Approximately three years after Oregon lawmakers signed a recreational cannabis law, the state is now experiencing a massive glut in its marijuana supply, collapsing prices and putting dozens of the industry’s licensed growers and retailers on borderline bankruptcy.
For the second year in a row, cannabis farmers harvested more than 2.5 million pounds of pot in October. Of that, the so-called wet harvest, 1.3 million in usable marijuana was logged into the Oregon Liquor Control Commission’s cannabis tracking system as of December.
The state of about 4 million people harvested a half pound of marijuana per every resident, which raises concern that there are too many growers. According to government data, there are 1,107 licensed active producers and another 900 producers seeking licenses from the Oregon Liquor Control Commission (OLCC).
While there is no cap on the number of licenses issued by the state, the OLCC placed a temporary freeze on new applications in the second half of 2018.
Cannabis farmers statewide reduced the amount they planted, while some did not plant at all, and others surrendered their licenses, said Don Morse, a Portland, cannabis consultant. In the first week of 2019, 70 grower licenses expired, and 57 grower licenses were surrendered, according to OLCC data.
“Everyone is concerned about this,” said Adam Smith, Craft Cannabis Alliance executive director.
“You’ll see people going out of business in the spring when it’s planting time. There are far too many in the industry in distress. No one is making money here.”
Beau Whitney, senior economist and vice president of New Frontier Data, a cannabis market research firm, said there would be more pain in the legal cannabis industry this year.
“Because of the federal illegality, there is not a balance between suppliers and demand,” Whitney said. “If it was an open market and it was legal throughout the United States, there would be demand and prices would stabilize.”
"Last year we saw prices plunge up to 50 percent," Whitney said. "This year prices could drop by 35-50 percent more."
“There is no short-term fix for this,” he said. “You have a lot of supply in the system, and it will take a while for it to flow through the system.”
With an abundance of pot, The Bulletin indicates that Oregon's cannabis market is limited to sales within the state's borders.
According to the Statesman Journal, in 2019, Oregon lawmakers have proposed legislation that would be the first significant step towards legalizing interstate exports of pot, a possible solution to the oversupply conditions.
While legalizing interstate exporting of pot could be years away, expect in the near term, a possible imminent collapse of small producers throughout Oregon. It seems like the pot bubble has already started to deflate.