New Mexico Preparing for Cannabis Supply Challenges Photo: Kyle Hinkson via Unsplash
August 3, 2021

According to the Santa Fe New Mexican, the Superintendent of New Mexico’s Licensing and Regulation Department, Linda Trujillo, has warned the Economic and Policy Committee of an impending “Krispy Kreme situation,” wherein demand is expected to vastly outstrip supply when the state’s adult-use cannabis market opens. Trujillo also said she expects an 18% plant failure rate to exacerbate the squeeze.

In late June, Ultra Health, the largest licensed medical cannabis operator in New Mexico, announced the release of a report from MPG consulting analyzing projected supply and demand in the state’s nascent adult-use market. The MPG report recommends that businesses be allowed to cultivate up to 10,000 mature plants in order to meet demand sufficiently.

Currently under New Mexico’s medical cannabis program, producers may cultivate up to 1,750 plants at any one time. The Cannabis Control Board (CCB) has now proposed an expansion of the number of plants allowed to growers. The proposed regulations for the adult-use market would allow producers up to 8,000 plants, with the ability to expand to 10,000 plants in the future. CCB will hold a public hearing on August 6, 2021, to hear comments on the plant expansion plan, among other proposed rules. The elevated production cap is intended to address the concerns about supply, especially within the medical program, when adult-use sales begin in 2022.  The most recent draft of the proposed rules would also cut the per-plant fee for large producers from $22 to $10. Levying a per-plant fee on producers would be a cost unique to New Mexico’s adult-use market, based on the knowledge of Cannabis Benchmarks analysts.

New Mexico’s adult-use cannabis market is scheduled to begin sales to consumers in April 2022, according to the legalization measure passed earlier this year. If that timeline holds, when producers can be licensed and begin cultivating expanded crops will play a large role in the amount of supply available once the market opens. Regardless, tight supply and upward pressure on wholesale flower prices are typical when a new adult-use market comes online.