No Bottom in Sight — Cannabis flower prices have fallen 42% in Massachusetts over the past year
Cannabis product pricing has always been something of a gray area for the cannabis industry during the last rollout of legalization. Different factors affect the price of cannabis products, and we see different trends in different states with legal markets. This has led to a record drop in the average cannabis price per ounce to $220 in October in legal markets across America. This decline has come despite the fact that 2022 saw an 11.6% increase in sales of cannabis for adult use compared to the previous year.
What’s causing this trend and why does Massachusetts appear to be the worst hit with a 42% drop in the cannabis flowering process since last year? Could it be just Massachusetts, or is it a larger problem facing the cannabis industry across the country? Read on as we answer these questions and more about why cannabis flower prices have suddenly dropped in Massachusetts.
Sales of adult-use cannabis began in Massachusetts in November 2016 to complement the state’s existing medical marijuana structure. With the advent of this branch of the cannabis industry in the region, sales and prices skyrocketed. The price of cannabis flower hit an all-time high in October 2021 at $3,625 per pound. Illinois is the only state known to have seen prices as high as Massachusetts during this period, with produce costing nearly $4,150 per pound.
Gross sales of cannabis retailers from the beginning of adult cannabis sales in Massachusetts to date total over $3.73 billion. This sum is divided among different types of cannabis products that are actively sold in the state. Cannabis buds make up the larger percentage of the overall market (43%), while other products such as vape products (17.6%), edibles (14.6%), raw pre-rolls (12.4%) and concentrates (9% ) make up the largest share of the rest of the market.
For those in the cannabis industry, the trend of cannabis downtrend has been a very significant and dramatic drop that many did not anticipate. For the sake of clarity, the decline in wholesale and retail cannabis prices was a nationwide phenomenon. The cannabis industry saw its lowest cannabis price level in three years between Q2 and Q3 2022. Although prices rose in April to coincide with the April 20th celebrations, prices have since fallen. Nonetheless, sales were still moving in high territory, meaning that other factors have impacted the price of products relative to available demand.
The decline in cannabis sales in different states is due to general and specific issues. The Massachusetts cannabis industry has its idiosyncrasies that have factored in the sudden 42% drop in cannabis prices, and those reasons aren’t far-fetched.
The first factor on the list of factors that have greatly impacted the price of cannabis products in the state is the increase in the number of growers in the state. Massachusetts was one of the states with high wholesale and retail cannabis prices when it started adult retail. The high prices were largely due to the fact that the state had a limited number of licensed growers to meet the available demand. With no proper systems and channels in place to transport cannabis across state borders, cannabis consumers had to shop at high prices.
However, the development of the cannabis industry has seen the influx of a growing number of growers from within the state. As these cultivators began large-scale production, supply began to complement demand, drawing on falling prices that were observed. This market shift is similar to that of Illinois, where the addition of existing cultivators to the canopy resulted in an increase in production and supply. This supply met the demand and curbed the scarcity, which was the main factor driving up the prices of the products.
Another factor that has had a major impact on Massachusetts cannabis flower prices is the actions of neighboring states. Vermont, Rhode Island, New York and Connecticut have made or are about to make changes in their operational cannabis markets that have indirectly impacted the Massachusetts market. Many Vermont retailers expanded their store structure on October 1, while Rhode Island is expected to follow by December 1, 2022. These moves, along with the expected start of adult cannabis sales in New York and Connecticut, had a massive impact on the Massachusetts cannabis process.
The competition available has matured the cannabis market to where it is now. The presence of competitors has caused the average Massachusetts flower price to drop from $381 per ounce in October 2021 to $220 per ounce in October 2022. This shows that the influence of emerging markets is a major factor behind the decline, and we could see more price declines in the coming months.
While it may be too early to make any conclusive statements, it’s clear that the decline in Massachusetts cannabis prices was no accident. The presence of more suppliers within the state has reduced the scarcity of the product, which has been a key factor in the skyrocketing prices. Likewise, the existence of complementary markets in neighboring states has a direct impact on what applies to the cannabis industry in Massachusetts.
Neither of these factors are going away any time soon, so it’s possible that this price drop will become the new norm for the people of Massachusetts. This is certainly good news for the end consumer, who now has to pay less for the same quantity of products, but not for the producers. Like any mature market, the Massachusetts cannabis industry needs to adapt to the new norm and see how things develop from there.
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