Wholesale cannabis prices rise in key states, but downward pressure expected

By Kate Robertson, Writer
September 25, 2023

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Wholesale cannabis prices stabilized or rebounded in some key markets through the summer, but cultivators should brace for renewed downward pressure as the fall harvest boosts inventories through the end of the year, experts say.

Chalk it up to simple supply-and-demand dynamics.

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“Over the course of this month, you start to see a huge buildup of inventory across the industry,” Ben Burstein, strategist at New York-based wholesale cannabis platform LeafLink, told MJBizDaily in an interview.

“You start to get huge surpluses of excess product, and at these times, especially around the harvest season, it causes big price declines.”

Data collected in 13 states by the LeafLink platform shows that after months of record-breaking lows, wholesale marijuana flower prices have stabilized in a few key, older markets such as California and Michigan.

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Producers in the states, who have long struggled with low prices, will benefit, while retailers already face higher costs.

Stores were paying 29%-plus more in August year-over-year for wholesale cannabis flower in California because the amount of licensed square footage has dropped by more than 15%, Burstein said.

Prices in Michigan rebounded by 19% since the end of 2022 and were up by more than 4% compared to a year ago as the number of marijuana retail outlets expanded and authorities cracked down on illicit sales.

Flower prices in Oklahoma and Oregon, which have reported some of the lowest wholesale cannabis prices in the United States, increased by more than 7% and 5%, respectively, versus a year ago.

Overall prices in the 13 states tracked across LeafLink's platform were up by 4% year-over-year in August 2023 and 15% compared to the end of 2022.

But price compression amid a glut of inventory continues to be a challenge for wholesalers in most states.

Connecticut-based wholesale marijuana data and analysis company Cannabis Benchmarks wrote in a recent blog post that prices have hit a "historic low," with the spot index reaching only $936 per pound - a 7.3% decline from September 2022.

Market maturity and seasonality

Burstein said very little is surprising about the wholesale cannabis price data that LeafLink collects.

“All states follow a relatively similar path in terms of the growth of a cannabis program and ultimately how the market matures,” he said.

When medical marijuana programs launch, the price per pound of cannabis flower can be as high as $7,000-$10,000, he said.

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As cultivators ramp up capacity and production to take advantage of higher prices and more growers become licensed - often to serve new adult-use marijuana markets and take advantage of higher prices - prices decline.

Wholesale cannabis prices rose in Maryland, for example, by more than 40% from August 2022 to August 2023.

Adult-use sales launched in July.

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Rebecca Raphael, the chief revenue officer at Curio Wellness, a Baltimore-based vertically integrated operator, wrote in an email to MJBizDaily that inflation contributed to oversupply at the company four months ago when the state was still medical-only.

In short, medical consumers, squeezed by rising costs, were spending less each week, she said.

“Now in an adult-use market, where we expected normalization due to increased demand, it appears that other licensees have over-forecasted the size of the Maryland market and continue to dump flower in an effort to right-size their inventory,” Raphael said.

Curio is at full capacity and has no plans to expand, she said.

In Missouri, where adult-use sales launched in February, wholesale cannabis flower prices rose from roughly $1,500 per pound in the final quarter of 2022 to more than $2,000 per pound in August.

Rightsizing supply and demand

Colorado had the lowest wholesale marijuana prices in the country in August at $810 per pound, according to LeafLink data.

“Pricing has held consistency since early summer, but dispensary traffic is down and we are seeing store partners run sales more frequently than we used to,” Jon Spadafora, president of Colorado-based Veritas Fine Cannabis, told MJBizDaily via email.

Cultivators have reduced their planting schedules, he said, but a lot of wholesale product is still available - and prices are still weak.

“As times get more difficult, the industry will see producers making wild deals to keep their lights on, which brings down pricing across the market.”

Arizona’s massive greenhouses oversupplied the market through 2021 and 2022, LeafLink's Burstein said, but prices were up slightly in August, year-over-year, by more than 2%.

Eric Offenberger, CEO of Arizona-based vertically integrated cannabis company Vext Science, told MJBizDaily that’s why he and his team chose to strategically shift their focus from wholesale cannabis flower sales.

They sell the company's cultivated products through owned retail channels instead.

“We made the determination that we didn’t want to be a [flower] wholesaler,” he said. “We wanted our supply to match our demand.”

Wholesale cannabis in the Massachusetts market is also rightsizing after losing cross-border shoppers from states that have now legalized marijuana, such as Connecticut, New York and Vermont, Burstein said.

According to Burstein, the portion of total sales from out-of-state buyers dropped from 25% to closer to 10%-15%.

As a result, wholesale marijuana prices declined by more than 18% since the end of last year and more than 27% since August 2022.

"Massachusetts, compared to Arizona, is much more of a demand-driven story," Burstein said.

Flower in Massachusetts is largely grown indoors. In states where outdoor grows are more common, July and August tend to have the highest prices.

Burstein said to expect declines through the latter half of the year.

"Almost all pricing declines in cannabis happen between the harvest and then the early months of the spring," he said, "when a lot of that product availability has been used and sold."

Kate Robertson can be reached at kate.robertson@mjbizdaily.com.