Cannabis producers sober up to reality as flower prices collapse
The cannabis market is experiencing its first economic downturn as a legalized market. Making matters worse (for companies), flower prices continue to fall.
What’s the big deal? Cannabis insiders call this a race to the bottom: Costs are rising, selling prices are decreasing, and demand has fallen.
Smaller operators are losing to larger ones, dispensaries and related services are shutting down and producers are seeing shoppers switch to cheaper brands.
Getting low: The average price per pound has been cut by nearly half to $709 — the lowest rate since 2014 when the Colorado Department of Revenue began tracking with two main suspects:
- Oversupply: Wholesalers overgrew and were forced to reduce prices to sell excess inventory.
- Federal law: Companies can’t shift oversupply from one state to another since cannabis can’t travel across state borders.
Getting high: State legalizations continue to give cannabis producers a boost. New York — the 15th state to legalize recreational cannabis, expects sales to start next year.
- Despite the issues, the three largest U.S. cannabis companies — Curaleaf, Green Thumb and Trulieve — grew sales by an average of 24% in the recent quarter.
- But stock prices tell a different story. The AdvisorShares Pure US Cannabis ETF (NYSE:MSOS) is down nearly 80% from its peak in 2021.
Keeping them down is a slow process toward federal cannabis legalization. Several legislations have been introduced but failed to gather enough support in the White House.