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Sunday, May 22, 2022
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

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Oregon Has a Marijuana Supply Problem – Too Much Pot With Nowhere to Go

Oregon has a marijuana supply problem. According to a report from the Oregon Liquor Control Commission, updated on March 2, there is nearly 1.2 million pounds of marijuana inventory sitting in the State in what it calls “usable marijuana.”

Detailed texture backround of cannabis flower for dispensary in clear jugs

According to a report from the Oregon Liquor Control Commission, updated on March 2, there is nearly 1.2 million pounds of marijuana inventory sitting in the State in what it calls “usable marijuana.” By comparison, a little over 200,000 pounds of edibles/tinctures are in inventory and over 100,000 pounds or concentrate/extracts as well.

That’s a lot of unsold cannabis that can go nowhere but stay within the State. With cannabis being illegal federally, it’s not possible to legally cross State lines with marijuana. That means there’s no way to export the unsold pot into other States that might have a shortage. Canada is having the reverse problem, where there simply isn’t enough cannabis to sell to customers, and it could take years to fix. If Oregon would be able to send its pot out of the country, it could help fix multiple markets at once.

Oregon is instead stuck in a bubble with very limited options. With such a big oversupply, that’s having a big impact on prices. The end result is going to be smaller margins and lower profitability for companies. According to Leafly, eighth-ounce cannabis of some products used to cost $60 and now are selling for just $6. Meanwhile, in California, similar products can still sell in some places for as much as $100. The range for eighth-ounce cannabis in Oregon ranges between $4 to $18.

Sales Averaging Over $50 Million Each Month

Unsurprisingly, sales in Oregon have been very strong with monthly revenues consistently being above $50 million and in August they hit $60 million. That just goes to show how vastly oversupplied the market still is and how much Oregon is producing. The problem is that as consumers get accustomed to a lower price of pot, it’ll be a harder sell if prices ever go back up. However, that could be a very possible scenario. As low prices make it unprofitable for growers to stay in business, many could shut down their operations. With fewer growers, there’d be less cannabis being supplied in the market, which would push prices up.

Low pot prices in Oregon are likely drawing in a lot of pot tourists from other parts of the country where cannabis might not be nearly as inexpensive. If that price advantage is lost, then that might also lead to cannabis sales starting to fall as a whole. Ultimately, this situation could create a lot of instability for the State that’s going to make it difficult for both consumers and producers.

Bottom Line

The oversupply problems in Oregon aren’t going to go away anytime soon. Even if producers start to shut down their operations, that’s still a lot of cannabis that the State is sitting on that will have to go somewhere. It’ll take a while to chip away at it, and it’ll take even longer to do so as prices creep back up.

It underscores just how important it is for the federal government to legalize marijuana so that efficiencies in the market can be gained and producers aren’t negatively impacted by growing marijuana. Unfortunately, there’s just no short-term solution for the State at this point.

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