Marijuana prices in Oregon are at an all-time low.
Median retail prices fell to $4 per grams at the start of 2023, according to state regulators, up from 16% from a year earlier. Last year’s decline continues a long downward trajectory that has cut prices by more than half in the seven years since recreational marijuana became legal in Oregon.
“Oregon’s recreational marijuana market is arguably the weakest economic position it has been in since the program’s inception in 2016,” the Oregon Liquor and Cannabis Commission wrote in its annual report to the state legislature last month.
Falling prices are great for consumers tired of inflation’s effects on most other products, but abysmal for Oregon retailers and growers. State economists warned last month that tax collections are below forecasts. It’s not just because falling prices have reduced the state’s cut — amid the steep decline, struggling cannabis companies are “unable to pay all their bills.”
Oregon collects a little more than $150 million in marijuana tax revenue annually.
The industry’s deeper problems are a notable development as Oregon’s cannabis market has grown into a $1 billion market.
“We have a record number of delinquent accounts receivable, retailers that owe us money,” said Mason Walker, CEO of East Fork Cultivars, which grows cannabis in Josephine County. “It’s happening across the market. It’s causing pain up and down the supply chain.”
The reason prices keep falling is Economics 101: Supply is much higher than demand.
Marijuana grows abundantly in Oregon. But cannabis remains banned under federal law and cannot be legally sold across state lines. And while cannabis has proven to be increasingly popular, the state’s 4.2 million residents consume only a fraction of the marijuana grown by the state’s farmers.
The OLCC estimates that Oregon demand for cannabis was only 63% of supply last year.
Sales in 2022 fell more than 17% to $994 million, the Oregon industry’s first-ever annual decline. Production is also falling as farmers respond to falling prices. But supply and demand are far from balanced.
Farmers produced less cannabis last year as it became clear that the surge in demand that came with the pandemic would not continue. But state regulators say there’s another problem for retailers and growers — large stockpiles of inventory left over from previous years. It can keep prices down indefinitely.
“These low consumer prices are forcing companies to operate under low margins and extreme pressure,” the OLCC wrote in last month’s report.
Some major cannabis companies have left Oregon entirely, among them Curaleaf, one of the nation’s largest marijuana companies.
“These (exits) are very remarkable and they leave a void for the survivors to fill,” Walker said.
Still, Walker said he sees no quick fix for his industry.
Oregon stopped issuing new cannabis licenses last year in response to the supply problems, but Walker said it has had little effect because so many licenses had already been issued.
And while marijuana remains illegal at the federal level, several individual states have legalized it. Walker said that cuts costs for people traveling to Oregon to buy cannabis, some of whom used to buy enough to quietly take some home when they left.
Oregon’s cannabis businesses have weathered tough times before, Walker said, most notably during a sharp drop in prices at the start of 2018. But he said the industry is dealing with “fatigue” from the prolonged downturn, with a growing number of companies giving up and selling their licenses for a fraction of what they had hoped.
“It’s not a completely screwed up market,” Walker said, “but it’s challenging.”
This is Oregon Insight, The Oregonian’s weekly look at the numbers behind the state’s economy. See previous installments here.
— Mike Rogoway | mrogoway@oregonian.com | 503-294-7699
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