What Oregon’s Cannabis Surplus Means for the Industry

Oregon has more weed than they know what to do with.  From an outsider’s perspective, that might not  seem like such a bad problem to have; that is, of course, until you realize what effects this surplus is having on the rest of the cannabis industry.  Since it is still illegal to transport cannabis between state lines (for now), the cultivated cannabis is stuck in perpetual limbo confined within the state.  This has led to state officials putting a halt on new marijuana licenses so that they can catch up processing the thousands of backed-up applications.  Let’s look closer of the extent of this cannabis surplus, the effects that it has had on Oregon and nearby states, and the potential effects it will have on the industry at large.

Is Cheap Cannabis Bad for the Industry?

According to several recent reports, Oregon has produced enough cannabis to supply state consumers at their current consumption rate for the next 6 years.  Just two years ago, farmers were able to offload a pound of weed for $1,500.  Last summer, that price dropped to $700 a pound.  As growers continue to produce cannabis, the price continues to drop.

While cheap cannabis sounds like a godsend initially, the implications of such an extreme nadir are far-reaching.  Operating at a loss stagnates business growth, impacts wages, and decreases job growth across the country.  It also affects the national industry price per ounce averages while also affecting the prices of neighboring states dramatically.

Data from a recent study by the Oxford Treatment Center shows that an ounce of high quality weed in Oregon costs $210.75.  In contrast, you can fly to Washington D.C. and you’ll shell out $597.88 for just one ounce of high quality cannabis.  Washington state has also shown signs of surplus recently with growers harvesting over 31,000 pounds of cannabis, but retailers only being able to sell about 20% of that production.  This surplus has led to Washington’s per-ounce price to be only $20 higher than Oregon at $232.90.

Colorado, on the other hand, has been dealing with issues with gray market cannabis production since it legalized recreational cannabis in 2014.  Colorado state officials have been working hard to keep gray market sources and any type of cannabis surplus contained, but due to the state’s proximity to the surplus markets of Oregon and Washington, it’s led to price an ounce being just $35 more than Oregon ($245.74).  So, what can these states do to offload their massive surplus of weed?  One idea that is currently making its legislative rounds on Capitol Hill is the legalization of interstate cannabis exportation.

What’s the Word on Interstate Cannabis Export Legalization?

Currently, cannabis companies that want to sell their products in different legal markets have to set up entire supply chains, from manufacturing to packaging, in each state.  If Oregon were able to export their cannabis, it would save these other states from having to implement their own complex seed-to-sale tracking systems.  If Oregon can legalize and implement out-of-state sales, it would be a move of major significance for the state and the entire cannabis industry.

The Oregon Legislature is considering a bill that would allow for an interstate compact with states that have legalized marijuana and share borders.  This would allow neighboring states to share cannabis between themselves, thereby helping to combat overproduction issues and spillage into black and gray markets.  This legislation could position Oregon to be a leading exporter of cannabis in the future if it were to pass and could possibly lead to other states following the state’s lead.

What Can Oregon Do If Export Legalization Doesn’t Come to Fruition?

This cannabis surplus problem begs to question whether Oregon has too much weed or not enough people to consume it.  State lawmakers felt that limiting the supply of cannabis is so important (even in times of severe surplus) that they voted overwhelmingly against limiting the number of marijuana licenses that it issues.  Lawmakers argued that the surplus could be extinguished if the state used its supply smarter.  Unfortunately, there was no insight into how that could be accomplished, which leads to an uncertain future filled for Oregon and the rest of the cannabis industry.

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