Too Much Cannabis, Not Enough Buyers – Washington’s Big Dilemma
Table of Contents
- Introduction
- How Washington Ended Up with a Cannabis Surplus
- The Impact of Oversupply on Prices
- Economic Contributions and Industry Challenges
- Potential Solutions to Balance Supply and Demand
- Future Outlook: What’s Next for Washington’s Cannabis Industry?
- Conclusion
Key Takeaways:
-
Washington has a significant cannabis surplus, impacting market prices and producer profitability.
- Prices have fallen drastically – The cost per gram has dropped as low as $4, hurting growers and businesses.
- The industry remains an economic powerhouse – Contributing over $600 million annually and supporting nearly 18,700 jobs.
- Possible solutions include interstate commerce, increased R&D, alternative product processing, and regulatory changes.
- Without intervention, the market could become unsustainable, leading to business closures and job losses.
Introduction
Since the recreational market’s inception in mid-2014, Washington’s licensed cultivators have consistently produced more cannabis than retail outlets have sold each month. This ongoing oversupply has exerted downward pressure on prices, with some growers reporting a decrease from initial sales of nearly $15 – 20 per gram to subsequent sales of around $4 per gram. The falling prices make it increasingly difficult for small and mid-sized cannabis businesses to remain profitable.
How Washington Ended Up with a Cannabis Surplus
According to a 2024 report by Whitney Economics, Washington can produce approximately 2.6 million pounds of cannabis biomass annually, while demand is projected to reach only 891,000 pounds by 2032. This massive imbalance has led to steep price drops in the market.
Back in 2021, the average legal price per gram of cannabis in Washington was $6.51, significantly lower than the $13.58 seen in illegal markets. As the surplus grew, legal cannabis prices continued to drop, with high-quality cannabis averaging around $230 per ounce in 2023. This has made it increasingly difficult for smaller cannabis businesses to compete and turn a profit.
The Impact of Oversupply on Prices
Since the recreational market’s inception in mid-2014, Washington’s licensed cultivators have consistently produced more cannabis than retail outlets have sold each month. This ongoing oversupply has exerted downward pressure on prices, with some growers reporting a decrease from initial sales of nearly $21 per gram to subsequent sales of around $4 per gram. The falling prices make it increasingly difficult for small and mid-sized cannabis businesses to remain profitable.
Economic Contributions and Industry Challenges
Despite the challenges, Washington’s cannabis industry remains a significant economic driver. In 2020, the legal cannabis sector contributed over $600 million in direct value to the state’s economy and supported nearly 18,700 full-time equivalent jobs.
Retail sales have remained strong, reaching $1.13 billion by November 2023. However, with oversupply continuing to pressure prices, some businesses are struggling to stay afloat, and industry-wide layoffs may become inevitable.
Potential Solutions to Balance Supply and Demand
Washington must find creative ways to manage its excess cannabis production before it causes long-term damage to the industry. Some potential solutions include:
- Interstate Commerce: If federal regulations change, Washington could legally export its surplus to states where cannabis demand is higher, helping to stabilize its market.
- Increased Research and Development: Excess cannabis could be redirected to scientific research, medical cannabis programs, or product innovation to create new markets.
- Processing for Alternative Uses: Cannabis biomass could be processed into oils, concentrates, and industrial hemp products to diversify revenue streams.
- Regulatory Adjustments: State agencies may need to reconsider licensing policies to prevent further oversupply, ensuring a more sustainable market.
Future Outlook: What’s Next for Washington’s Cannabis Industry?
The future of Washington’s cannabis market will depend on how policymakers and industry leaders address the surplus problem. Without intervention, continued price drops could force many businesses to close, reducing employment and weakening the state’s economic contributions from cannabis sales.
The industry must push for changes that allow for greater market flexibility, whether through regulatory adjustments or innovative business models that absorb excess supply.
Conclusion
While Washington’s cannabis industry continues to generate revenue and employment, the growing surplus presents a serious challenge. Without intervention, prices will keep falling, putting financial pressure on businesses.
Whether through policy changes, federal legalization, or industry innovations, Washington must find a solution before its cannabis market becomes unsustainable. The question remains: What will the state do with all that extra weed?
