Why Do Marijuana Shortages Keep Happening Every Time Marijuana Is Legalized?

Why Do Marijuana Shortages Keep Happening Every Time Marijuana Is Legalized?

Whether it's a reluctant industry or incompetent regulators, one thing is certain: we're not so great at this.

Vallejo, California shares an area code with most of the Emerald Triangle, where, even today, with erratic licensing squeezing small producers out of the burgeoning market, an awful lot of high-quality cannabis is grown, processed, sold, and smoked. It was and is the Wine Country of weed, the Loire Valley of terpenes, California’s cannabis basket. That is to say, it should go without saying that the 707 has not and is not about to run out of marijuana anytime soon.

Thus, for those adult cannabis consumers looking to exercise their still-new rights to purchase some legal marijuana — and at the start of the seventh month of licensed and regulated retail sales — a dispensary with little legal cannabis to sell and lots of bare shelf space is an incongruity, a very dumb and very obvious cosmic joke.

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Amid such bounty, the rare brands that passed the test were selling for $70 an eighth or more, prices not seen outside of real supply shortages in the black market days.

Within a few weeks, the industry had recovered, at least partially. More than 70 brands had figured it out (with an untold number of smaller outfits giving up). For buyers, it was a brief hiccup, soon to be forgotten.

But a hiccup at all, in a state with the country's oldest pre-established industry and consumer base, is a clear sign something isn’t working. Someone had blundered, which would be bad enough, if it weren’t for the fact that scenes like this played out all over the state — in just the way experts and observers had been predicting and fearing for months.

“A Hard Reset”

New California state regulations around marijuana purity, testing, and packaging went into effect July 1. And from seed to sale, the industry just wasn’t quite ready. For the last few weeks of June, dispensaries held emergency fire sales to get rid of noncompliant product — flower that hadn’t been tested, edibles in the wrong packaging, dubious oil of unknown potency from mysterious sources. According to a survey of anonymous dispensary owners conducted by a Mendocino County couple who own a topical cannabis brand, in some cases, tens of thousand of dollars’ worth of product or more had to be discarded.

The marijuana industry had a “hard reset,” as Leafly termed it. The industry knew this was happening, and when — knew all about it for months, and yet still couldn’t manage without a disruption big enough to jolt consumers.

Suppliers are due some of the blame. They’d been overproducing for years, and if they could not or would not meet the standards that they knew would eventually apply to them. Then again, these are commodity farmers, and ones who don’t enjoy government guarantees or subsidies, like most everyone else plying the land in California. They are at the mercy of the market, and with everyone else growing as much as they could while rules were lax, the market was flooded.

But in other cases, government came down too hard. New testing rules — including one requirement banning the sale of marijuana deemed “too wet” — put some manufacturers out entirely, and left cannabis users and patients to scramble for what they could find back on the underground market. There, they found a significant number of fellow customers they might have recognized at old medical dispensaries, before a tax burden of 35 percent or more, depending on jurisdiction, shooed them away from retail outlets before they opened.

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Why were brands and dispensaries seemingly caught off guard? They might simply not have been able to move so far so fast. So did regulators do enough to help them? And if so, why do they keep repeating the same mistakes seen around the country?

Is this… normal?

This also says something deeply ironic about marijuana legalization: Sometimes, from both sides, consumer and producer, things were easier and cheaper in the old gray-market days. This is admittedly a myopic view. The outlook for people formerly incarcerated or with criminal records for marijuana ruining career or benefits prospects has certainly improved, significantly.

The New Norm of Reform

With few exceptions, interrupts like this have become a feature of marijuana policy reform. In Nevada last summer, it happened when supply outstripped actual demand. In Pennsylvania earlier this year, where medical marijuana was so popular and dispensaries stretched so thin that it prompted the end of a state ban on cheaper, easier-to-use smokeable marijuana (even though patients are clearly instructed that their cannabis flower is "not for smoking). And in Massachusetts, where voters legalized recreational marijuana on the same night as Californians, recreational buyers are still waiting to hear when sales will start. They will, once regulators get around to approving an independent testing lab — but they also might not, as localities throughout the state, given the power of choice whether or not to allow a commercial marijuana industry inside town limits, have opted to become the cannabis equivalent of dry counties.

Good thing bootleggers never prosper, and in marijuana producing areas that suddenly have trouble selling marijuana, there is no strong financial incentive to break the law.

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With transition from black-market to legal or somewhat-legal in every state where the experiment is tried, it’s clear that regulators and policymakers aren’t quick to learn lessons from other states. Meanwhile, states that have mature recreational marijuana markets are back in a very familiar and predictable pickle: They’re full.

Epic oversupply situations are causing prices to fall to historic lows in Washington and in Oregon.

Cycling between feast and famine, with enough uncertainty to make the faint-of-heart or low-of-funding consider other work. Famine, in a time of plenty. To err is human, and to suffer shortages and interruptions is the penalty all emerging marijuana markets must apparently pay.