Here is Why the Oregon Cannabis Market is in Trouble

Sunrise over Portland Oregon
Photo by: Sung Choi/Shutterstock

As cannabis legalization progresses, each state faces its own unique issues related to legal weed. While none of the legalized states have experienced complete societal collapse like anti-pot advocates would like you to think, new problems are still coming out of the woodwork in states that have had legal weed for a while. Oregon, for example, is seeing severe issues related to the oversupply of marijuana.



Supply Dwarfs Demand

The Oregon cannabis market is wildly over-saturated by anyone's measure. For consumers, this is pretty great. You can walk into nearly any Oregon dispensary and find yourself a gram of decent quality bud for five bucks, and even concentrates are dropping in price. When the state began legal recreational sales in 2016, a gram of butane hash oil (BHO) wax or shatter went for a minimum of $40 in most dispensaries.

These prices were justified by to the relative scarcity of flower, since concentrates require a lot of raw materials to refine. But now that everyone's had a chance to get in on the growing side and bulk flower is readily available, the price of concentrates has tanked. You can now find a full gram of BHO for $25 at any reasonably priced dispensary, and snag one for even less if you're an adept bargain hunter.

According to cannabis economics and policy expert Seth Crawford, Oregon is growing so much weed that they're producing three times what can be legally sold.

Putting The Figures in Perspective

When you take into account Oregon's recreational marijuana laws, that's a truly staggering figure. Adults in Oregon are restricted in how much they can have on their person in public. If you're walking around Oregon streets after visiting a dispensary, here's how much you can have in your possession:

  • Supply and Demand Curve1 ounce of usable cannabis
  • 16 ounces of a cannabinoid product in solid form (edibles)
  • 72 ounces of a cannabinoid product in liquid form (beverages)
  • 5 grams of cannabinoid extracts or concentrates
  • 4 immature marijuana plants
  • 10 marijuana seeds

Crawford's overproduction estimate assumes that each eligible adult purchases the full amount of flower they can legally possess each day, and as you can see that's a mind-blowing haul. According to the Guardian, there were over 1 million pounds of unsold pot hoping to become part of the Oregon cannabis market as of May.

For context, that's more than 128 million eighths!

Growers Feeling the Heat

Photo by John Leyba/The Denver Post)
Marijuana growers are getting more and more nervous. Trey Willison, a Eugene farmer, informed the Guardian that he spotted warning signs about a year ago. He noticed that the clones he sold to other growers were being cloned themselves, and realized the practice was simply unsustainable.

 

Now that other growers are sitting on warehouses stocked full of cannabis, panic mode is starting to set in. Owners of extraction companies have gotten used to receiving semi-frantic calls from growers, asking if they're looking for more raw materials to use in their concentrates.

This puts extractors in a good position, as they're getting below bottom shelf pricing from growers desperate to offload their excess stock. With the growing popularity of concentrates, and the ability to sell them to other companies who use them in edibles, extractors seem to be the only people coming out on top.

But even then, restrictions make it harder to accept such offers. Per Oregon law, processors can't sell extracts directly back to the farms that supplied the flower. Instead, they must have a buyer lined up beforehand.

And with the oversupply of marijuana in full swing, it's harder to get buyers than ever.

An Avoidable Mistake

So, how did this massive oversupply of marijuana happen? One answer: A lack of regulatory foresight.

Back in 2016, the Oregon Liquor Control Commission (OLCC) decided that instituting a cap on business licenses was unnecessary. At the time, they predicted that the first two years of legalization would see only 800 to 1,200 businesses getting licensed.

As of May 10th, 2018, the Oregon cannabis market contains a total of 2,008 producer licenses.

Compare that number to the 757 retailer licensees and 395 processor licensees, and the scale of the problem becomes even more evident. Without any limit on how many producers could get licensed in the first two years, it seems practically everyone decided to get some skin in the game.

Tracking Overstock in Oregon

 

Marijuana Plant Growing in the Sun
Photo by: Kandelaki/Shutterstock
One critical question remains: what happens to all that unsold pot? At best, it sits in storage and builds up some extra CBN before being sold through normal channels. At worst, desperate farmers unload it on the black market.

 

The problem is so widespread that in February, the state held a summit made up of representatives from multiple U.S. attorney's offices, USPS, Customs and Border Protection, and even the FBI.

While the summit did not produce a concrete agenda, the event aimed to investigate collaborative ways to combat the robust black underbelly of the Oregon cannabis market. The rural communities at the edges of Oregon simply don't have access to the breadth of resources necessary to stop black market marijuana leaving the state. Nor does the oversupply of marijuana in Oregon.

In 2017 alone, 2,644 pounds of marijuana were seized by postal agents, and it's reasonable to assume much more made it out undetected.

 

 

The future of black market cannabis in Oregon is uncertain. At this rate, the oversupply of marijuana will cause hundreds of producers to be pushed out of the industry. While great deals are a win for the consumer, they may end up raising black market crime rates in their wake.