The Oregon Cannabis Market: A Case Study in Oversupply Photo: Clay Banks/Unsplash
December 13, 2022

The Oregon Liquor and Cannabis Commission (OLCC) issued sales data for November 2022 this week. November 2022 sales, at $75.4 million, were down 5.5% from October 2022 sales of $79.8 million and down 12.9% from November 2021 sales of $86.5 million.

It is no secret Oregon wholesale cannabis prices have been getting trounced for well over a year now, having fallen from a pandemic high in July 2021 at $1,411 to a post-pandemic low of $669 per wholesale pound in June 2022. The OLCC implemented the second moratorium in January 2022 on the issuance of new licenses of all types, except laboratories, citing a “crowded marketplace.” As of November 19, 2022, licensed businesses include 1,410 cultivators (producers), 826 recreational retailers, 277 recreational wholesalers, 328 processors, and 20 laboratories – a total of 2,841 licensed recreational cannabis businesses.

A recent Gallup poll found 16% of adults over 21 regularly smoke cannabis. Given that finding, a back of the envelope calculation indicates there is one retailer for every 427 regular cannabis consumers in Oregon and one producer (cultivator) for every 275. This indicates the Oregon market is more than amply served and that fact is reflected in wholesale cannabis prices in the state.

Product Sales Data

November 2022 sales of Usable Marijuana, Concentrates / Extracts, and Edibles / Tinctures were lower across the board in November 2022. Usable Marijuana sales, at $36.6 million, were down 7.8% from sales of $39.7 million in October 2022 and down 18.1% from sales of $44.5 million in November 2021. This is the fifth consecutive month of lower usable marijuana sales.

November 2022 concentrate / extract sales, at $19.6 million, were down 3% from October 2022 sales of $20.2 million and down 9% from sales of $21.5 million in November 2021.

November 2022 edible / tincture sales, at $10.6 million, were down 1.3% from October 2022 sales of $10.6 million and down 1.9% from November 2021 sales of $10.7 million.

Harvest Data

Previous harvest data suggested the possibility that a lower year-on-year harvest total might be in the offing when the October 2022 outdoor harvest came in at 3.2 million pounds wet weight, down 1.2 million pounds – 27% – from the October 2021 harvest wet weight of 4.4 million pounds. One might think such a large reduction in outdoor-grown production might spur a price rally; instead, outdoor price fell over 14% from the October 2022 peak to the price per pound as of the end of November 2022.

The November 2022 harvest, at 661,461 pounds of wet weight, is 66.6% higher than the November 2021 outdoor harvest of 397,122 pounds. Contacts in the state put the significantly higher November outdoor harvest down to weather-delayed planting in 2022.

The combined October-November 2022 harvest data still shows a significant year-on-year drop of 19.2% in outdoor wet-weight harvest. However, the average monthly outdoor spot price in November 2022 is down over 38% from November 2021’s average monthly spot price, suggesting there is still a significant oversupply of cannabis in the system.

Oregon spot prices reflect the persistent oversupply and influence of the illicit market, as well as cutthroat competition on the retail end of the supply chain. While the moratorium may very well underpin price in the coming years, oversupply and falling legal consumer demand will continue to weigh on the market in the near term. The primary price support in the outdoor market has been demand and, with that waning, the illicit market becomes stronger and legal prices fall toward the cost of production. Until cannabis becomes legal across the U.S., prices in Oregon remain vulnerable.