Oregon cannabis producers grew too much weed again this year, according to a new report, continuing the glut of marijuana that has plagued the state’s regulated pot industry for years.
For much of this year, analysis of Oregon’s production of cannabis showed that the state was on a downward trend compared to last year, leading to a modest increase in prices. But a new report from state economists Mark McMullen and Josh Lehner that was released on November 20 shows that this year’s fall harvest of outdoor weed pushed this year’s total crop beyond production levels posted in 2022.
“Through the first nine months of the year, the marijuana harvest was nine percent lower than a year ago, and 15 percent lower than the record crop back in 2021,” the economists wrote. “As the market appeared to be adjusting, prices were stabilizing. That changed with the large October outdoor harvest which is 15 percent larger than last October.”
Oregon’s cannabis cultivators have been growing more weed than the state’s consumers can smoke for at least five years. Mark Pettinger, a spokesman for the Oregon Liquor and Cannabis Commission (OLCC), said last year that the problem is caused in part by the difficulty operators and regulators have in predicting weed production. Because much of the state’s weed is harvested at the same time, the industry can be slow to adjust to changing market conditions at the wholesale and retail level.
“It’s because about 85% of the crop is grown outdoors, comes down in October during harvest time, but planting planning is made the following April — which there really hasn’t been enough time to really gauge how the harvest from the previous fall is impacting the market,” Pettinger told a local television news outlet in 2022.
Weed Oversupply Challenges Industry
The glut of weed in Oregon’s regulated market has wreaked havoc on the industry for years. Because of the oversupply, prices on wholesale cannabis and retail products have plummeted. While the decline in prices is welcomed by most consumers, cannabis companies have been left with dwindling margins and falling, or nonexistent, profits. As a result, producers, wholesalers and retailers throughout the state are having a difficult time making ends meet.
Beau Whitney, a Portland-based economist who monitors cannabis prices in Oregon and throughout the United States, said that more than one-third of respondents to a cannabis industry survey said that they are having difficulty paying their taxes. Even more said that managing debt is a problem.
Whitney said that the latest report of Oregon’s abundant fall harvest “couldn’t have come at a worse time.”
“People are walking away from cannabis licenses or selling them for pennies on the dollar,” Whitney told Willamette Week.
The slump in cannabis prices has also been reflected in the collection of Oregon’s weed taxes. Throughout the state, tax delinquencies are up and cannabis tax revenue has fallen short of estimates for four of the past five quarters.
Whitney noted that Oregon regulators could spur an increase in cannabis prices with a curb in production, which could be accomplished by limiting the number of licenses or their capacity. But Pettinger of the OLCC said that the current oversupply conditions are the result of intentional policy decisions coupled with the federal government’s continued refusal to legalize cannabis, which would open up markets across the country for Oregon’s weed growers.
“The state and the industry and elected officials envisioned Oregon becoming a net exporter under federal legalization,” Pettinger says. “The oversupply we’re seeing underscores the dilemma in all states where marijuana is legal—it’s the equivalent of an Iowa corn farmer only being able to sell his crop within Iowa.”
Falling Prices Lead Trade Groups To Merge
Falling weed prices and the resulting instability of Oregon’s cannabis industry led two industry groups to join forces in a recent merger. The two groups, the Oregon Cannabis Association and the Cannabis Industry Alliance of Oregon, announced the merger last month following unanimous votes by the boards of directors of each organization.
“There’s a lot of knowledge, there’s a lot of passion, there’s a lot of really educated folks within the cannabis industry in Oregon,” said Hunter Neubauer, board member of the combined trade group. “Those folks need one place to go to, where they can take a little bit of money that they have, and hopefully become members, and show up with us in Salem and advocate for reasonable regulations and future opportunities for the industry.”
The newly merged group is named the Cannabis Industry Alliance of Oregon and represents more than 500 member businesses in the state’s licensed cannabis market, which generates about $1 billion in sales annually.
“It’s a community that we all really value and we want to see survive and thrive,” Mike Getlin, the board chair of the Cannabis Industry Alliance of Oregon, told local media. “We want something more than a bunch of minimum wage jobs owned by out-of-state and potentially even overseas financial interests. So that’s what this fight is really about for us.” (Full Story)