Photo: Jana Sabeth/Unsplash
Oregon perhaps exemplifies the cannabis price crash better than other states, in that policymakers have stepped in on multiple occasions in what was understood to be efforts to “fix” the oversupply problem with two license moratoriums. The second moratorium was instituted this month and will stay most new licenses for growers and retailers until March 31, 2024. Given Oregon spot prices tanked during the last moratorium there is some question about the purpose and effect of the new moratorium.
Casey Houlihan, Executive Director of Oregon Retailers of Cannabis Association, told Cannabis Benchmarks the moratorium is not about cannabis prices. Indeed, Houlihan said the newly passed two-year grower and retailer moratorium had no effect on prices last week; it was not the reason Oregon’s Spot rose nearly $63. Last week’s price gain was the largest weekly rise since the third week of March 2021, when Oregon’s Spot rose $66. Houlihan put last week’s price increase down to seasonal demand and not the moratorium, which he says “is to stop the bleeding” in the industry.
“Price swings will continue until cannabis is legal everywhere” and “Oregon prices are suppressed by the illicit market,” said Houlihan. He admitted illicit cannabis, which is readily available in Oregon, competes with legal cannabis on quality, and said discerning buyers will buy high quality illicit cannabis before they buy lesser quality legal product, no matter the price. That said, he sees illicit, high quality cannabis going for $70 per ounce, which suggests illicit prices may also be suffering from oversupply. Houlihan has seen legal product at $72 for two ounces at retail, which he noted is $1.15 per gram, but he also sees “good retail marijuana for $200-300 an ounce.”
The price dichotomy in Oregon, according to Houlihan, is based on quality and prices are not neatly siloed by grow type or source. Oregon cannabis consumers are perhaps more sophisticated buyers, with years of experience in the legal and illicit cannabis markets. These buyers do not base purchases on a seller’s license designation, but on the nature of the product itself and on product consistency. There is a tacit acknowledgement that legalization has not made a dent in the thriving illicit market.
Houlihan offered a more nuanced view of the two-year license stay on growers and retailers; “it was never designed to have a major impact on price,” he said. Instead, it was intended to “encourage competition” and “prevent longer term additional instability.” He noted the moratorium is not supported by the entire cannabis community and recounted how “smaller retailers,” those with “one or two stores,” see the moratorium as impeding their ability to grow their businesses such that they cannot be easily taken over by big cannabis companies. In short, the larger the retail footprint, the less likely smaller retailers are to be taken over by “big cannabis.”
According to Houlihan, the upside of the moratorium is that smaller retailers and growers are seeing an immediate bump in the value of their businesses, owing to the fact that new entrants will have no choice but to buy an existing business under the license moratorium. Cannabis businesses that have been pressured by falling prices might now rightly expect better prices for their businesses if they want to sell or take on a partner. So while the moratorium seeks to “stop the bleeding,” it may also offer a transfusion by bringing new blood into existing businesses, resulting in a more competitive, and perhaps innovative, market.
In a rundown of prices and retail demand, Houlihan has seen “dialed in” outdoor-grown product going for as high as $500 per pound. At the other end of the spectrum, he has observed “whole outdoor plants” going for $20 per plant. He noted the cost of raising outdoor cannabis runs about “$40-$50 per plant and [that] does not count getting the plant ready for sale.” So growers avoid the cost of trimming, packing, and shipping by selling in bulk to extractors. Trimmed outdoor flower of middling quality is going for $150 to $200 per pound. Outdoor quality greenhouse product typically draws outdoor flower prices, but “with an uptick.”
Regarding retail product demand, Houlihan said he would “not be shocked if an overall increase in volume, but not spending” occurs, suggesting an expectation that lower prices are here to stay. He noted that top-shelf pre-rolls are selling very well, but also noted the presence of some “abysmal” quality pre-rolls. He said the variability in quality can sometimes be down to established farms with recognized brands occasionally experiencing missteps resulting in poor outcomes. For outdoor growers with “branded farms” he does not see a move into products other than flower. Among consumers in Oregon, Houlihan does not see growing demand for tinctures, shatter, or more esoteric products, with consumers instead choosing among high quality flower. He is a proponent of high quality sun-grown flower and is seeing steady consumer demand in this category.
At the end of the day, Houlihan sees the moratorium as a public good for Oregon’s cannabis industry, providing a reset for growers and retailers buffeted by falling prices in an overcrowded market. It is not about price, it is about new blood; a transfusion for one of the most mature markets in the country.