Colorado’s weed is getting much cheaper.
In October, the cost of a wholesale pound of cannabis was around $2,400 to $2,600. That price has almost been cut in half to between $1,400 and $1,600 last month, according to data from Tradiv, an online marijuana-distribution platform.
“In less than a year, we’ve seen wholesale prices drop to nearly half of their previous totals,” John Manlove, director of sales at Tradiv, told Business Insider in an email. “We’ve never seen prices like this.”
The reason prices are dropping so rapidly is because the market’s getting flooded. As growers ramp up production, the huge amount of marijuana hitting the market in Colorado is causing a “steady decline” in wholesale prices regardless of demand, says Manlove.
The story’s similar for Washington, where the price of legal marijuana has dropped precipitously since the first recreational dispensaries opened, according to The Cannabist. Wherever there’s a legal market for marijuana, prices have been dropping.
Manlove says that this has to do with the way cities in Colorado, like Denver, regulate the recreational marijuana market.
In May, Denver’s municipal government extended a moratorium on granting licenses to new retail dispensaries as well as marijuana cultivation facilities.
This has allowed a “minority of large cannabis business owners” to buy and consolidate the remaining licenses, says Manlove.
And without strict “canopy limits” — the amount of plants one facility can grow — the influx of marijuana into the Colorado market will continue to cause prices to drop, says Manlove.
So, Colorado growers, with few limits and access to a huge market, are able to build an economy of scale, reducing prices across the board.
Though low prices are good news for consumers, cultivators will have to cope with lower profit margins on raw marijuana flowers.
According to Headset, a cannabis-intelligence platform, the highest-margin products for dispensaries are those that make marijuana easier to consume, like edibles, beverages, and pre-rolled joints.
If these trends continue, then raw marijuana will continue to get only cheaper. And it’s likely that the retail market will adapt by pushing further into such higher-margin products.
Original Article via Business Insider