News

Price Deflation a Big "Buzz Kill" for Legal Marijuana Growers

The trend toward marijuana legalization has picked up speed during the past several years.

In 2015, legal pot produced an estimated $3 billion in U.S. sales. And, in August 2016, Gallup said that 13% of Americans admit to using marijuana. That equates to 33 million U.S. users.

At the same time, the cost of marijuana has been falling.

The CEO of a marijuana investor consortium says potential pot investors should look before they leap.

Review this excerpt from a Jan. 17 Bloomberg article:

The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge -- and an opportunity for companies that can help cut production costs.

Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories. In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market. Supply is surging as growers expand and install the latest agricultural technology.

“Anybody that is investing in this sector or starting a business in this sector needs to be doing so with the understanding that the price of cannabis is going to drop precipitously,” said [the] chief executive officer of Oakland, California-based Arcview Group, a marijuana investor consortium. “The agricultural technology space is already booming, and now they get to lay their hands on the cannabis industry.” …

Retail prices also are dropping, though not as fast as in the wholesale market. Marijuana shops in Colorado collected an average $6.61 per gram in November, down 25 percent from the first quarter of 2014, according to BDS Analytics, a research firm.

You can read the entire article by following the link below:
https://www.bloomberg.com/news/articles/2017-01-17/as-pot-prices-plunge-growers-scramble-to-cut-production-costs

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