Wholesale cannabis prices across some principal markets experienced stabilization and even surges during the summer. Even so, the winds might change direction with the upcoming fall harvest potentially flooding the market with increased stock.
Supply and Demand
At the core of the price fluctuation lies the age-old dance of supply and demand. Ben Burstein, a strategist with the New York-based wholesale cannabis platform LeafLink, shed light on the situation. “Over the course of this month, you start to see a huge buildup of inventory across the industry.” Such surpluses during the harvest season historically correlate with plummeting prices.
LeafLink’s data, gathered from 13 states, reveals a silver lining. After enduring record-breaking lows, the wholesale prices of marijuana flowers have found steady ground in mature markets, notably California and Michigan. This stabilization is a boon for producers who’ve grappled with low prices for ages. However, it’s not all rosy. Retailers now wade through heightened costs, with stores in California paying nearly a third more year-over-year due to a significant decline in licensed square footage.
While California saw a price surge, Michigan’s prices rebounded by a notable 19% since the end of 2022, bolstered by the growth of retail outlets and rigorous action against unauthorized sales. Oklahoma and Oregon, previously recognized for some of the US’s lowest wholesale cannabis prices, also marked increases of over 7% and 5% respectively, compared to the prior year.
However, not all states enjoy such an upward trend. Cannabis Benchmarks, a Connecticut-based analytical firm, highlighted a “historic low” with prices diving to a mere $936 per pound, marking a 7.3% drop from last year.
Market Maturity and Seasonal Impact
The roadmap for the growth of the cannabis program remains consistent across states. Burstein explains that when medical marijuana programs launch, the price per pound can be as high as $7,000-$10,000. But as cultivation intensifies and the market matures, prices experience a downturn.
In Maryland, for instance, a soaring increase of over 40% in wholesale cannabis prices was observed from August 2022 to August 2023, with adult-use sales only launching in July.
Rebecca Raphael of Curio Wellness highlighted an interesting dynamic. Initially, medical consumers, grappling with inflation, reduced their weekly spending. Now, with the evolution into an adult-use market, certain licensees may have miscalculated Maryland’s market size. Consequently, this has resulted in the offload of excess inventory.
Rightsizing the Equation
In August, Colorado boasted the country’s lowest wholesale marijuana prices at a mere $810 per pound. However, Jon Spadafora, president of Veritas Fine Cannabis, indicated a reduction in dispensary footfall. As the industry faces challenges, producers might resort to drastic deals, inevitably driving down the market prices.
Arizona, on the other hand, witnessed a minimal year-over-year price hike in August by just over 2%. This minimal growth inspired strategic shifts in companies like Vext Science. Eric Offenberger, the CEO of Vext, explained their pivot from wholesale cannabis flower sales, choosing instead to channel cultivated products through owned retail avenues.
Burstein also touched upon Massachusetts, which has been grappling with a drop in cross-border shoppers from newly legalizing neighbors. The result? A dramatic decline of over 27% since August 2022.
A seasonal observation by Burstein suggests that states favoring outdoor cultivation witness peak prices in July and August. Yet, he forecasts a decline in the latter half of the year, noting that most cannabis price drops occur between harvest and early spring.
Price volatility is not new in the cannabis sector. However, with rising inflation affecting everything from the cost of cannabis flower to marijuana accessories, price fluctuations have become more pronounced. As the cannabis industry continues its intricate dance of supply, demand, and market maturity, stakeholders must remain agile. Adapting to these shifts might be the key to unlocking sustained growth in this ever-evolving landscape.