Oregon’s Cannabis Glut: Great For Consumers, Not So Much For Producers

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By Phillip Smith

Drivers heading north on I-5 in southern Oregon not only enjoy the region’s towering mountains and evergreen forests, they are also treated to the occasional enticement. At various points along the way, giant billboards appear, shouting out messages like “NEED WEED? Exit Here” and the succinct “MARIJUANA! This exit.”

And when motorists pull off the highway and wander into those shops, they’re finding weed at unbelievable prices. One shop offered grams of the popular Blue Dream strain for $2, and bargain-hunting buyers could walk out with an ounce for only $45. A number of other strains were also available for $100 an ounce or less.

It’s no fluke. Walk into any pot shop in Oregon, and you’ll find perfectly acceptable grams of weed for $2 or $3. Yes, it’s typically outdoor marijuana, which store clerks will tell you goes for less because it doesn’t get the same level of care and attention that indoor or greenhouse weed does. But the real reason is that outdoor weed gets one key input—light—for free from the sun. At $2 gram, indoor and greenhouse growers are barely recovering production costs; outdoor growers have a little more wiggle room.

If you’re feeling particularly Californian, you can still pay $10 or $12 a gram if you want, but that $2 weed is going to get you just as high as that $12 weed. And state regulations let you know the THC content of anything you buy, including high octane strains at bargain basement prices.

Oregon’s ridiculously cheap pot prices are a boon to consumers—and the state’s tax revenues. With retail prices falling by half last year, consumption jumped by around 30% over the previous year, driving tax revenues past the $94 million mark by year’s end.  While marijuana consumers are happy and pot tax coffers are brimful, the situation is not so great for the state’s legal pot producers.

Unlike other early legalization states, such as Colorado and Washington, Oregon placed few limits on who could grow legal commercial marijuana, and the result has been overgrowth of epic proportions. According to the state Oregon Control Commission (OLCC), the agency that regulates weed, at the end of the fall harvest last year, Oregon produced enough legal marijuana to supply the state’s needs for the next six years. You don’t need a Ph.D. in economics to understand how the law of supply and demand is driving prices down.

And OLCC has the raw data to show it: The wholesale price of indoor marijuana peaked at around $2,200 a pound in late 2017 before steadily declining to its current level of about $1,000 a pound. For outdoor weed, which accounts for the vast majority of Oregon production, the price peaked at about $1,500 in late 2016, declined to about $1,000 a pound in late 2017, and slid even further to under $500 a pound after last year’s harvest.

For the OLCC, the glut is a sign that the system is working: “Oregon oversupply is a sign that policy choices made to attract illegal and grey market producers into the new commercial system have been successful; this was a start-up challenge Colorado and Washington didn’t have to face,” the regulators noted. “Oregon medical marijuana growers had long been suspected of diverting into the illegal market so it was important to attract these well-established producers into the OLCC’s new regulated recreational marijuana program. To entice medical as well as formerly illegal growers into Oregon’s legal market the state lowered the barriers to entry with low license fees and taxes and chose not to limit the number of licenses.”

Still, the OLCC conceded that while that approach “fulfilled the immediate objective” of absorbing growers into the legal market,” it has also “led to industry churn as businesses face mounting cost pressures and attempt to position themselves for the long term.”

Now, fearing that “industry churn” could lead some businesses to try to sell their products on the black market or outside the state, lawmakers have moved to rein in production. This year, lawmakers enacted legislation that for the first time allows the OLCC to stop issuing new production licenses when supply exceeds demand.

They also moved to seek broader markets for the state’s legal weed, passing a bill that would allow growers to sell their product out of state. But that isn’t going to happen without federal approval, and there’s no sign of that in the immediate future. Still, two Democrats who represent Oregon in Congress, Sen. Ron Wyden and Rep. Earl Blumenauer, last month filed a bill that would allow for interstate commerce between states with legal marijuana programs.

Some legal pot farmers have gone bankrupt, others have just left the business, but a sizeable number have now switched to yet another cannabis product: hemp. In 2015, there were only 13 registered hemp growers in the state; now there are more than 750. And the number of acres devoted to hemp production jumped dramatically as well, from 105 acres in 2015 to more than 22,000 now. That’s because hemp can be exported since it is now legal under federal law and because of the boom in CBD products, which can be derived from low-THC hemp as well as from marijuana. With those push factors, the price of hemp flowers, now going for around $350-$700 a pound, is getting close to and sometimes surpassing the price of outdoor weed.

Oregon’s legal marijuana market continues to evolve, and, as the OLCC put it, the industry will continue to churn. There are going to be winners and losers among the producers, but for Oregon marijuana consumers, these are the best of times.

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Johnny Green
About Johnny Green 2544 Articles
Johnny Green is a cannabis activist from Oregon. Johnny has a bachelor's degree in public policy, and believes that the message should always be more important than the messenger. #LegalizeIt #FreeThePlant