California is the world’s largest producer of marijuana and has been struggling to keep up with demand. The state has seen a huge oversupply of weed that is flooding the market and causing prices to plummet.
Don’t bother selling adult-use cannabis if you want to get into the cannabis business in California—where more than $5 billion worth of legal, adult-use cannabis is expected to be sold this year, according to tax figures—and you want to do it fast. Instead, you’d want to see it flourish.
The majority of localities in the state still prohibit retail adult-use sales. Many of those that do have restrictions on the number of dispensaries that may operate inside municipal boundaries. High taxes and an availability of cheap, illicit-market marijuana, according to virtually everyone who runs a retail shop, are killing them. Making money this way is not a smart idea!
Obtaining a production licence and beginning to produce large quantities of cannabis is the fastest method to get into the cannabis industry. Big businesses in the Salinas Valley and Santa Barbara County did just that.
And, according to conversations with industry insiders, they’ve grown much too much marijuana. Although exact numbers are unknown, one estimate suggests that California’s legal growers produce more than three times the amount of cannabis sold in legal dispensaries.
Whatever the precise number, the general consensus is that there is so much cannabis on the market that prices are collapsing and legal producers, who have been losing money this year, may be pushed out of business.
“It’s going to be a bloodbath,” said one industry source, who works in wholesale sales and distribution and requested anonymity to talk freely.
The exact amount of cannabis produced in California remains a state secret, known only to state regulators and a few political leaders. However, you may make some educated guesses based on the facts provided.
The state’s demand for cannabis is estimated to be about 2.3 million pounds, according to the most current public estimate, released in 2017. This covers both medical and adult usage.
According to the most current statistics available, the quantity of cannabis on which the state Department of Tax and Fee Administration reported receiving cultivation taxes between July 2020 and July 2021 was approximately the same.
According to Natalynne DeLapp, executive director of the Humboldt County Growers Alliance, the state may be generating up to three times as much cannabis as it can consume by mid-2021.
The total area of authorized grows recorded with the state Department of Cannabis Control yielded that figure. When the entire area of indoor, outdoor, and mixed-use grows is added together, the state’s permissible, legal growing capacity exceeds 6 million pounds.
“And that’s genuine back of the napkin math,” said DeLapp, who advocates for small growers in the state’s traditional “cannabis basket,” the wooded hills and mountains.
They also can’t compete with huge greenhouses in the Salinas and Santa Barbara valleys that produce lower-quality but higher-margin cannabis.
So what was the payoff for the over 2,500 growers in Humboldt County who applied for state licenses in 2016, even before adult-use cannabis was legalized? “They’re selling their farms and selling their businesses,” she added, citing the price of an outdoor pound of cannabis dropping below $1,000 and the return of last year’s crop, which was unsold.
But, in addition to endangering small companies attempting to establish themselves in a new sector, the overabundance of cannabis also jeopardizes the legitimacy of marijuana legalization.
Other industry sources claim that, despite the fact that California already has too much cannabis, better grade cannabis produced in Oregon—where production costs are lower—is allegedly crossing state borders and showing up in California dispensaries. If this is accurate, it would be a violation of every law known to man: state, federal, and international.
But, if that’s the case, and if the state already has too much marijuana, where does that leave California cannabis?
No one knows for sure except state regulators and law enforcement (and whoever is transporting the product), but the general consensus is that it’s either being sold off-books within state lines for half the price of heavily taxed legal cannabis—or it’s showing up in New York, Florida, and other states where California cannabis commands a premium.
Mark Ponticelli, the founder and proprietor of the People’s Remedy dispensary in Modesto, California, in the state’s agricultural Central Valley—where the illegal, underground market cannabis is both cheaper and better—said, “The legal market is still one-quarter what the criminal cannabis industry is.”
“The black market is still coming here,” he added, adding that the cannabis cultivated in greenhouses in the big farms that are killing local farmers isn’t as excellent. It hasn’t been properly cured. The nutritional combinations are incorrect. It’s mass-produced, but it’s not as excellent as the product of traditional farmers.
“You can buy pounds on the streets for $2500 to $3000 all day,” he stated on the black market. “And it’s fire, fire weed,” says the narrator. Then you can sell it for $4,000 to $5,000 on the streets in Florida.”
There’s too much weed in my system. It’s the incorrect cannabis. Cannabis that is too costly. And marijuana isn’t lucrative.
There was no one cause that resulted in this scenario. Following legalization, restrictions were relaxed, allowing for enormous growth. Big producers benefit from environmental quality standards. There’s also the market’s natural cycles, which may swing between too much and too little before settling into a groove that resembles balance.
But that isn’t the case in California right now. After an imbalance, a correction is unavoidable. And, with the state preoccupied with COVID-19 and a recall election, it seems that the market will be left to its own devices to figure out what to do with all this excess marijuana—and if the growers will be able to remain in business.
