Deep Cannabis Bear Market: Hundreds of Smaller California Pot Farms Quitting – The Average Joe

    Deep Cannabis Bear Market: Hundreds of Smaller California Pot Farms Quitting

    Victor Lei — Head of Research

    April 10, 2023

    April 10, 2023

    The cannabis nightmare continues. In the past year, cannabis oversupply has driven pot prices down, leading to hundreds of smaller California farms quitting the legal market.

    • Cannabis’ price per pound fell nearly 50% between mid-2021 and 2022-end.
    • California lost 1,766 cultivation licenses (~25%) since the beginning of 2022 — potentially worsening in July as annual license renewals come up.

    Low wholesale prices and high taxes have made it impossible to run a profitable small business — per industry insiders (SFGate).

    Pays to be big

    With the closure of smaller farms, California’s largest cultivator Glass House (OTC:GLASF) is actually beginning to see a shortage in supply.

    • “We’re currently selling it faster than we can grow it” — with plans to ramp up production.
    • Large producers have much lower breakeven prices — benefiting from their size.

    According to cannabis investor Aaron Edelheit, the market will dwindle to a few farms with the best quality or lowest production costs.

    Cannabis markets: While the S&P 500 is up 7% this year, the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS) is down 24%. Until production and demand reach a steady equilibrium or federal legalization comes to market, it’ll be difficult to see a sustained recovery.

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