Weed prices are falling, as formerly illegal pot growers are coming in from the cold and investing the money they’d been stashing under their pillows into legal grow sites—thus pushing up supply while making less money for cultivators.
An analysis by Bloomberg Markets views this as an opportunity for companies to cut production costs and focus on efficiency.
“Anybody that is investing in this sector or starting a business in this sector needs to be doing so with the understanding that the price of cannabis is going to drop precipitously,” said Troy Dayton, CEO of Arcview Group, a California-based cannabis investor group. “The agricultural technology space is already booming, and now they get to lay their hands on the cannabis industry.”
In Colorado, average prices per pound sought by wholesalers since legalization in 2014 have fallen to about $1,300 (48 percent) according to Cannabase, operator of Colorado’s largest market and the largest in the country.
While supply surges, growers expand and install more sophisticated growing technology.
According to John Chandler, VP of Urban-Gro in Lafayette, Colorado, indoor growers can cut production costs to less than $300 a pound from more than $1,000—a savings which hopefully will be passed on to customers.
Retail prices also are dropping, although not as fast as the wholesale market. Pots shops in Colorado collected an average $6.61 per gram in November, down 25 percent from the first quarter of 2014, according to a chart provided by BDS Analytics, a Colorado-based research company.
A great deal of ink has been spilled lately predicting that the cannabis market in North America could reach $20 billion in the coming five years, especially after recent pot legalizations in last November’s elections.
However, November also brought us a not-popularly elected president whose choice for attorney general could throw a huge hammer into the works.
But let’s be optimistic and celebrate what modern technology is providing: greenhouses and warehouses with insulated walls, energy-saving glass ceilings, integrated pest management, odor and air purification, climate-control that provides water with reclaimed condensate, etc.
“If you want to provide cannabis to your people, you’ve got to adapt or die,” said Brian Lade, owner of Smokey Point Productions in Arlington, Washington.
“The cleaner you can be, the less chemicals you have to use,” added Lade, who started growing weed in a garage when he was 17 years old—23 years ago.
With sophisticated indoor growing technology, cultivators in states that don’t get glorious, year-round sunshine can still create their own warm, sunny conditions in efficient and environmentally friendly atmospheres.
Just keep the chemicals out and the prices down, and we’ll all be happy.
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