Cannabis Prices Are Plummeting Thanks To Legalization

Cannabis Prices

It’s the opposite of what the experts predicted back in 2015. But, whatever. Cannabis prices are plummeting, and we have to note but legalization to thank.

It’s simple supply and demand. But when experts were analyzing market trends last year, and taking in the massive corporate bloom of the cannabis industry, most were expecting price hikes.

And price hikes happened, but they happened just after legalization when the uncertain business environment had sellers hedging their bets.

Overall, however, the retail price of marijuana is sliding across the nation. As regulations replace prohibition, the “risk premium” of cannabis is going way down. Now that the cost of doing business doesn’t have to factor in the expenses of being illicit, prices can find their more natural level.

In fact, black market operators are beginning to find themselves priced out of the game entirely. Think about alcohol. Alcohol costs tripled under prohibition and quality control plummeted. That’s one analogy used by the researchers who published a study last week analyzing the price slide in Washington state after legalization took effect in 2014.

Harriet Taylor | CNBC

Availability also makes a big dent in the price. In states like Massachusetts, prices are still high because consumers don’t have that many options. Medical marijuana restrictions also limit the pool of available buyers, decreasing demand and keeping the price up.“My dispensaries were charging $55 an eighth before tax when we first opened in 2014, and now we charge $25,” said one Colorado operator.

That dramatic price drop is happening in Washington and California, too, not just Colorado. Californians pay up to $20 per gram for marijuana in dispensaries. In Washington, cannabis prices per gram have slipped from a post-legalization high of $25 per gram to less than $10 per gram now.

Certain holidays and special occasions, like last month’s 4/20 celebrations, took cannabis prices to unbelievable lows. In Colorado the average price per retail gram was down to $5.77 on April 20, BDS Analytics reports.

Ultimately, cannabis’ commodity cost could be $2 per gram, researchers estimate. The drop in cannabis prices, however, doesn’t seem to be impacting the projections for a record setting cannabis sales and profits.

Researchers also noted that although prices are dropping because of legalization, cannabis use among teenagers is not on the rise due to loose weed laws.