Oregon Marijuana Market Flooded With Product, Prices Crash

Consumers in the state of Oregon smoked or vaped or otherwise ingested 340,000 pounds of legal cannabis last year. At the same time, Oregon growers produced 1.1 million pounds of marijuana. That supply-demand imbalance has sent weed prices tumbling to around $4 a gram, about half the price that consumers once paid.

As of April 1, the state had approved 963 licenses for recreational marijuana growers and had another 910 queued up awaiting approval, according to Willamette Week.

The pressure on growers is becoming intense because it is a violation of federal law to transport a federally controlled substance across state lines. Doing so exposes growers to federal drug trafficking charges.

What had once been a mostly local business changed in 2016 when the state permitted non-state residents to own controlling stakes in local farms and dispensaries. The state liquor control commission also regulates the recreational marijuana market and says it has no authority in law to limit the number of licenses it issues.

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The result has led many small growers to close down and lose their entire investments. Filing for bankruptcy protection is not an option, again because marijuana is still a federally prohibited drug.

Some distressed growers are taking the huge risk of transporting their product out of the state. As one grower said, however, “If somebody has got thousands of pounds that they can’t sell, they are desperate. Desperate people do desperate things.”

A less-desperate approach is to sell product at weed auctions held at various times in undisclosed locations throughout the state. Growers submit their product and it is sold (they hope) to the highest bid from a licensed wholesale buyer. At a recent auction bud sold for $100 a pound. A year ago about $1,500 a pound was the going price before dropping to $700. At $100 a pound, a small grower is probably losing $150 on the sale.

What outside investors and small-growers who are waiting for and counting on is that marijuana’s status as a federally prohibited drug will be lifted and that sales of marijuana across state lines will become legal. When (if) that day comes, Oregon’s oversupply problem goes up in smoke.

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