Folks in the cannabis industry fear that cultivation, production and retail regulations could drive up the price of weed just when consumers are able to buy in stores without a doctor's recommendation. In January, recreational weed sales for those 21 and older are expected to mark a new era in California. But it could be hard enough for old-school growers and producers to jump through new regulatory hoops that supply won't match demand.
"The first quarter of next year, prices will probably go up," says Jonathan Rubin, CEO of New Leaf Data Services LLC, which tracks wholesale cannabis prices in states where weed is legal. "What I think you'll see is that the traditional winter price increase will be much bigger than it was this year. Because there's going to be compliance costs and testing. I can almost guarantee bottlenecks in testing and permits."
Derek Peterson, CEO of cultivation firm Terra Tech, agrees. He says that with a system of state licenses and localities that can ban all pot businesses, it's not clear if supply will meet the immediate demand statewide. "So much of the supply side is dictated by regulations," he says.
However, the market could eventually level out or even see a downward trend in prices later in 2018, Rubin says. While old-school mom-and-pop growers who find the state's new paperwork too cumbersome might walk away from the business and leave a supply gap early on, he believes new players will quickly grab their seats.
And the new players are often from industries, such as agribusiness, that have regulations and best practices down. Already, Rubin says, advanced-technology greenhouse operations are filling in the market.
"There will be big commercial flower growers starting to grow cannabis," he says. "There will be a lot of new entrants with commercial farming backgrounds and best practices methods. That's all going to drive prices down."
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
You have successfully signed up for your selected newsletter(s) - please keep an eye on your mailbox, we're movin' in!
On top of that, Californians probably can look forward to deep discounts for weed this fall harvest season. Rubin believes that growers will dump product on the market to raise the cash needed to become compliant in 2018. And those operators who just can't jump over the hurdles to become legit might put all their weed on sale for the last time, he says.
According to his firm's 2017 Mid-Year Wholesale Market Report Overview, the price of Golden State outdoor marijuana is down from $1,542 per pound in the first six months of 2016 to $1,133 for 2017. And the price could keep moving south until recreational marijuana hits stores in January.
Scenarios, including Northern California growers trying to cash in so they can afford to meet new regulations, "suggest that prices are going to drop very hard," Rubin says.
Get it while it's hot.