Businesses across the recreational cannabis industry in Oregon are facing some of the worst economic conditions since marijuana was legalized over seven years ago.
The average price per gram of marijuana has fallen to $4, a record low according to a recent state budget forecast.
TJ Sheehy is the director of analytics and research at the Oregon Liquor and Cannabis Commission. He said Oregon retailers are running out of new customers, which is lowering demand.
“The people who were more price sensitive and were making their buying decisions based on price relative to the illicit market or whatever else, they already entered the market,” said Sheehy. “And so we just don’t have those people on the sidelines coming in anymore.”
Sheehy said because farmers are planning how much marijuana to grow at least a year in advance, it’s hard to anticipate changes in customer demand. That helped create the current oversupply.
Sheehy added that around 85% of cannabis in Oregon is grown outdoors.
“Most of that outdoor canopy is brought down in one month, in October,” he said. “And they’re being planted in April or May. And so you have people planting in one market where it’s really good, and then it grows over the course of six to nine months and then they’re harvesting it and selling it into very different market conditions.”
Last year, there was almost twice as much supply of cannabis as there was demand, according to Sheehy.
“We’re quite worried,” said Mason Walker, CEO of East Fork Cultivars, a grower and producer with a farm in the Illinois Valley. “We’re projecting a loss this year and sort of bracing for that. We’re in it for the long-haul, our plan is to be around as a company for a long time and continue our work. However, it’s looking like it’s gonna be a hard year for us.”
Walker said he’s seeing a price war between retailers as they struggle to attract new customers and face steep federal taxes.
“I think a lot of retailers are doing steep discounts on their inventory in order for them to remain solvent because consumer demand is dipping,” he said. “There’s a bit of a price war at the retail shelf level.”
Walker said the future of many marijuana businesses in the state depends on a successful summer season this year. Without that, many businesses across the industry could shut down or be forced to lay off workers.