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A marijuana market saturated with product, falling prices and high taxes have put some Washington pot growers on the brink of closure, industry experts say.
Marijuana growers and processors in the Evergreen state blame state regulators and an excise tax of 25 percent for what they say is a supplier-crushing bottleneck. Regulators failed to anticipate crop cycles or issue production and retail licenses cohesively, which led to a flooded market, roughly a dozen growers and retailers tell GoLocalPDX.
Put simply, there are more Washington growers with more marijuana than the market has demand for, and wholesale prices have dropped to a third of what they were when retailers opened their doors in July.
“We’re in a serious blood bath right now for producers and processors,” said CannaSol owner Jeremy Moberg. He said marijuana growers are selling at below their production cost just to stay afloat. “The house is burning down, there’s a 31,000-pound supply in Washington, that’s ten years of supply,” he said.
Industry watchers say the market mayhem and price wards in Washington are a real warning to Oregon, as the state readies to roll out its own legal pot market later this year.
Falling market
Vancouver, Washington marijuana retailer New Vansterdam was ready for opening day, but at a cost, spokesperson Shon-Leuiss Harris said.
When legal recreational cannabis hit the market, growers were courted with premium prices for their limited product -- between $10 and $14 per gram -- from retail shops that needed stock in order to open, Harris said. Washington growers had expected the average wholesale price would be no less than $6 per gram, or $2,721 a pound.
“There were some pretty laughable prices in July,” Harris said. At one point, New Vansterdam was offered a wholesale price of $21 per gram. Comparatively, current retail sale prices range between $15, on the low end, and $25 per gram.
But, as outdoor crops came to harvest at the same time, the market flooded, giving retailers the ability to negotiate cut-throat prices. Moberg, who said he is sitting on 1,500 pounds of marijuana, said some farmers are selling to other producers, as well as retailers, for as low as $2 per gram. To break even, a grow operation can sell for no less than $3-$4 per gram.
“It started out being a golden ticket to turning into another struggling business industry,” said 3RB grower Rocky Butain. Rather than selling for $7 a gram as he anticipated, he is lucky to get $4 per gram.
“No producer planned their business around $4 a gram,” said Harris, who wouldn’t specify what New Vansterdam, which brings in $1 million per month in gross sales, pays for wholesale marijuana flowers. But, he said he is seeing a trend of prices between $3 and $6.
As of Tuesday, Feb. 3, there were roughly 380 producers and processors (most are both) and 114 of retailers, theWashington State Liquor Control Board’s Brian Smith said. In total, 334 retail licenses will be issued.
Farmers reeling
In roughly a dozen interviews conducted by GoLocalPDX, retailers and growers said that farmers across the state are reeling from overproduction.
“Profit margins went from extremely good to barely worth it,” said Moberg, who has had at least one job inquiry from a worker at a farm that is going out of business.
“There are people throwing in the towel already," he said.
Some farmers are trying to stay alive by offloading their goods to other producers and processors.
Christopher White, a small-level grower at West Coast Herbs, said he gets calls everyday from farmers trying to sell their stock.
“They can’t get rid of it, nobody wants it,” he said.
Power Shifts to Retailers
After initial shortages the economic power has shifted from growers to retailers, and some growers are selling at a loss to establish a place in the market.
“If there is relief in sight, it’s legislative,” said Moberg, who is lobbying for measures in the Washington legislature that would improve market conditions, including lifting city and county moratoriums banning the sale of marijuana, and increase the number of retail outlets.
Smith, of the WSLCB, said growers are upset they aren’t making the money they’d hoped for, but that the market glut is a boon for consumers. He said to be competitive with the black market, retailers need to be able to sell for $12 per gram. But, Harris said to stay in business retailing for that price, wholesale cost would need to be in the ballpark of $1 per gram.
Harris said he has knows growers who are “re-evaluating” the move to commercially farm marijuana.
White, who grew medicinal marijuana prior to getting a recreational permit, said his small operation serves a niche -- powerful boutique pot that retails for $24 a gram -- that does not face the distribution bottleneck larger outdoor operations are facing.
“People are getting weeded out already,” he said. The shop White sells to carries between just four and five growers.
“A lot of people feel stupid for applying for this license,” White said. “Everyone thought recreational was a gold mine and it’s the opposite.”
White said he is happy to sell for $7 a gram, but knows some growers selling for $2.
A warning for Oregon
Southern Oregon growers are already producing more marijuana than the legal recreational market will buy, Moberg said. The licensing structure in Colorado, the only other state where marijuana is legal, differs from Washington’s in that it allowed the producers to hold retail licenses, which Washington’s forbids. Stand-alone retailers and producers were only allowed after October, 2014.
In Washington, an excise tax of 25 percent applies between producer and processor, processor and retailer, and retailer to consumer, while Colorado enacted a lesser 15 percent excise tax and a 10 percent sales tax.
Grower and retailer licensing was at the top of a list of recommendations industry experts had for Oregon to avoid challenges Washington is facing. Moberg warns that Oregon’s top concern should be capping production. Meanwhile, the OLCC is hearing from Oregonians around the state as it takes initial steps in developing a marijuana regulation process.
http://www.golocalpdx.com/news/pric...en-to-drive-marijuana-growers-out-of-business
Marijuana growers and processors in the Evergreen state blame state regulators and an excise tax of 25 percent for what they say is a supplier-crushing bottleneck. Regulators failed to anticipate crop cycles or issue production and retail licenses cohesively, which led to a flooded market, roughly a dozen growers and retailers tell GoLocalPDX.
Put simply, there are more Washington growers with more marijuana than the market has demand for, and wholesale prices have dropped to a third of what they were when retailers opened their doors in July.
“We’re in a serious blood bath right now for producers and processors,” said CannaSol owner Jeremy Moberg. He said marijuana growers are selling at below their production cost just to stay afloat. “The house is burning down, there’s a 31,000-pound supply in Washington, that’s ten years of supply,” he said.
Industry watchers say the market mayhem and price wards in Washington are a real warning to Oregon, as the state readies to roll out its own legal pot market later this year.
Falling market
Vancouver, Washington marijuana retailer New Vansterdam was ready for opening day, but at a cost, spokesperson Shon-Leuiss Harris said.
When legal recreational cannabis hit the market, growers were courted with premium prices for their limited product -- between $10 and $14 per gram -- from retail shops that needed stock in order to open, Harris said. Washington growers had expected the average wholesale price would be no less than $6 per gram, or $2,721 a pound.
“There were some pretty laughable prices in July,” Harris said. At one point, New Vansterdam was offered a wholesale price of $21 per gram. Comparatively, current retail sale prices range between $15, on the low end, and $25 per gram.
But, as outdoor crops came to harvest at the same time, the market flooded, giving retailers the ability to negotiate cut-throat prices. Moberg, who said he is sitting on 1,500 pounds of marijuana, said some farmers are selling to other producers, as well as retailers, for as low as $2 per gram. To break even, a grow operation can sell for no less than $3-$4 per gram.
“It started out being a golden ticket to turning into another struggling business industry,” said 3RB grower Rocky Butain. Rather than selling for $7 a gram as he anticipated, he is lucky to get $4 per gram.
“No producer planned their business around $4 a gram,” said Harris, who wouldn’t specify what New Vansterdam, which brings in $1 million per month in gross sales, pays for wholesale marijuana flowers. But, he said he is seeing a trend of prices between $3 and $6.
As of Tuesday, Feb. 3, there were roughly 380 producers and processors (most are both) and 114 of retailers, theWashington State Liquor Control Board’s Brian Smith said. In total, 334 retail licenses will be issued.
Farmers reeling
In roughly a dozen interviews conducted by GoLocalPDX, retailers and growers said that farmers across the state are reeling from overproduction.
“Profit margins went from extremely good to barely worth it,” said Moberg, who has had at least one job inquiry from a worker at a farm that is going out of business.
“There are people throwing in the towel already," he said.
Some farmers are trying to stay alive by offloading their goods to other producers and processors.
Christopher White, a small-level grower at West Coast Herbs, said he gets calls everyday from farmers trying to sell their stock.
“They can’t get rid of it, nobody wants it,” he said.
Power Shifts to Retailers
After initial shortages the economic power has shifted from growers to retailers, and some growers are selling at a loss to establish a place in the market.
“If there is relief in sight, it’s legislative,” said Moberg, who is lobbying for measures in the Washington legislature that would improve market conditions, including lifting city and county moratoriums banning the sale of marijuana, and increase the number of retail outlets.
Smith, of the WSLCB, said growers are upset they aren’t making the money they’d hoped for, but that the market glut is a boon for consumers. He said to be competitive with the black market, retailers need to be able to sell for $12 per gram. But, Harris said to stay in business retailing for that price, wholesale cost would need to be in the ballpark of $1 per gram.
Harris said he has knows growers who are “re-evaluating” the move to commercially farm marijuana.
White, who grew medicinal marijuana prior to getting a recreational permit, said his small operation serves a niche -- powerful boutique pot that retails for $24 a gram -- that does not face the distribution bottleneck larger outdoor operations are facing.
“People are getting weeded out already,” he said. The shop White sells to carries between just four and five growers.
“A lot of people feel stupid for applying for this license,” White said. “Everyone thought recreational was a gold mine and it’s the opposite.”
White said he is happy to sell for $7 a gram, but knows some growers selling for $2.
A warning for Oregon
Southern Oregon growers are already producing more marijuana than the legal recreational market will buy, Moberg said. The licensing structure in Colorado, the only other state where marijuana is legal, differs from Washington’s in that it allowed the producers to hold retail licenses, which Washington’s forbids. Stand-alone retailers and producers were only allowed after October, 2014.
In Washington, an excise tax of 25 percent applies between producer and processor, processor and retailer, and retailer to consumer, while Colorado enacted a lesser 15 percent excise tax and a 10 percent sales tax.
Grower and retailer licensing was at the top of a list of recommendations industry experts had for Oregon to avoid challenges Washington is facing. Moberg warns that Oregon’s top concern should be capping production. Meanwhile, the OLCC is hearing from Oregonians around the state as it takes initial steps in developing a marijuana regulation process.
http://www.golocalpdx.com/news/pric...en-to-drive-marijuana-growers-out-of-business
