Economy

Marijuana Prices Are About to Change

January 27th 2017

By:
Kyle Jaeger

The marijuana economy is shifting rapidly as more states allow legal, retail sales and cannabis businesses innovate to meet growing demand.

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The good news for consumers is that pot prices are falling.

"There's just a lot more supply than there was early on in the market — so that's a key thing," Tom Adams, editor-in-chief of Arcview Market Research, told ATTN:. "But beyond that, there are specific changes that are driving it. Best practices are spreading. Growers are getting better at growing cannabis cheaply. Doing better indoors, doing better in greenhouses, doing better outdoors."

In Colorado, the retail price of an ounce of weed has decreased from $250 to $190 since the state began allowing recreational marijuana sales in 2014, as this chart from Bloomberg Markets shows.

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Bringing cannabis out of the black market has also enabled more growers to produce their products outdoors, which is the cheaper than growing indoors because it doesn't require one to pay for electricity or rent.

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Growers, cultivators, and cannabis dispensaries are the most vulnerable to industry changes, Arcview Group CEO Troy Dayton told ATTN:. The high-volume yields flooding the legal market are driving competition between dispensaries, who are then forced to sell at lower costs, putting pressure on those who produce the product to grow more to keep profits high.

Besides consumers, the other industry winners are ancillary companies that sell cannabis-related technologies and cultivating materials, such as irrigation systems and energy-efficient lighting. "If you want to compete on a price game, you have to use versions of our technology to do it," John Chandler, vice president of Urban-Gro, a company that sells various cannabis-related technologies, told Bloomberg Markets. "Everybody is putting in irrigation systems, so that’s good for us."

The main takeaway for marijuana users, however, is that bud is getting cheaper. How cheap depends on where you live, of course, but the days of $50 eighths appear to be behind us.