New Marijuana Markets Should Heed Warnings from Oregon, Say Economists
Oregon's marijuana industry is booming, but growers say they face a significant problem. An overabundant supply is forcing their prices down. Economists say new marijuana markets should look at Oregon as an example of a legal marijuana market gone wrong, and head the warnings of Oregon growers.
Fluctuations in price and supply are to be expected from a new market, says economist Stephen Easton. However, the market is not entirely new – it is a reinvention of the existing illegal market, which was robust in Oregon. Several growers say low-profit margins make their business unsustainable, and they plan to give up their state licenses.
Easton, who is a professor of economics at Simon Fraser University, says merely adding legal growers is not working for Oregon. While the state was focused on launching a robust recreational market, they failed to realize that consumption does not merely increase in proportion to supply.
A number of marijuana growers in Oregon now say they are pulling out of the recreational market and will focus on producing for medical companies. Inventory in the state is staggering. More than 450,000 kilograms of flowers are currently logged into the system with another 159,000 kilograms of extracts, edibles and tinctures.
Oregon's marijuana supply is currently estimated to be twice as much as demand. In response, prices have fallen about 50 percent since the market launched in 2015, dropping from $14 per gram down to just $7 per gram today. Some specialty growers are still able to sell their products for $15 or $20 per gram, but they are an elite minority.