The people of Colorado have noticed a rather pleasant trend this year. For most of 2016, residents have seen a steady decline in pot prices, leading to some of the cheapest cannabis that the state has seen in years. The price drop is especially notable on the recreational side of cannabis sales. Of course this is welcomed news from mostly everyone in the state, but what is it that is making cannabis prices drop? It turns out there are a lot of factors on why we are seeing prices plummet for recreational cannabis, but the main cause is probably that so many more people are starting large industrial grow operations. These companies intend to supply to both dispensaries around the state and edible companies that need more material. These massive grows are flooding the market with more flower than some dispensaries know what to do with. This has led to steadily decreasing prices all year, and we can most likely expect to see that trend continue. If you haven’t personally noticed that flower prices have been dropping, don’t lose hope, because these price drops are starting to become substantial.
The price change in cannabis is less noticeable when you are talking about grams, but once you bump the quantity up to a pound, the price decline becomes clear. Last time this year, cannabis was around $2,500 a pound. Now, that price has dropped dramatically to only around $1,500 for a pound. There was such a surplus of cannabis in June of this year that pound prices dropped below $1,000 for a while. Wholesale recreational growers are able to produce a lot of flower and it is really changing the way our industry works. The number of licensed growers in Colorado has risen to 583, from the 493 that existed last year. That increase of 18.2 percent is definitely not going unnoticed. The other thing to keep in mind, is that many of those licenses are owned by dispensaries and edible companies that are growing their own product, but that may change soon because independent wholesale grow operations can produce flower at a fraction of the cost. Medicinal cannabis is having a hard time keeping up, because it can’t be grown by wholesale grow operations that aren’t connected to a dispensary. It is still taking over $1,000 dollars overall to produce a pound of medicinal cannabis at most places, but wholesale recreational operations are slashing their costs down to below $750.
Dispensaries do everything they can to keep medicinal prices relatively competitive to their recreational supply, but when there was only a 5% increase in medicinal cultivation licenses, compared to the nearly 20% increase of recreational, it is easier said than done. The cannabis lovers of Colorado don’t seem to be having much trouble consuming the excess cannabis, because this year is bringing in record breaking total sales. The industry is on pace to reach over 1.3 billion dollars in 2016. While people might be getting more cannabis for their buck, flower has actually been steadily declining in market share for dispensaries. Concentrates and edibles have both stepped up to become a much larger profit portion for dispensaries. Both edibles and concentrate sales are way up, and concentrates now make up nearly one quarter of most dispensaries’ sales. In the future, I think we can expect to see more of these recreational wholesale growing operations, which will lead to even cheaper prices and more than likely put an end to a lot of the vertical integration that many cannabis businesses currently have.