Ask Our Experts 11/17/19: Price declines and their impacts on the market

 

Q: Given the states of cultivation and capacity this season, what are the impacts in terms of prices, whether wholesale or retail?

By New Frontier Data

A: A report over the summer from the State of Colorado (Marijuana Enforcement Division) provided some very interesting data on inventory and on prices. As Colorado and other markets mature, they can identify key issues that have not yet manifested themselves in more nascent markets. Colorado serves as a good microcosm of activity and dynamics in the broader cannabis market.

For example, explains New Frontier Data’s Senior Economist Beau Whitney, “while much has been written about the inventory situation in Oregon and how it has resulted in steep declines both in wholesale and retail prices, Colorado had a much more controlled rollout of its cannabis regulatory system. By issuing licenses first to medical growers and placing a cap on canopy, Colorado was able to control the amount of supply to the market.”

Also, unlike most states, Colorado only allows growers to increase their canopy if they can prove sufficient demand for their existing output. Thus, while Colorado sees periods of excess inventory, they periods are short-lived as more demand comes online to consume it.

Despite Colorado’s deliberate approach to canopy and supply, prices nonetheless have declined over time. Since the state began publishing data in 2015, prices for Colorado flower have declined 50% (roughly $1,000 per pound) while trim has declined 45% (nearly $164 per pound).