Legal marijuana prices in Colorado have dropped approximately 40% in just under one year.
Supply seems to be outpacing the demand for marijuana in the Centennial State. This is not to say that demand is not high, it certainly is. However, an oversupply of marijuana is causing competitive pricing and an overall drop. According to Motley Fool, the average price per pound of marijuana on a wholesale level was $2400-2600 in October 2015. Last month those numbers dropped to $1400-1600.
While some may assume that a flood of new marijuana growers is behind the surplus, this does not seem to be the case as Colorado has placed a moratorium on issuing new cultivation licenses. This has resulted in a concentrated pool of growers. With no limits on how much a particular grow operation can produce, this small pool of growers can flood the market and drive down the price of legal marijuana.
Let’s look at the pros and cons of such a surplus. On the positive front, the most obvious benefit will be consumers enjoying lower marijuana prices. As the cost starts to rival the blackmarket, consumers will have less incentive to purchase marijuana illegally. This can potentially result in more legitimate transactions and an increase tax revenues. Colorado has used marijuana taxes to fund a range of programs, including an effort to combat homelessness in Aurora.
Lower prices do come with some concerns. Smaller operations can be pushed out before they even have a chance to flourish. With large-scale wholesale operations, small profit margins per transaction are sustainable. Smaller growers may not be able to survive in this type of environment.
A boutique cannabis movement may already be taking foot. As the use of insecticides has come under scrutiny, many consumers want to know where their flower and infused products come from. This has opened the door for companies such as Bloom Farms and Forever Flowering, which emphasize growing high-quality, safe marijuana.
