The Price of Pot: Supply On Demand

The price of pot seeks equilibrium.

It does a body good to be the bearer of glad tidings. To wit: The price of weed is going down. Of course, it depends on whom you ask (and where you ask them), because some claim the price of weed is on the rise—even in trail-blazingly legal Colorado. How to make sense of these disparities?

At the end of June, the capital-market watchers at Convergex were reporting that, in Colorado, “an ounce now sells for between $250 and $300 on average, compared to $300–$400 last year.”

The market gurus explained that in 2015, producers are “buying additional warehouses and expanding their grow facilities, increasing supply. This is all a function of a maturing market, as dispensaries try to find the market’s equilibrium price.”

On the other hand, we also hear that pot prices are rising—by as much as 5 percent. An investment analyst who prefers to remain nameless (because High Times is apparently too groovy for some suits) told us that, “since legal recreational marijuana is a relatively new industry, I don’t think anyone can profess to have a good pricing model just yet.”

As for medical marijuana, some analysts expect prices to rise regardless of the ever-growing supply. “The price for cannabis medical extracts is rising because more patients and prescribing physicians are becoming more concerned about the consistency of supply and quality control,” says Ziv Turner, founder and CEO of the Israel-based One World Cannabis. Thus, as medi-pot consumers become more discriminating, “fewer growers—especially those whose background evolved from recreational cannabis—will have the technical ability to breed or extract to more exacting pharmaceutical standards,” resulting in higher-priced meds.

But if medical weed faces a pricier future, the cost of recreational herb is (probably) dropping. Not surprisingly, the states where rec weed is legal—or soon will be—enjoy the lowest prices.

Lucky stoners in Colorado got an additional bonus on September 16, the day that the state’s 10 percent sales tax was temporarily suspended. The tax holiday isn’t intended to boost pot sales; instead, it’s due to an obscure provision in the state constitution’s “Taxpayer’s Bill of Rights.” That one-time, one-day tax break is expected to cost the state about $100,000. Then, beginning in July 2017, the onerous sales tax will be cut to 8 percent, as part of the state’s effort to put illegal dealers out of business.

All of this is good for Colorado consumers, but how are the pot purveyors doing? Pretty damn well, as it happens: Sales of rec weed this year have so far outpaced 2014 by about 150 percent. Dispensaries are hauling in between two and three times as much ka-ching! as last year, and one estimate predicts that Colorado will ultimately reap $480 million in revenues—a 50 percent increase compared to 2014.

To put it simply, we don’t know the “real” price of weed yet—and we won’t until cannabis is legal in all 50 states, with at least some uniformity to regulations and tax regimes. And that will be a good day.