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Oregon Grows More Weed Than it Can Smoke, Crashes Market

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Marijuana has been recreationally legal in Oregon for three years now. Last year, Oregonians consumed 340,000 pounds of cannabis flower. As of February, 1.1 million pounds of cannabis flower was logged in the Oregon state database, which is three times the amount of flower that was smoked in 2017. Despite the market being flooded, more and more cannabis grow businesses are popping up. By April 1, The Oregon Liquor Control Commission had approved 963 licenses for cannabis grows, with 910 licenses awaiting approval.

With the amount of marijuana that is being grown in Oregon, the price of marijuana has dropped to $4 and $5 a gram. This is substantially cheaper than standard marijuana prices. In Colorado dispensaries, a gram of weed typically costs around $10. Because of the low costs of weed, cannabis businesses are unable to sustain themselves. Unfortunately, because marijuana is still a federally scheduled narcotic, these failing businesses are unable to declare bankruptcy. Because of this, there are a limited number of options for these businesses. They can sell to large corporations for a fraction of what they invested, or they can try to liquidate their assets and suffer the financial loss for what it is. This is obviously less than ideal for small cannabis growers in Oregon, who were hoping to make a serious profit off of what is actually a booming industry.

What used to be a market controlled largely by small, local businesses is now a collapsing market that is quickly being taken over by large corporations. Larger businesses from out of state can sustain themselves long enough to wait out these extremely low prices until the market picks back up, while small businesses struggle to break even in the collapse. According to Mason Walker, the CEO of Cave Junction Cannabis Farm, five or six companies currently own 25-30% of the market.

This desperation from the small business owners has led to a slow leak of legally grown marijuana into the black market. Farmers who are unable to turn a profit are selling off their crop across state lines and putting more illegal weed back into the hands of drug dealers.

What is happening in Oregon is not unique. The price of marijuana dropped 38 percent in Colorado in 2016. Many people are eager to get in on the new and booming industry, and because of the explosion of new businesses, the market is being inflated with new product. Oregon’s breweries and wineries have experienced a similar market crash in recent years. One senior economist from New Frontier Data, Beau Whitney, compared it to the computer industry in years past, saying that “there used to be a lot of computer companies, but there’s not so many anymore.”

The OLCC is claiming that they have no authority to put a cap on the number of licenses that it is distributing. But this seems to be one of only a few solutions to the problem. Limiting the number of licenses, limiting the amount of weed that can be grown under these licenses, or allowing the market to free fall and figure itself out over time are the only possible options right now. States like Massachusetts are attempting the second option. But Walker and other farmers are strong supporters of allowing the market to be left up to its own devices so that it will eventually stabilize in the future.

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