Get an ounce of legal weed in Michigan for $122
In January, Michigan cannabis prices hit an all-time low, which is great for customers and retailers, but is causing smaller growers to panic. Retailers have listed 122 ounces valued at $122 in their licensed stores.
Cannabis supply is dragging prices down sharply, and customers are buying it at record prices. State records show that there is 55 times more weed on the market and consumers are buying it for 16 times the price since cannabis hit the market two years ago. Rates are lower now than they were 30 or 40 years ago when weed was illegal. On average, the price for 28 grams per ounce fell by 70% from $516 in December 2019 to $152 this January.
In Kalamazoo, some dispensaries sell an ounce for as little as $50, while in Michigan the average price for a gram is $5, less than 50% of the national average.
GROWTH IN THE CANNABIS MARKET
Michigan Marijuana Regulatory Agency executive director Andrew Brisbo said the market jargon is growth now, but he anticipates it’s entering a period where supply and prices will meet demand and stabilize.
Michigan has quickly become the country’s fourth-largest cannabis market with 2021 sales of $1.8 billion. In November 2018, voters legalized recreational cannabis, but it took the state another year to set up the licensing framework for its sale.
As consumers enjoy the lower prices, medium and small farmers say they find it difficult to match the prices of larger farms.
Rivalry among cannabis growers grows as new cities allow operations. The number of cities allowing cannabis businesses increased from 87 to 118 over the past year, while the number of permitted businesses increased by nearly 150 to 1,238. People like East Lansing’s Haley Poag, who refused to buy cannabis from dispensaries to avoid Michigan’s 10 percent marijuana excise tax, are being drawn to the expense. Poaga said she has accounts with some of the local pharmacies, so she gets text messages when they have special offers, and that’s whenever she’s shopping.
Justin Palmatier, owner of dispensaries Lake Effect and Doja in Portage, claimed distributors could buy marijuana for less and increase sales. Competitors promptly matched his pharmacy’s $5 per gram discount. Several competitors lowered their prices to $75 after Lake Effect began selling an ounce for $100, or 28 grams, Palmatier claimed. We must meet or exceed the discounts of local competitors; When prices fall, we start racing down. Added Palmatier.
According to Chris Krestchmer, general manager of Lansing-based Homegrown Cannabis Company, which grows wholesale marijuana and sells it retail, larger marijuana growers are emerging and crowding out smaller companies.
In just two years, the number of farmers has increased dramatically to 1,238. Of these, 458 are larger operations with a 2,000-10,000 plant capacity or Class C growers. State records show that the amount of weed on the market has risen to over 1,273,453 pounds, resulting in an oversaturated market.
Krestchmer said they knew it was on the way, but it came faster and harder than anyone expected and it had become a difficult game for them.
Some farm owners worked with local governments to change laws that would allow them to combine numerous permits to produce even more marijuana, like the massive farm to be built in Lawrence, southwest Michigan.
Until more locations allow marijuana stores to open, or the state limits the number of licenses a grower can hold at one time, farmers will continue to struggle, Krestschmer said.
THE STATE OF CANNABIS IN MICHIGAN
Though the state now allows local governments to control how much cannabis is grown in their communities, nearly 80% of Michigan cities ban the sale of marijuana. Cities, especially troubled ones, are motivated by economic factors to allow larger companies.
Compared to the other 18 states that have fully legalized marijuana, Michigan has one of the lower marijuana sales taxes at 10%, which is paid on top of the regular 6% sales tax. For example, in Washington the tax is 37%, but in Arizona it is only 16%.
Taxes on cannabis sales were expected to have netted Michigan $250 million last year. Each county and city receives 15% of the consumption tax. A large venture can bring in $200,000, or twice the annual budget of a small community like Lawrence.
According to Palmatier, seeing larger ones (growers) step in and produce thousands of square meters of product at reduced prices is forcing everyone else to follow that price. He added that the smaller companies wouldn’t realize they couldn’t compete at this price point until it was too late. As a result, they could shut down operations.
Palmatier worries the market would be constrained by the closure of smaller cannabis operations as larger companies raise their prices when the price hits a bottom. Palmatier said he believes they would see fewer options at higher prices from these larger organizations.
DIFFERENT PRODUCT TYPES HAVE ALSO EXPERIENCED SIMILAR TRENDS
Michigan vape cartridge sales jumped 178 percent between June 2021 and June 2022, making it the second-highest monthly sales item. Last month, sales of this product exceeded $35 million.
A 91% increase from June last year saw Michigan dispensaries sell over £179,000 of cannabis-infused edibles in June 2022. Edibles retail sales totaled more than $19 million last month.
For concentrates, on the other hand, sales volume increased by 150% from June 2021 to June 2022; Last month, they grossed over $10 million for adult use. Ultimately, Michigan dispensaries are on track to record more than $1.7 billion in combined adult-use cannabis sales across all product categories this year.
The fall in marijuana prices is a result of the over-availability or oversupply of plant or cannabis products. It was brought about by larger companies that combined multiple licenses and were able to grow larger amounts of weed. With so much supply and a standard demand rate, cannabis prices were bound to go down, and competition in the market made the price go down even more.
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