Cannabis production in the United States exceeds demand

The meteoric rise in legal cannabis production in the United States is forcing the industry's entrepreneurs to renew themselves. Producers are now exploring new cultivation techniques to reduce production costs.

Too much supply for demand

America is experiencing the first difficulties of an open cannabis market. The supply of high-quality, diverse weed is abundant, and continues to increase with each passing month and license distribution. In Colorado, the price of a pound of recreational cannabis (453 g) at a wholesaler cost around $2,500 at the time of legalization in 2014. Since then, this price has dropped by almost 50% and is now around 1300 dollars.

According to Troy Dayton, CEO of cannabis consortium ArcView, «Anyone investing in the cannabis industry should expect prices to fall steadily. He believes that companies specializing in agricultural yields are the cause of these price drops. A view not denied by J.Chandler, CEO of local company Cultivation Technologies: »If you want to be competitive, you have to go through us and our irrigation systems. What's good for us is that they all need it.«

While entrepreneurs are seeing their margins shrink, the average cannabis consumer is smiling even more than usual. The average final price of a gram of cannabis in dispensaries stands at 6.61 $, whereas it was around $8/10 in 2014.

The return of outdoor culture

The indoor cannabis cultivation has developed thanks to (or because of, depending on your point of view) prohibition. By seeking to protect their crops, illegal growers have revolutionized cannabis cultivation cycles. But these techniques seem doomed to disappear in places where the climate allows outdoor cultivation. In a bid to cut costs, growers are looking to get rid of all unnecessary expenses. Brandy Keen, a grower from Colorado, sets the tone for the years to come: «You can consume half as much energy outdoors as in a warehouse in. 4 well-insulated walls, a glass ceiling, optimized water re-condensation and greenhouse cultivation becomes much more profitable.»

The future will be green and sweet for those who expand their growing area. Such is the case for Brian Lade, a producer in Washington State. He is investing $25 million to expand his farmland to 12,500 square meters and multiply his production by 16. In this state, the price of grass has been divided by 2 in just 2 years. A headache for the public authorities, who had indexed taxes to the price of cannabis. Tax revenues will therefore fall short of expectations.

Via The Cannabist

Théo Caillart