While industry experts have a good idea why wholesale marijuana prices continue to drop, the drop could soon stop.
According to a new report by cannabis industry analysts, the price of a pound of legal cannabis has been falling since the middle of 2016. The report by Cannabis Benchmarks, an independent price reporting agency, shows that the U.S. spot index for legal marijuana fell 13 percent in 2017 compared to 2016. A subsequent report by the agency found that marijuana prices had continued to dip slightly during the first month of 2018.
The spot index, which averaged $1,789 per pound in 2016, opened 2017 at $1,562 per pound and closed the year at $1,436 — a decline of 6 percent. By January of this year, the price had fallen to $1,292 per pound.
While the marijuana industry has been operating under a cloud of uncertainty in the wake of Attorney General Jeff Sessions’ rescinding of the Obama-era Cole Memo, analysts say that drop in wholesale marijuana prices has nothing to do with the perceived threat of federal interference, but rather simple supply and demand.
As report author Adam Koh told The Cannabist, the spot price uncertainty of cannabis is in line with other commodities, though pot prices are more susceptible to factors such as politics, varying state guidelines, and natural disasters.
While the overall drop in wholesale prices was primarily driven by significant overproduction in Oregon, most of the nation’s major Western marijuana markets — with the exception of Colorado — have seen decreases in their composite prices. As Koh adds, however, while the drop in prices has been steady, it has also been relatively calm.
“While prices declined in (Colorado and Washington), they did so fairly gradually,” he told The Cannabist. “The landscape in those two markets is pretty settled on the whole, so you didn’t see a lot of abrupt regulatory changes like you’ve had in the past — no big overhaul of rules like what took place in the first couple of years of those markets. So businesses were just able to go about their day-to-day operations with less turbulence.”
While the different markets across various states make predicting pot prices a bit of a challenge, Koh believes the continued lack of overall market turbulence will help the prices of pot to level off sooner than later.
“I think we’re getting close (to the bottom),” he says.
Stay tuned to the Sugar Leaf for updates.