With the ever-growing onslaught of recreational cannabis shops and industry marijuana growers/producers in Oregon, the price of marijuana is falling drastically every month.
Citing the inevitable imbalance of too much supply and not enough demand, many producers are finding the need to reduce the cost of their product to ensure a consistent turnover.
John Lehner, an economist from the Oregon Office of Economic Analysis, states that marijuana prices are plummeting about 20% per year, and he anticipates the price point to continue to fall. He cites competition as the culprit. The formula? Simple — more states means more growers, and more processors means more supply. Without enough demand, the supply becomes excessive and the price point naturally falls as sales slow.
Many cannabis brick-and-mortar shops now find themselves competing to offer the biggest sales, the best deals, and the lowest prices. Unless they can offer the most attractive deal, the customer goes elsewhere, leaving the retailer left holding product that needs to be sold.
Lehner discovered that average retail price for recreational cannabis has fallen from $10 a gram to $7 a gram in just a few months. This leaves the retailer scrambling to offer “deals” that they would never have thought to offer just to lure customers in the door and close a sale.
How many growers could there be in Oregon who are looking to sell their products for profit? Currently, the Oregon Liquor Control Commission (OLCC) holds 1,114 recreational marijuana producer applications on file. Of those, 906 are active. Additionally, Lane County has 120 pending applications and 122 active. This clearly illustrates a near saturation in the cannabis market on the production end.
On the retail side of things, the OLCC has already granted 520 recreational retail licenses statewide and 208 more are still pending. In Lane County alone, there are currently 73 active licenses and 22 pending.
At this point, many producers are now finding ways to operate the retail side of things as well, which filters a larger percentage of the profits directly back into their farms, rather than the producers struggling to find an appropriate wholesale price. For now, this seems to be an alternative to the struggle, but many producers fear what the future may hold for recreational sales in Oregon in the coming months and years.
