Inflation continues to rise, but cannabis prices remain the same

Inflation is all over the news, gas prices are rising, stocks are plummeting, the war in Ukraine is cutting off resources and the pandemic is still squeezing the supply chain. But there’s one place where consumers aren’t seeing the price increase: the cannabis store.

The cannabis industry hasn’t entirely escaped inflation. The material costs of growing cannabis have increased significantly. Rather, stable prices in pharmacies indicate a high supply of weed and intense competition. There are so many products on the market that stores are reluctant to raise prices for fear of losing customers to the corner shop. breeders too.

At the start of the pandemic, cannabis sales skyrocketed as people stocked up on weed and other goods to help them get through lockdown. Initially, there was more demand for weed than supply and not enough to satisfy people’s appetites.

Now the opposite is the case. Due to inflation, people are belting out and splurging on extra cash for gas, groceries, and other commodities. This has led to an oversupply of cannabis products, with a customer base that suddenly has less money to spend.

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There’s too much weed on the market

Competition for customers among cannabis stores is intense right now due to the abundance of products on the market. As most other commodities in the economy rise in price, weed shops have kept their prices the same simply to get customers to the door.

“Any of the stores that raise their prices of their own [it] would be a small death sentence at this point. Customers know they have many choices,” said Jason McKee, general manager and buyer at Ganja Goddess in Seattle, Washington. “Price increases are a dangerous game.”

Indicative of the market as a whole, sales at the Seattle store appear to have dropped a bit, but there is no cause for concern. The shop didn’t have to cut staff or hours.

“There was definitely a small percentage drop in sales, especially as this is dragging on; Gas prices continue to rise. As long as that’s the case, I think we’re going to see a slowdown,” McKee said. “In general, we’re just trying to keep customers interested and making them want to come back.”

The same goes for breeders. They have to compete with other growers and cannot afford to raise prices when selling to pharmacies because there are so many products on the market. Both growers and retailers seem locked into current price levels at the moment and are afraid to raise prices even as their spending increases.

McKee said he buys produce from about 60 growers and sellers, and only two have raised prices and one has even lowered prices.

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Producers feel the pressure

The global supply chain is still a mess from the pandemic and shipping is being reduced worldwide. All goods coming in from overseas face long waits and backup at the dock, driving up prices for even the simplest of materials, including those needed to grow and sell cannabis.

“Like almost every industry, we really feel the pressure when it comes to the supply chain,” said Matt Gaboury, co-founder of House of Cultivar, a grower in Seattle. “We’ve had to switch suppliers for certain things just to even get the packaging material or some of the consumables we need… Everything is more expensive than it was three years ago.”

But as the prices of cannabis growing materials increase, the amount of money growers can get for their harvest when sold to dispensaries is no greater. Again, the abundance of weed on the market has led to intense competition among growers. Growers keep prices low just to sell produce, forcing them to bear the additional cost of materials.

“I think our industry is really suffering because the cost of all these things has gone up, so obviously our cost of production is going up and the price is staying the same. that means our margins are going down,” Gaboury said. “If anything, they trended down, not up, to account for inflation.”

Supply chain issues have also impacted the availability of basic materials. “Stuff that would normally take 60 days [is now taking] twice as long, easy. We had a packing container that was probably in port for almost six months,” Gaboury said.

Even the war in Ukraine is affecting the cannabis industry. Ukraine and Russia export 28% of the world’s fertilizers (which contain nitrogen, phosphorus and potassium). Wartime trade disruptions and economic sanctions have significantly reduced these supplies, sometimes doubling the price of fertilizers — and that includes those needed to grow cannabis.

“I can get most fertilizers, but the specific one I want for the summer isn’t available,” said Joe Poulter, owner of Fire Flower, an Oregon grower. He estimates that the cost of fertilizers and other materials purchased from agricultural suppliers has increased by about 25% in recent months.

In addition, items that you may not think much of but are essential for growing plants have increased in price. For his outdoor grow, Poulter estimates that 20-gallon pots have gone from about $6 per pot to about $9.

Gaboury of House of Cultivar mentioned that their coir, a medium used to grow plants instead of soil, has doubled or even tripled in price because it’s sourced overseas.

Multiply these seemingly small increases by hundreds or even thousands of plants for some grows and it’s a significant additional expense.

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What will the weed market do next?

The stock market’s dip into bear market this week does not bode well for the US economy, and the Federal Reserve took a big step last week to fight inflation by raising interest rates dramatically to cool the economy.

For now, retail prices in cannabis stores appear to be stable, but consumers are not buying as much weed as a larger portion of their budgets is being eaten up by gas, groceries, and other commodities that have increased in cost due to inflation.

At this point, it’s cannabis growers who feel the most pressure. Ultimately, growers may have to raise prices to make ends meet or face going out of business. Higher wholesale prices would likely result in higher retail prices at the pharmacy.

But unless all growers collectively can raise prices, some growers could be put out of business by others who can still afford to sell at low wholesale prices.

Aside from the woes of the US economy, another variable in this equation is that the cannabis industry itself is volatile, constantly expanding and contracting. It’s a highly competitive industry, with operators constantly opening and going out of business. The fledgling market is still figuring it out, even in states that have been selling legal cannabis for several years.

“We haven’t really achieved stabilization yet,” said Gaboury of House of Cultivar. “In a state like Washington, we’re more of a mature industry…so I think our roller coaster ride is starting to level off. Our dips and our highs aren’t as severe as they used to be. It’s still variable, but it’s becoming less and less and more consistent.”

The full impact of inflation on weed prices remains to be seen, but the market has shown resilience and is poised to bounce back. In the meantime, support your local weedshop and grower.

Pat Goggins

Pat Goggins is a contributing editor at Leafly and has specialized in cannabis cultivation after working for a commercial grower in Oregon for two years. When you’re not correcting typos, chances are you’ll find him on a boat or in the mountains.

Check out Pat Goggins’ articles

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