Oregon’s Overproduction of Pot
As the price per pound plummets, cannabis farmers in Humboldt have been worried. Now, as their economic reality is beginning to affect that of the community, other business owners are starting to feel the economic earthquake that is hitting this region. Local business owners of non-marijuana related businesses in Southern Humboldt are privately telling us of drops in sales of 40 to 70%.
A good part of the price drop has been the enormous amount of marijuana produced both here and elsewhere. For years, growers have been increasing the number of pounds they produced. For the last two years, many have been left with unsold product. This year, almost no farmers are increasing their production capabilities.
The inevitable result of too much cannabis produced for the legal market is that many of the pounds are sold on the underground market (also saturated) which moves marijuana to states where producing it is dangerous because it is illegal and thus prices are higher.
Some legal growers have expressed hopes that law enforcement would crack down on the underground market in hopes that would keep prices up in the legal market. (Note: this could backfire as many farmers who are in the permit process and are trying to be completely legal continue to divert some pounds to the black market as they struggle to bring in enough money to make the transition without failing.)
Oregon, which began legal sales of recreational marijuana in 2015, is already grappling with the same issue as our community.
Yesterday, AP News released an article on Oregon’s top federal prosecutor’s response to the overproduction of marijuana in its state. This article while not addressing the financial impacts of growing more than the market can bear gives a hint of what might be the direction that other federal prosecutors, including in California, might head as Attorney General Jeff Sessions continues to take a tough stance on marijuana.
According to the article, Oregon’s top U.S. Attorney, Billy Williams, explained his views
“Here’s what I know in terms of the landscape here in Oregon, and that is, we have an identifiable and formidable marijuana overproduction and diversion problem,” he said Friday.
Williams added: “And make no mistake about it, we’re going to do something about it.”
Because there was no cap on the number of marijuana farmers, an expert on marijuana policy and a former professor, Seth Crawford, argues in the article this creates an “overproduction problem.” According to the piece, he estimates that farmers in his state produce three times that amount bought legally. The article continues
“You created this huge industry that has nowhere to put its product,” Crawford said.
“If you were an investor and you had just dropped $4 million into a (marijuana) grow and you had thousands of pounds of flower that was ready to go but you had nowhere to sell it … if you want any of your money back, the only thing you can do is sell it on the black market,” he said. “It was a system designed for failure.”
Read the entire article here.