July 06, 2018, Oregon
When the sale of adult-use marijuana started in Oregon four years ago, the price of one gram of cannabis flower was around $30 dollars. These prices have dropped drastically in recent years. One can now get 3.5 gram of flower in just five dollars. This sort of price deflation for any legal commodity is unprecedented. A gram which was sold at $30 is now available in just one and a half buck. Even top-shelf cannabis products in Oregon are not sold higher than $10 dollar per eighth. It is also important to note that these cannabis prices also inclusive of different sales taxes.
Supply-Demand Imbalance: The Reason Behind Deflated Cannabis Prices in Oregon
Simple economics know-how can help you in understanding the exponential dip of cannabis prices in Oregon. The demand and supply equation in Oregon has been tilted towards the latter. Oregon growers are supplying nine times more than the demand. This much disparity in supply and demand means only one thing i.e. a steep dip in cannabis prices.
Last year, growers in Oregon harvested over million pounds of the flower. The retail stores in the state could only manage to sell around 100,000 pounds. So, the remaining 0.9 million pounds of flowers are lying in the stores waiting to become part of the shelves in the form of different products.
Why has Oregon Harvested That Much of Cannabis?
There are multiple reasons why Oregon is now facing the issue of surplus cannabis harvest.
No Cap on Cultivation Licenses
Every state where cannabis has become legal, the regulators have put a cap on the number of cultivators and manufacturers. Some states are even so strict in following this provision that they have delayed the process of licensing.
On the other hand, Oregon hasn’t set any limit on the number of licensed cultivators, resulting in the proliferation of cannabis farms all across the state. The state must have put a cap on the number of licensed cultivators after forecasting the demand of strain in the state. Oregon cannabis regulators maintain that it is the responsibility of the legislature to add a pertinent provision in the legislation to limit the number of licensed cultivators.
An Easy and Affordable Entry into the Cultivation Business
Entering the cannabis cultivation business is not really difficult in Oregon. The Micro Tier I cultivation license fee is just $1,000. Oregon Liquor Control Commission, the entity looking over the state’s cannabis affairs, is also lenient in its scrutiny process.
Due to this easy and affordable licensing procedure, over 1,000 growers are in a tight competition to sell their products to processing facilities and retailers. However, it is being said that investors and farmers are finally getting the sense of reality. Many cultivators have reduced the area of cannabis planting and some haven’t planted the strain in the first place. Experts think that in next two to three years the supply and demand of cannabis will get neck and neck, resulting in stabilized retail prices.