Breaking Down An Ounce: The Factors Affecting Cannabis Prices

Depending on where you reside, cannabis has never been as accessible as today. Though certain states have yet to legalize recreational cannabis, the cannabis market has proven lucrative. 

Recreational and medical sales, however, are slowly following behind the black market, which, according to Forbes, is aiming at $100 billion in revenue this year. 

Recreational and medical cannabis markets offer an array of products that have undergone rigid standards – a stark contrast to black market products. 

However, there are a few things to consider when walking into a dispensary filled with plenty of product options.  

Most people will first look at the weight and price to determine whether the product is worth taking a toll on their pockets.

The more you purchase, the more the price decreases, as it is in most industries. That is especially true with the cannabis industry, where purchasing an ounce can be more cost-efficient for habitual users than buying it by the eighth or a half an ounce.

High-Quality Vs. Mid-Quality

A 2020 review published by the American Addiction Centers Oxford Treatment Center broke down the prices for cannabis across every state and territory across America using priceofweed.com. 

For high-quality cannabis, naturally, you will be spending a bit more, but you would be surprised at the prices in some of the most expensive states. 

Places like the District of Colombia, Virginia, and North Dakota (where restrictions applied at the time of the Oxford Treatment Center’s review) had astronomical prices for cannabis. 

In 2020, D.C. prices stood average at $597.88 per ounce of high-quality cannabis compared to $551 for mid-quality. North Dakota’s most potent cannabis was priced on average at $383.60 per ounce, while mid-quality stood around $330. And Virginia’s ounces of high-end cannabis stood at $364.89 versus $311 for mid.

The price for high- and mid-quality cannabis remains higher for the District of Colombia. However, South Dakota and Minnesota beat out Virginia and North Dakota for the most expensive mid-quality ounces. In South Dakota, 28 grams of mid averages around $335 per ounce. High-quality cannabis is roughly $351. In Minnesota, chances are you’ll be paying upwards of $331 for mid-quality, while high-quality cannabis is far cheaper at $280.

The states with the cheapest ounces of high-quality products are all in the West, where legalization has been prevalent over the years. These states include Oregon ($210.75), Washington ($232.90), and Colorado ($241.74). Meanwhile, the states with the cheapest ounces of mid included Washington ($196.82) and Oregon ($187.09). Mississippi held the lowest average at $170.22.

The average price of high-end cannabis in America is $326.06 in 2020, while the mid-grade average is around $265.58. Of course, these averages are similar to the cost of an average joint (0.66 grams).

The Factors

Determining the cost of cannabis is similar to any other industry: supply & demand. Americans consume cannabis more now than ever before, with support for legalization at an all-time high. 

Beyond the basics of the economy, there are several factors to consider before cannabis hits the shelves, according to theweedblog.com.

Location

As suggested by the breakdown above, states that have legalized cannabis are often more affordable. The west region, for example, has an ideal climate for growing cannabis outdoors, making it far more accessible, which, in turn, helps reduce the average cost of an ounce. Plus, states along the West Coast have already proceeded to legalize cannabis and establish a legal market.

The states that have enacted cannabis reform laws also have been able to master their grows, reducing production costs while perfecting their cultivation. These factors ultimately help decrease the cost of cannabis to a significant degree.

The Difference In Indoor Vs. Outdoor 

There is a notion that cannabis grown outdoors does not measure to the same quality as indoor. However, that is not necessarily true. Sure, indoor cannabis is typically more costly, but that’s due to the expenses of growing the cannabis – the space, lights, water supply, etc. These factors add to the price of the products that sit on dispensary shelves.

Marijuana grown outdoors can be of equal quality if cultivated and harvested correctly. Plus, there are fewer expenses, less energy, and minor environmental impact than growing indoors.

Profit Margins & Overhead Costs

For businesses that rely on indoor growing methods, their sale prices include expenses involved with indoor cultivation. For cannabis dispensary operators, there are the overhead costs of the store, which can quickly rack up. 

Between licensing fees, staff, and the general maintenance of the shop, the price of cannabis products, whether a pre-rolled joint or a full ounce, will be affected by the profit margin for business owners.

Packaging

Branding is truly the selling point for any company, but how that impacts prices is no secret. The cannabis industry must adhere to strict regulations such as child-resistant packaging. 

Companies can get creative with their branding within the rules. Some companies prefer to use generic dispensary packaging while others go all out to create a unique brand experience. 

Taxes 

A significant component of the price of cannabis is the local and state taxes associated with sold products. In Oregon, for example, the state tax is upwards of 17% for cannabis products and another 3% from local taxes. 

It is not just the sales taxes that affect the price but also the tax rates on cannabis retailers. According to an article published by MJBiz.com in April, section 280E of the Internal Revenue Code prevents statewide legal cannabis retailers from deducting basic expenses offered to other types of businesses, including rent, utilities, insurance, and maintenance. Often, this results in companies paying 80% to 90% in federal tax rates, or even close to 100%. 

With global cannabis sales projected to double by 2025, cannabis prices could increase or decrease.