Denver-based Good to Great Consulting told Bloomberg.com. “It’s coming out of hiding.”

Posted in News on January, 2017