The state monitors and updates the average market rate for a pound of marijuana every six months. It’s currently at a low of $1,816 per pound of marijuana flower.
“About $2,500 is what I could sell it last year at this time. Now around $1,500 a pound. Depending on the quality,” Sally Vander Veer said, President of Medicine Man in Denver. “That’s a lot. About a 40 percent decrease in one year. So it’s significant. But we are ready for that. We are large enough that we can absorb lower margins with regard to our flower.”
Medicine Man produces about 7,000 pounds of marijuana a year and also sell extracts for a higher price that make up for the shrinking margin. Smaller cultivators may have a tough time pushing through the steady decline in the price of weed.
The 4-year-old industry is experiencing unprecedented supply for a relatively steady demand. There are approximately 600 marijuana cultivation licenses in the state.
“I don’t think anyone is sure what’s going to happen. There’s been a steady and gradual drop in price both in our state and in Washington,” said University of Denver business professor Paul Seaborn. “I think the marijuana industry is responding to supply and demand but this is uncharted territory because we’ve never had a legal industry where we can see these fluctuations.”
Small businesses could suffer as prices plummet but the effect on the state economy remains unclear. Some in the industry say the price drop will bring in more consumers once committed to the low prices of the black market.
More volume could make up for lost taxes resulting from a lower price. But if that volume doesn’t come in, Seaborn speculates changes could come.
“The state could put restrictions on new supply either through capping licenses like we’ve seen in Denver or adding new taxes at some point,” Seaborn said.