There is an interesting dilemma in Oregon. When the law was written to legalize cannabis there was one goal and that was to get rid of the black market and illegal activities associated with the sale and trade. So a very liberal law was crafted. The goal was widely achieved but with some unforeseen results. Like most things liberal they are now blaming the policy for being poor business. Prices of herb in the state have dropped by as much as half because of the amount of growers that entered the market.
Oregon has long been known for the farmers craft of great product. The problem is that it’s going to be tough for them to all stay in business with the prices dropping so drastically. There are little barriers to entry and the growers are not being taxed which makes it really easy to enter the segment.
There are two issues that might work in their favor. One there is a sever backlog of applications so the government is putting a moratorium on the application process until they can catch up. And the state legislature is supposed to take up the issue in their next session. Both of these events can help prevent the price of herb from falling more into free fall.
The state has 4 million people and 1 million pounds of flower in inventory. This is classic economics. Over supply of oil was what has kept oil prices low the last few years. As you would expect whole sale prices have dropped in half over the last year due to this over supply.
The goal has always been to support the medical aspects of the industry and rein in the black market at the same time. Maybe even getting doctors and scientists performing medical research and weakening the cartels. Wouldn’t it be nice to have solid constructive research done with cannabis so we can have conclusive evidence of it’s health benefits?
The only real limits is on medium sized growers. Industry groups think those restrictions aren’t fair which cause another major concern is that if that changes in a few years there could be consolidation and small mom and pop craft growers won’t be able to compete with big conglomerates and less than 10 growers could control the market if pricing issues continue. In Colorado producers are limited to crop size in the number of plants that they can grow.
Oregon Cannabis Association thinks that capping licensees would cause more consolidation. The state is working on conducting a study to get the facts and determine what should happen next. The industry is so new and changing so rapidly it’s hard to know what the best solution is even when you look at the Colorado model. Every state has different issues and this will cause different results to the way business is conducted.