US: Oregon records biggest drop in cannabis prices since 2016

According to state regulators, average retail prices for cannabis in the state of Oregon have dropped to an unprecedented low of $4 (3.77 euros) per gram in early 2023, marking a 16% year-on-year decline. previous. Currently, the supply of cannabis is much higher than the demand in Oregon, as there is a lot of production, but as it remains illegal at the federal level, it cannot be sold or exported across state borders. Curaleaf has already ceased operations in Oregon.

This reduction continues the long-term trend of prices falling by more than half since recreational cannabis was legalized in Oregon seven years ago. The Oregon Liquor and Cannabis Commission (OLCC) stated in its annual report to the state Legislature that the recreational cannabis market in the state of Oregon is currently in its weakest economic position since the program's inception in 2016.

While the drop in prices is good for consumers, who are tired of the effects of inflation on most other products, the drop turns out to be bad for Oregon retailers and growers.

State economists have recently warned that tax collection is below forecasts and the reason for this is not just because falling prices have reduced state tax revenues. Still, struggling cannabis companies are “unable to pay all their bills” in the midst of a steep decline.

Recreational cannabis: a million dollar market

Despite being a billion dollar market (about 940 million euros), the cannabis industry in Oregon is experiencing greater and greater problems. The market has a record amount of overdue receivables and retailers owe farmers money.

This is happening across the market, causing difficulties across the entire supply chain. According to Mason Walker, CEO of East Fork Cultivars, to The Oregonian “We have a record amount of overdue accounts receivable and retailers who owe us money”. Mason grows cannabis in Josephine County.

More supply than demand: Curaleaf shuts down operations in Oregon

Supply is much higher than demand in Oregon, resulting in prices falling. Cannabis grows abundantly in the state, but since cannabis remains federally illegal it cannot be legally sold and exported across state borders. Furthermore, while cannabis is becoming increasingly popular, Oregon's 4,2 million people consume only a fraction of the cannabis grown by the state's farmers. OLCC estimates that demand for cannabis in Oregon was only 63% of supply last year.

In 2022, sales declined by more than 17% to $994 million (about €935 million), marking the first-ever annual decline in the cannabis industry in the state. Production is also declining as farmers react to falling prices, but supply and demand are far from balanced. State regulators believe that another concern for retailers and producers is the large stockpile of inventory left over from previous years, which could keep prices low indefinitely.

The OLCC stated in its report last month that “these low consumer prices force companies to operate under low margins and extreme pressure”. As a result of these difficulties, some large cannabis companies have stopped operating in the state of Oregon, such as Curaleaf, one of the largest cannabis companies in the US, which announced in January the closure of its operations in the state.

Mason Walker believes there is no quick fix to the industry's problems, and while Oregon has stopped issuing new cannabis licenses in response to supply issues, this has had little impact as many have already been issued.

As more states legalize cannabis, people who travel to Oregon to buy cannabis spend less, some of whom used to buy enough to take home with them when they left. While Oregon's cannabis industry has weathered tough times before, Walker believes fatigue is starting to set in from the prolonged recession. More and more companies are giving up and selling their licenses for just a fraction of what they expected.