Marijuana Prices Drop Forcing Growers to Get Competitive

Marijuana Prices Drop Forcing Growers Competition

The last few years have seen several wins for marijuana as more and more states have chosen to legalize both recreational and medical marijuana. As marijuana reform happens across the country and the supply for marijuana continues to increase, the cost of wholesale marijuana is being affected. Colorado has seen a 48 percent decline in marijuana prices, making the expected rate $1,300 per pound since recreational marijuana became legal in the state in 2014. In order to make the process affordable for growers, the latest technology is required. Updating cultivation facilities with state of the art technology is an expensive undertaking that may leave smaller growers struggling to keep up.

Competitive Upgrades

wholesale marijuana prices dropping leading growing competition
Wholesale marijuana prices are dropping, leading to growing competition.

Technology is available which would cut the cost of cultivation down to $300 a pound as opposed to over $1,000 per pound, which would enable those who can afford it to compete within the market. The growers who can’t afford the upgrades are likely to struggle. Cultivation Technologies have been selling cultivation technology that was originally used for tomato greenhouses, such as high efficiency lights and automated feeding and watering systems. J. Chandler, vice president of the Colorado based company, explained, “If you want to compete on a price game, you have to use versions of our technology to do it. Everybody is putting in irrigation systems, so that’s good for us.”

Dropping Marijuana Prices and What They Mean

While retail marijuana prices haven’t dropped as dramatically as the wholesale prices have, they have still seen a 25 percent decrease in Colorado since 2014, according to BDS Analytics. Despite the price drops, the entire industry continues to boom and is predicted to triple in revenue within 5 years’ time. This would bring the annual revenue from $6.7 billion, which is what it made last year, to $20 billion. Scotts Miracle-Gro Co. has also been buying out marijuana cultivation companies in order to enter the cannabis industry and profit from its rising business. The company has purchased specialty fertilizer companies as well as other businesses that specialize in hydroponics supplies and lighting.

Anticipating a Future Boost

Another boost is expected following the infrastructure establishment of recently legalized states.

Last November’s election saw the number of states with legal medical marijuana rise to 28 and D.C., which is well over half the country. California, Nevada, Massachusetts and Maine also joined Colorado, Washington, Oregon, Alaska and D.C. in legalizing recreational marijuana for adult use. It will likely take up to 18 months to have a full recreational marijuana infrastructure built in these states, but at the point where it is, the industry will see another strong boost.  A number of states, including Rhode Island, Vermont and New Jersey are trying to bypass a ballot vote and choose to legalize recreational marijuana through legislature. The rush to legalize comes in response to Trump’s decision to nominate Jeff Sessions, a known opponent of marijuana, as Attorney General. Lawmakers across the country are trying to secure marijuana laws while they feel they still can. Trump has promised not to interfere with state policy regarding marijuana and it’s unclear whether or not Sessions presents a legitimate threat.

As the industry continues to develop, a hope lies that the smaller growers will be able to keep up with the changing marijuana prices. Many offer cleaner, healthier, organic options and this may be where their power within the market will lie.



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