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The Great Cannabis Price Crash – High Times

#READ A great price crash in #marijuana could be in the offing after Tuesday’s election.

  • Compare that to wholesale prices of $1,000 (or less) to $2,500 for top-shelf, and it’s easy to see room for a massive price crash.
  • A suddenly much-larger new market (that is, once the legislature works out the adult-sale machinery) might create a logjam in supply, raising prices.
  • But if the crowd-sourced data on websites like Priceofweed.com is accurate , the great price crash is already happening.
  • Until now, the retail price of cannabis has remained steady even as the commodity’s wholesale price-that is, the price growers receive from retail dispensaries-has steadily dropped over the past five years.
  • Marijuana will be an agricultural a commodity just like any other (albeit much more strictly regulated), and over time market forces will determine the price.

A great price crash in marijuana could be in the offing after Tuesday’s election—as well as hordes of heretofore-illegal cannabis farmers filling out job applications.

@HIGH_TIMES_Mag: #READ A great price crash in #marijuana could be in the offing after Tuesday’s election.

A great price crash in marijuana could be in the offing after  Tuesday’s  election—as well as hordes of heretofore-illegal cannabis farmers filling out job applications.

While quality and choice have improved and expanded remarkably for the cannabis consumer even over the span of a few years, the retail price of cannabis has remained remarkably steady in most markets.

Between $30 and $40, give or take $10-to-$15 for top-shelf or some B-grade, is the rough asking price for 3.5 grams of cannabis at most retail medical-marijuana dispensaries.

There’s a little bit of variation based on geography—it’s easier to spend $30 on an eighth in Denver than it is in Oakland and San Francisco,  where it is very easy indeed to spend $50 or more—but the $40 benchmark has proven remarkably resilient, even as the cannabis industry has matured from a street dealer’s hustle to a venture capitalist’s portfolio.

Soon, marijuana will be an agricultural a commodity just like any other (albeit much more strictly regulated), and over time market forces will determine the price.

But there are some special circumstances to this particular commodity.

Until now, the retail price of cannabis has remained steady even as the commodity’s wholesale price—that is, the price growers receive from retail dispensaries—has steadily dropped over the past five years.

But that’s in the context of a market just beginning, still subject to myriad state and local restrictions, and generally preceded by the special circumstances of the medical-marijuana economy.

However, if five states legalize recreational cannabis for adults on Election Day, the number of Americans living in states where no medical recommendation is necessary to buy cannabis would triple overnight.

Let’s look at California. A suddenly much-larger new market (that is, once the legislature works out the adult-sale machinery) might create a logjam in supply, raising prices. But so many large-scale farms have been readied for legalization that that shouldn’t happen. Evidence of this trend can be found around the state, as rural areas with weak economies permit bigger and bigger grow sites.

The real price plunge will come for consumers who’ve been buying it on the illegal market. The price of pot has always been artificially inflated—thanks to Prohibition. For decades, the plant was grown, harvested, processed, shipped, and sold in—at best—a legal gray area. Any black-market commodity carries a black-market markup. As cannabis becomes legal, economists and observers agree, that premium will evaporate, and the price will drop.

With that artificial tariff gone, and all sorts of new actors entering the business, cannabis should become a buyer’s paradise, with a glut of supply.  And as the San Francisco Chronicle observed, that could mean an absolute crash in the price of cannabis for producers and retailers alike.

Just how far the price of marijuana will drop is an open question. Some growers pegged the hit to their bottom line at 30 to 40 percent; they may pray for such a minor hit if the 2010 estimate given by the RAND Corporation–90 percent below the then-current illegal-market price–comes true.

Other states have seen wild fluctuations in the price of pot—but this was thanks in part to constricted supply. Cannabis prices in Washington were as high as $25 a gram or more before most cultivation centers came online; prices  now have stabilized to around $10 a gram  earlier this year—that same magic $35-to-$40 figure—to as low as $3 a gram, the Chronicle reported.

Or even lower than that. That 2010 RAND study guessed that the cost of producing  a pound of cannabis could drop to between $150 and $300. Compare that to wholesale prices of $1,000 (or less) to $2,500 for top-shelf, and it’s easy to see room for a massive price crash.

That said, cannabis is labor intensive, and some of the human toll is baked into the cost of the finished product. Top-shelf buds will likely never be machine-trimmed, as the rough handling shakes loose too many trichomes and terpenes. There will be also be a market for mass-produced cheap cannabis. Just how big either market will be remains to be seen.

As the Chronicle noted, we might see companies turn toward “higher-margin, value-added, highly processed goods” for special clienteles.

But if the crowd-sourced data on websites  like Priceofweed.com is accurate, the great price crash is already happening. Users report purchasing high-quality ounces for as little as $100.

The alcohol comparison is beat to death, but look for something similar to what happens to other legal agricultural commodities. Plants with high yields that are easy to grow—think: Blue Dream—will almost certainly come cheaper, while tricky, finicky plants with small yields—thin and spindly sativas like Jack Herer and Sour Diesel—will be more dear.

Either way, you’ll stop paying black-market prices to black-market people.

The Great Cannabis Price Crash – High Times

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