Oregon marijuana prices are at an all-time low.
Median retail prices fell to $4 a gram at the start of 2023, according to state regulators, off 16% from a year earlier. Last year’s decline continues a long downward trajectory that has reduced prices by more than half in the seven years since recreational marijuana became legal in Oregon.
“The Oregon recreational marijuana market is in arguably the weakest economic position it has been in since the inception of the program in 2016,” the Oregon Liquor and Cannabis Commission wrote in its annual report to the state Legislature last month.
Falling prices are great for consumers who weary of inflation’s effects on most other products, but abysmal for Oregon retailers and growers. State economists warned last month that tax collections are below forecasts. That’s not just because falling prices have reduced the state’s cut — amid the steep decline, struggling cannabis businesses are “unable to pay all their bills.”
Oregon collects a little more than $150 million in marijuana tax revenue annually.
The industry’s deepening troubles are a notable development, given that Oregon’s cannabis market has grown into a $1 billion market.
“We have a record amount of overdue accounts receivable, retailers that owe us money,” said Mason Walker, CEO of East Fork Cultivars, which farms cannabis in Josephine County. “That’s happening across the market. It’s causing pain up and down the supply chain.”
The reason prices keep falling is Economics 101: Supply is much higher than demand.
Marijuana grows abundantly in Oregon. But cannabis remains prohibited under federal law and can’t be sold, legally, across state lines. And while cannabis has proven increasingly popular, the state’s 4.2 million residents consume only a fraction of the marijuana the state’s farmers grow.
The OLCC estimates Oregon cannabis demand was just 63% of supply last year.
Sales in 2022 fell by more than 17% to $994 million, the Oregon industry’s first-ever annual decline. Production is dropping, too, as farmers respond to falling prices. But supply and demand are far from balanced.
Farmers produced less cannabis last year, as it became clear the surge in demand that accompanied the pandemic wouldn’t continue. But state regulators say there’s another problem for retailers and growers – large stocks of inventory left over from prior years. That could hold prices down indefinitely.
“These low consumer prices force businesses to operate under low margins and extreme pressure,” the OLCC wrote in last month’s report.
Some major cannabis companies have left Oregon altogether, among them Curaleaf, one of the nation’s largest marijuana businesses.
“Those (exits) are very notable, and they leave a vacuum for the survivors to fill,” Walker said.
Still, Walker said he doesn’t see any quick fix for his industry.
Oregon stopped issuing new cannabis licenses last year in reaction to the supply issues, but Walker said that has had very little effect because so many licenses had been issued already.
And while marijuana remains illegal at the federal level, more individual states have legalized it. Walker said that reduces spending by people who travel to Oregon to buy cannabis, some of whom used to buy enough to quietly take some home when they left.
Oregon’s cannabis businesses have weathered hard times before, Walker said, most notably during a sharp decline in prices at the start of 2018. But he said the industry is coping with “fatigue” from the prolonged downturn, with a growing number of businesses giving up and selling their licenses for a fraction of what they had hoped.
“It’s not a completely screwed up market,” Walker said, “but it’s challenging.”
This is Oregon Insight, The Oregonian’s weekly look at the numbers behind the state’s economy. View past installments here.
— Mike Rogoway | mrogoway@oregonian.com | 503-294-7699
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