Cannabis inflation, inschmation

by DGO Staff

Everything may seem like it’s getting more expensive, but the one thing that isn’t is weed

Whether we like it or not, the price of nearly everything is going up. Gas, groceries, restaurants, and airline tickets. But the one thing that is getting cheaper? It’s cannabis.

That’s right. Weed prices are dropping, right in the midst of rampant issues with inflation.

So, you might be asking yourself if cannabis is immune to inflation. The short answer is no. The Colorado cannabis market is not free from the effects of inflation, but there are some factors in the weed market that are driving the prices down and keeping them there.

What’s causing the drop in recreation-al prices?

For starters, the relatively small supply chain for Colorado’s weed market is one of the most significant factors in driving down the price. Marijuana is still federally illegal, which means that any weed grown in Colorado has to stay in Colorado. As such, there’s limited travel required for all of the products created or grown within the state’s borders, which keeps shipping rates incredibly low at a time when shipping rates are insanely high.

But that’s not the only issue. Dispensaries are also seeing less
traffic and purchase amounts are dwindling due to customers
having less disposable income. And what’s causing the limited disposable income? You guessed it. Inflation. It’s causing people to be hit with higher prices in nearly every other aspect of their daily lives, which limits the cash they have to spend on weed.

There’s also an abundance of weed because demand saw an uptick during the pandemic. Because people were forced to stay home during the pandemic, they were buying more weed (likely to keep them sane. Trust us; we were there too). In turn, growers produced more and more to keep up with the demand, but now that supply is outweighing the demand.

Don’t believe us? Take a look at the numbers.

The supply of cannabis produced in the last 18-24 months far exceeds what consumers are buying. In July 2022, the price of a pound of flower dropped to $709, nearly half the price in 2020 — and the lowest price since the state began reporting prices in 2014.

An increase in the number of cannabis businesses has also helped to drive the price down. In 2014, 48% of all weed sales in Colorado were in Denver. In 2021, that number had dropped to 31%, likely due to all of the markets across the state.

Flower prices are also dropping in part due to more people growing, cannabis being cheaper to grow, and massive companies moving into the state and affecting the market with massive grow operations.
Neighboring states are now selling recreational cannabis, which is another reason the price has decreased and why sales have slowed in the last year. Residents of Southwest Colorado have no problem driving to New Mexico to buy weed if they choose to, but residents in New Mexico are not driving an hour or more to purchase cannabis in Colorado like they once were.

What’s causing the downturn in medical?

Heck, it’s worth pointing out that even medical sales are down nearly $40 million in the last two years. There are numerous factors causing that downturn.

For starters, patients are not allowed to receive medical cannabis endorsements through telehealth visits. Patients could do so during the pandemic, but that window closed back in July. Plus, House Bill 1317 put a cap on the amount of THC concentrate patients can buy each day. While patients used to be able to buy 40 grams daily, they are now limited to 8 grams a day. This law also allows the state to track purchases to prevent medical consumers from going to multiple shops in a single day, and makes getting
a medical card a lot more complicated for 18- to 20-year-olds. Those younger patients must visit a doctor in person and obtain written consent from two doctors from two different practices.

All of this adds to the abundance of supply in the state that is continuing to stack up.

So what’s the issue?

Well, weed may be cheaper to buy for you, but shops are struggling, and that is a problem. Sales are down across the board.

In turn, there are a handful of Colorado growers who want to see the state put a freeze on new licensing until things level out.

More growers producing more cannabis will only keep driving the price down further, they argue, making it harder for the smaller operations to stay afloat — especially as they compete against the larger grow operations across the state.

Still, there are some in the industry who don’t see the prices as a decline, but more of a leveling off due to complete oversaturation of the market. People are still buying weed, but it appears they are not buying as much. Whether that trend will continue remains to be seen, but if it does, it could have some not-so-great effects on Colorado’s cannabis industry.

 

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