Understanding Cannabis Price Fluctuations in State by State Markets
What’s the price per pound of cannabis in the United States? When is it the cheapest to stock up? All of these questions are finally starting to see answers. While Colorado isn’t the largest cannabis market within the United States, it does serve as a good indicator on the national health of the industry.
In 2019, we saw several changes in price per pound. For roughly a year, the price per pound was dropping significantly. In October of 2018, a pound of flower could be purchased for $760 or less. Currently, the average wholesale price per pound sits at about $1000 according to the latest figures generated by the DOR (Colorado Department of Revenue).
Some growers says that the price estimations are conservative, with some per pound prices reaching $1300+. As a result to a higher price per pound, all of the subsequent cannabis products also will notice a price hike.
Price per pound is Seasonal
One of the key factors to the fluctuation in price per pound over the span of a year comes down to cropping cycles. The vast majority of the recreational cannabis market rely on “outdoor cultivation”. While indoor cultivation might be able to provide a year-long supply chain, outdoor cultivation trumps the process in sheer volume that can be produced.
With outdoor harvests only occurring once per year, the price per pound can be traced to the supply. After the fall harvest, there is a surplus of cannabis on the market. This drops the price per pound significantly.
As the year advances, most of the surplus gets used, and at the end of summer, it should be running low or depleted. In these instances, dispensaries and suppliers rely on indoor cultivation which has a higher cost of operation. Thus, the limited supply and steady demand, creates a problem within the chain increasing costs.
Government Also plays a role
In Colorado, they are always amending the law to make it more efficient. New regulations on dispensary shelving, microbial problems for commercial growers and suppliers running out of stock, all play a role in increasing the price.
This is expected with a relatively new industry. Over time, government interference should become less disruptive to the supply chain, and will stable out costs in that aspects. However, as the industry continues to mature, while addressing rising issues, prices will be subject to fluctuations due to government regulations and processes.
What this means for wholesale buyers
For those who purchase large quantities of cannabis, it’s best to plan for a large yearly investment during the December – January time period. This will ensure that you’ll get the lowest price point per point which would increase purchasing power.
This will allow you to keep prices within dispensaries highly competitive which should lead to increased sales.
Why all of this will eventually change entirely
There will come a point in time where the State cannabis market will be introduced to the “inter-state” cannabis market. Price fluctuations will still remain consistent within traditional seasonal changes, however, once inter-state cannabis commerce is introduced, the supply chain issue would be resolved.
Within Colorado, many dispensaries worry about running out of supply. With interstate commerce, this problem is remedied, yet nonetheless would impact wholesale prices.
The Maturing of an Industry
It’s refreshing to take a look at the key performance metrics of the cannabis industry. We’re getting a deeper understanding of market dynamics like never before, and with all of this data we are bound to improve and innovate.
The support for full scale cannabis reform within the United States is at an all-time high, and with Canada and soon-to-be Mexico, already working on national cannabis reform – we should see a federal shift after the 2020 elections.
Many politicians will be promising the country cannabis reform, however, it’s unlikely that anything significant will occur beforehand.
Nonetheless, despite all of the struggles in the industry, we are seeing it mature into a cornerstone industry. Within the next ten years we will be dealing in international cannabis commerce and with the potential reclassification from the World Health Organization on cannabis, international attitudes towards the plant will shift dramatically.
When this occurs, there will be a global “green rush” which will transform the industry into something vastly different than what it is today.
With a global hemispherical cannabis trade, we might one day see a stable price per pound in the international market; however, many of the consistent factors currently determining the price per pound will remain valid price indicators
For now, for local markets, using these metrics will allow cannabis-based businesses to reduce costs and increase revenue, while simultaneously providing cost-saving benefits to the end consumer.
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