California grows more legal cannabis than it can sell
California has plenty of affordable, tested cannabis flowers to smoke at low prices this summer.
What a change compared to last summer, when a cannabis drought caused by COVID demand and a seasonal shortage of legal supplies drove up prices in pharmacies.
Pot shop owners are selling the outdoor ounces for $ 200 in the fall of 2020. They are trying to make way for the early summer 2021 harvest which is now arriving in stores.
Right now in West Los Angeles:
- The higher path has an ounce at $ 140 and a half ounce at $ 55
- The pottery has ounces at $ 132 and $ 128
- herb has half ounces for $ 50 and ounces for $ 130
- MedMen Venice– which is pilloried for high prices – has an ounce of White Runtz by Farmer and the Felon for $ 160, Pacific Stone 805 Glue for $ 155 an ounce, and Miss Grass has a half-ounce for $ 85
On the cheap flower shelves of pharmacies, legalization can now offer the black market’s number one value proposition: the low price. That adds to convenience, legality, testing, and security.
What Changed Supply and Demand in California?
The smiles of the cannabis users are sadly the tears of the pot growers.
Prices are falling as California – three years after legal sales began – is growing more legal cannabis than ever before. Now the number of legal businesses is only a fraction of what they were in the medical marijuana era.
According to the California Department of Cannabis Control, the state has 7,297 active cannabis farm licenses as of August 30, 2021.
In contrast, the state reports 1,130 retail or delivery licenses. Retail store licensing remains subject to local California control and slow growth laws.
California has nearly seven licensed cannabis farms for each licensed retail business.
Leaf analysis
Ross Gordon of the Humboldt County Grower Association told MJBizDaily.com on Aug. 7 that he estimates the state grows 1,700 acres of legal cannabis, but the stores only sell an estimated 1,100 acres of product. Another Canndescent producer Adrian Sedlin told MJBizDaily.com that legal supply is now twelve times legal demand.
After three years of festival and famine in the legal market, traders are seeing successive floods of flowers that began with the 2020 harvest and they make no promise that it will go back.
The early light deps in 2021 are coming up strong, the reports say. Behind them is the full harvest of the sun. In the background, huge indoor and mixed light systems also pump pounds.
Leafly’s sources confirmed reports of farmers struggling to hit target prices for their spring season of light dep flower, which are now falling. Older buds from the 2020 outdoor crop are reportedly sometimes unable to sell.
Large California distributors buy from farms and sell to stores, so they are in a unique position to report on the health of the market. You are concerned, they told Leafly.
“There’s a big flood and more to come,” a distribution licensee told Leafly.
At CannaCraft, the major distributor / manufacturer licensee, Tiffany Devitt, chief of Government & Consumer Affairs, said the market was “unbalanced” and “unstable” with “devastating” price volatility ranging from the drought last summer to the flood this year Summers wavered. And there aren’t enough new stores to soak up the excess product.
“We assumed a market in which the system made it so difficult for breeders to enter the legal market that we did not have enough supply and the prices in 2019 and 2020 were extremely high.
“Today we have a lot more supply, but the retail growth is not there because most jurisdictions have banned retail,” said Devitt. “Even if the state has made good faith efforts to fix retail licensing, new licensees are simply entering the same markets and cutting market share there, rather than actually expanding the overall markets. More flowers in the same market are pushing prices down, and that’s devastating for the California cannabis industry. “
The illegal industry could play a shadow role
A Northern California breeder and retailer also said that not only is there an oversupply of legal cannabis, but there is also a deluge of illegal cannabis being secured through legal channels.
Instead of distraction – where legal weed leaves the prosecuted system, he reports “inversion” – where cheap, unlicensed cannabis enters the legal system.
“Oregon produces tons of THC and calls it hemp,” reports Leafly’s source. “Oklahoma is too. This depresses the illegal market prices. And that depresses prices in the legal market. This happens because illegal products flow inexpensively into the legal system. Or by reducing the illegal market demand for legal cannabis, which creates an oversupply on the legal market. “
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The licensee reported not only high taxes and regulations driving the inversion, but also little oversight of malefactors. Many cannabis growers and distributors are spread across both sides of the market, he said.
“Over-taxation only works when there are rules that are enforced. It doesn’t look like they are, ”he said.
The cannabis economy changes forever
The ban greatly skewed the cost of cannabis, but as it’s declining, the cannabis economy is changing.
A decade ago, researchers predicted that legal cannabis could be 90% cheaper than the ban prices. We saw this confirmed in Oregon, where eighths dropped to just $ 6 in 2019.
The question was, “Where, when, and how fast would weed prices fall?”
The illegal market used to be cheaper than the legal market, and prices on the east coast used to be higher than in the west. Today there are 19 legalization states, more than 30 medical states, plus hemp legalization with leakage into the THC markets.
We need to open more jurisdictions to retail and we need to fix the cultivation tax system.
CannaCraft Chief of Government & Consumer Affairs Director Tiffany Devitt
Today a major California retailer and market expert told Leafly, “Legal and illegal market prices have leveled out.”
Addressing the oversupply problem in the California legal market will require new stores in new cities and a reduction in cultivation taxes to offset declining profit margins across the industry, Devitt said.
“There is no quick fix, but in order to make the market more stable and maintain one of the state’s great heritage industries, we need to open more jurisdictions to retail and we need to fix the cultivation tax system which is based on a flat-rate load. At $ 154.40 a pound, the tax rate is currently 20 to 70% or more, compared to a year ago it was 10 to 15%, ”Devitt said.
What is a farmer to do?
As legal cannabis supplies rise and prices fall, winners and losers emerge among cannabis farmers.
If you are thinking of growing legally, you are growing an excellent, highly potent, aromatic, exotic small-batch pot. The top end has never been so expensive: $ 75 for an eighth-ounce for craft wonder board Peach OZ. Justin Bieber bought this in LA in July.
But at the lower end of quality, small farms cannot compete against the flood of medium and low quality buds. (This is similar to traditional farming, where heirlooms require a premium.)
Another factor is location as remote outdoor farmers have more pressure to move pounds out the door.
“[Prices] are definitely starting to decline and it seems the further away you are, the sooner you are ready to negotiate, ”one broker told Leafly.
Price drop: Wholesale cannabis prices in California over time
High quality flower buds grown indoors
A pound of inside OG Kush at the late 90s ban spikes: ~ $ 5,000 (interviews)
A pound of inside Exotics in 2021: ~ $ 2,000 (interviews)
Light Dep (also known as Mixed Light) buds
Pounds of Light in 2020: $ 1,300 to $ 1,600 (MJBizDaily.com)
Pounds of Light in 2021: $ 600-800 (MJBizDaily.com)
Outdoor (aka full sun) buds
Pounds 2020 outdoors in 2020: $ 800 to $ 1,000 (MJBizDaily.com)
Pound 2020 outdoors in 2021: $ 200 to $ 500 (MJBizDaily.com)
David Downs
David Downs heads Leafly.com’s news and lifestyle coverage as California Bureau Chief. He has written for WIRED, Rolling Stone and Billboard and is the former cannabis editor of the San Francisco Chronicle and author of several cannabis books, including “Marijuana Harvest” by Ed Rosenthal and David Downs. He is the co-host of The Hash podcast. TW: @davidrdowns | IG @daviddowns
Show article by David Downs
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