Thứ Ba, Tháng Năm 30, 2023
HomeBusinessCannabis industry struggles to find broader commerce amid massive glut

Cannabis industry struggles to find broader commerce amid massive glut


TUMWATER, Wash. (AP) — This email is addressed to legal marijuana growers around Washington state. Another of their colleagues died.

“Selling liquidation,” it said. Attached is a listing of items for sale: LED grow lights for $500 each. Rotary evaporator for hash oil, $10,000.


Across the Columbia River in Oregon, where the state’s top cannabis regulator recently warned of an “existing crisis” in the industry, it’s an open secret that some growers are licensed. put the product on the black market outside the state just to stay afloat.

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“Apple’s weed store,” MedMen, is sprouting up with millions of unpaid bills, while Canadian cannabis company Curaleaf has closed growing operations in California, Oregon and Colorado.

Along the West Coast, producers face what many call the failed economy of legal marijuana. There is ample supply, thanks to excellent growing conditions and a wealth of expertise, but any excess remains stuck within each state’s borders due to the federal marijuana ban. Prices have fallen and manufacturers have struggled.

“I’m at the bottom of the abyss,” said Jeremy Moberg, who owns CannaSol Farms in Washington and, like many growers, complains that the state’s 37% marijuana tax yields barely a profit margin.

No one expected Congress to help by legalizing the drug nationwide. Instead, some are pinning their hopes, however dim, on President Joe Biden’s administration approving the interstate marijuana trade that already regulates it.

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They argue that would allow the West Coast – with its favorable climate and cheap, clean hydro for indoor farming – to feed the rest of the country.

In Senate testimony last month, Attorney General Merrick Garland said the Justice Department would soon announce a new marijuana policy. Drug policy experts say they don’t expect it to go as far as to allow interstate trafficking.

However, legislators in Washington last week passed a “trigger bill” – modeled after bills already passed in Oregon and California – that would allow the governor to enter into deals needed sa interstate if federally permitted.

Twenty-one states have now legalized recreational marijuana use by adults.

The way they set up their markets has implications for how much they can sell if their growers and processors are allowed to sell cannabis in other states.


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Washington and Colorado were the first states to legalize recreational marijuana in 2012. Many of the early regulations Washington applied to deter the Justice Department — including restrictions on the size of growing facilities farming and out-of-state investment ban — still in place.

That has helped some of the smaller growers thrive. But it would hinder those hoping to compete in the federal market alongside larger, more efficient producers from Oregon or California, who face fewer restrictions.

In Oregon, which started selling in 2015, the big growers have achieved some economies of scale that could give them a foothold in a broader market — but in the meantime, The state’s oversupply is considered the nation’s worst.

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“Cannabis in Oregon is like corn in Iowa,” said TJ Sheehy, an analyst with the Oregon cannabis agency. “If you put a box around Iowa and said you could only grow corn in Iowa to sell to the people of Iowa, you’d do the same thing.”

The oversupply is huge for cannabis consumers.

When legalization began in Oregon in 2015, a pound of marijuana could sell for $3,000; today, it can be $100 to $150, said Isaac Foster, co-founder of Portland Cannabis Market, a wholesale distributor.

In Washington, which has some of the highest marijuana taxes in the country, the price consumers pay is still cheaper than illegal weed. The state is collecting half a billion dollars in taxes each year.

But with such low prices, keeping the industry sustainable is a challenge.

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As the spring planting season approaches, Moberg, of CannaSol Farms, says he already has three shipping containers of unsold weeds, covering 75% of what he produced last season.

Co-founder Nathan Howard says East Fork Cultivars, one of Oregon’s first licensed growers, has stored thousands of pounds.

“We hope to be able to sell most of that money to keep the lights running,” says Howard.

Oregon regulators know manufacturers are struggling, but say they would be in a good position if the federal government allowed interstate commerce.

Legal growers often want to supply the legal market, rather than risking their business and freedom if they are caught selling through the back door. But the excess supply and cheap wholesale prices have made it difficult for some to survive solely selling legally.

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“They either die or become creative,” said Tanner Mariani, head of sales for the Portland Cannabis Market. “And a lot of people chose to get creative and… figure out how to get it from one market to the other and then out of the state.”

Authorities have also struggled with illegal farms operating under the guise of legality — particularly in Oregon, where many farms are funded by foreign corporations.

In California, about two-thirds of communities do not allow legal marijuana operations, which helps the illegal market thrive.

A post-pandemic economy has led to layoffs in the already tense legal sector. Oversupply has pushed wholesale prices to sell-out levels. As in Oregon, it’s no secret that some growers supply the black market.

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An analysis by cannabis investor Aaron Edelheit has determined California’s legal market has lost nearly a quarter of its total cannabis growing area after the beginning of 2022 – he calls it “a wipeout.”

With so many California manufacturers out of business, wholesale prices have begun to recover.

One of the first licensees was Erik Hultstrom, who began cultivating shop buds in a steel-gated warehouse on the edge of Los Angeles.

Five years later, he’s sold his license and is trying to contract a large grower to sell buds under the Hultstrom brand.

“I don’t know of any companies that actually make money,” he said.

However, not everyone is so concerned. Rob Sechrist, of the cannabis-only Pelorus Equity Group, described the market turmoil as typical for an emerging industry.

“Every time someone fails, the market share goes to someone else,” says Sechrist.

Indeed, cannabis distributor Nabis will open a large warehouse southeast of Fresno this month.

Some growers have found a happy medium.

In-house producer Doc & Yeti Urban Farms, in Tumwater, Washington, has about 100 customers who frequent its retail stores, said co-founder Joseph DuPuis. Brand loyalty has kept his team of 13 alive and profitable.

“If you can withstand the storm, you have an opportunity to reach out to calmer waters and survive in this market,” says DuPuis.


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