There’s a lot of affordable, tested cannabis flower to smoke at low prices in California this summer.
What a change from last summer, when a cannabis drought brought on by COVID demand and a seasonal shortage of the legal supply sent prices soaring at dispensaries.
Pot shop owners are selling 2020’s fall outdoor ounces at $200. They’re trying to make room for 2021’s early summer harvest, which is arriving in stores now.
Right now in west Los Angeles:
- The Higher Path has an ounce at $140 and half ounces at $55
- The Pottery has ounces at $132 and $128
- Herb has half ounces for $50 and ounces for $130
- MedMen Venice—which gets pilloried for high prices—has an ounce of White Runtz from Farmer and the Felon at $160, Pacific Stone 805 Glue for $155 per ounce, and Miss Grass half-ounces at $85
On budget flower shelves at dispensaries, legalization can now provide the number one value proposition of the black market: low price. That’s on top of convenience, legality, testing, and safety.
What changed supply and demand in California?
Cannabis consumer smiles are pot farmer tears, unfortunately.
Prices are tumbling because—three years after legal sales began—California is growing more legal cannabis than ever. Meanwhile, the number of legal stores remains a fraction of what they were in the medical marijuana era.
According to the California Department of Cannabis Control, the state has 7,297 active cannabis farm licenses as of Aug. 30, 2021.
By contrast, the state reports 1,130 retail store or delivery licenses. Retail store licensing remains subject to local control in California, and slow growth laws.
California has nearly seven licensed pot farms for every licensed retail store.Leafly analysis
The Humboldt County Grower Association’s Ross Gordon told MJBizDaily.com Aug. 7 that he estimates the state is growing 1,700 acres of legal cannabis, but stores are only selling an estimated 1,100 acres of product. Another producer Adrian Sedlin at Canndescent told MJBizDaily.com that legal supply is 12 times legal demand now.
After three years of feast and famine in the legal market, distributors are seeing successive floods of flower that started with the 2020 harvest and they don’t promise to recede.
Leafly’s sources corroborated reports of farmers struggling to get target prices for their spring season of light dep flower, coming down now. Older buds from the 2020 outdoor harvest sometimes cannot be sold, according to reports.
Major California distributors buy from farms and sell into stores, so they’re uniquely positioned to report on the health of the market. They’re concerned, they told Leafly.
“There is a big glut with more coming,” one distribution licensee told Leafly.
At major distributor/manufacturer licensee CannaCraft, Chief of Government & Consumer Affairs Tiffany Devitt said the market is “unbalanced” and “unstable” with “devastating” price fluctuations that swung from drought last summer to flood this summer. And there aren’t enough new stores to soak up the excess product.
“We went from a market where the system made it so difficult for cultivators to join the legal market that we didn’t have enough supply and prices were extremely high through 2019 and 2020.
“Today, we have a lot more supply but retail growth isn’t there because the majority of jurisdictions have banned retail,” said Devitt. “So even as the state has made good faith efforts to fix retail licensing, new licensees are just entering the same markets, slicing the market share pie there ever thinner, rather than actually expanding overall markets. More flower going into the same size market is driving prices down and that’s devastating California’s cannabis industry.”
Illicit industry may be playing a shadow role
A Northern California grower-retailer also said that not only is there a glut in the legal supply of weed, but there’s a flood in the illegal supply of weed that’s backed up into legal channels.
Instead of diversion—where legal weed leaves the tracked system, he’s reporting “inversion”—where cheap, unlicensed grown pot is entering the legal system.
“Oregon is producing tons and tons of THC and calling it hemp,” Leafly’s source reports. “Oklahoma is too. This depresses illicit market prices. And this forces prices down in the legal market. It does this by illicit products flowing into the legal system inexpensively. Or, by reducing illicit market demand for legal market cannabis, thus creating a glut in the legal market.”
The licensee reported not only high taxes and regulations driving inversion but low oversight of malefactors. Many cannabis growers and distributors straddle both sides of the market, he said.
“Over-taxation only works if there are regulations that are enforced. It doesn’t look like they’re doing it,” he said.
Cannabis economics are changing forever
Prohibition grossly distorted the cost of pot, but as it recedes, cannabis economics are changing.
Researchers forecasted a decade ago that legal cannabis could be 90% cheaper than prohibition prices. We’ve seen that validated in Oregon, which saw eighths hit as low as $6 in 2019.
The question has been “Where, when, and how fast would weed prices drop?”
The illicit market used to be cheaper than the legal market, and East Coast prices used to be higher than the West. Today, there’s 19 legalization states, more than 30 medical states, plus hemp legalization with leakage into the THC markets.
Today, a major California retail owner and market expert told Leafly, “The legal and illegal market prices have equalized.”
Fixing the legal California market’s oversupply problem will require new stores in new cities, and lowering cultivation taxes to match the shrinking profit margins industry-wide, said Devitt.
“There’s no quick fix, but to bring more stability to the market and sustain one of the State’s great heritage industries, we need to open up more jurisdictions to retail and we need to fix the cultivation tax system, which is a flat tax based on weight. At $154.40 per pound, the tax rate is currently 20% to 70% or higher, while taxes were 10% to 15% a year ago,” said Devitt.
What’s a farmer to do?
As legal cannabis supply increases and prices fall, winners and losers among pot farmers are emerging.
If you’re thinking of growing legal—grow superb, highly potent, flavorful exotic small batch pot. The top end has never been pricier: $75 an eighth-ounce for artisanal Wonderbrett Peach OZ. That’s what Justin Bieber was buying in July in LA.
But at the bottom end of quality, small farms can’t compete against the flood of medium or low-quality bud. (That’s similar to the traditional farm economy where heirlooms command a premium.)
Another factor is location, with remote outdoor farmers under more pressure to move pounds out the door.
“[Prices] are definitely starting to drop, and it seems the more remote you are the more willing you are to negotiate,” one broker told Leafly.
Price drop:California cannabis wholesale pricesover time
Indoor-grown high-grade flower buds
Pound of indoor OG Kush at late ‘90s prohibition peaks: ~$5,000 (interviews)
Pound of indoor exotics in 2021: ~$2,000 (interviews)
Light dep (aka mixed light) buds
Pound of light dep in 2020: $1,300-$1,600 (MJBizDaily.com)
Pound of light dep in 2021: $600-$800 (MJBizDaily.com)
Outdoor (aka full sun) buds
Pound of 2020 outdoor in 2020: $800-$1,000 (MJBizDaily.com)
Pound of 2020 outdoor in 2021: $200-$500 (MJBizDaily.com)