Cannabis Prices Plummet
Cannabis prices in Colorado are in a free-fall, having dropped by almost 50% in the past year alone, according to an online cannabis-distribution website.
According to the website Tradiv — once referred to as the startup “striving to be the Amazon of the marijuana industry” — the wholesale price of a pound of cannabis has dwindled by almost half since last October, from $2,400-$2,600 to the current price of between $1,400 to $1,600.
“In less than a year, we’ve seen wholesale prices drop to nearly half of their previous totals,” says Tradiv director of sales John Manlove. “We’ve never seen prices like this.”
The reason for the drop is that cannabis has flooded the Colorado market. The state has extended moratoriums on new retail dispensaries receiving marijuana distribution licenses — as well as growth licenses — which has left the existing companies to soak up the rest of the licenses to consolidate the market.
The state has also not placed a limit on the number of cannabis plants a given facility may cultivate.
As such, the state’s growers have begun churning out marijuana at a rate that has grown the market and pushed prices down, sometimes even hurting their very own profits on raw cannabis flowers.
The changes in pricing have not just occurred in Colorado: They have also been seen and felt in Washington, one of the four other states in the country to have legalized recreational cannabis.
In the two years since Washington introduced legal marijuana to the marketplace, prices for cannabis in Washington have been slashed in half, with grams initially selling for $25-$30 and now selling for just over $10, according to the Washington Liquor and Cannabis Board.
“In the beginning, we were fighting to keep our shelves stocked,” says Andy Dhalai, who owns the 420 Holiday dispensary in Longview, Washington, and who feels increasingly squeezed by lowered pricing. “Sometimes it feels like a race to the bottom.
Higher initial prices for cannabis in Washington may be attributable to the novelty of the substance, as well as shortages. Now with the landscape having changed dramatically in two years, prices “are now steadily falling at about two percent per month,” says Steve Davenport of the Pardee RAND Graduate School.
“If that trend holds, prices may fall 25 percent each year going forward,” Davenport predicts.
So how does a consumer or observer account for these changes in prices? There may be no avoiding the precipitous and continual drop in cannabis prices. However, there may be a more nuanced way to think about cannabis going forward, with higher-end cannabis taking its place alongside the more generic forms. This, according to Carnegie Mellon Professor Jonathan Caulkins, could be the future of marijuana.
“It’s just a plant,” Caulkins says. “There will always be the marijuana equivalent of organically grown specialty crops sold at premium prices to yuppies, but at the same time, no-frills generic forms could become cheap enough to give away as a loss leader – the way bars give patrons beer nuts, and hotels leave chocolates on your pillow.”