Supply and demand generally control prices in an open economy. Closet Colorado cannabis farmers got good prices during prohibition, because herb was relatively hard to get. There was also an element of thrill dodging the neighbors. Now your favorite medicine or smoke is becoming legal, the trend is boring.
Some California cultivators hope to hold prices high with talk of noble cultivars like Mendocino Covelo/Dos Rios OG Kush, and South Mendocino County Sour Diesel. This may work if you like your German auto with a star on the bonnet. In Colorado, this may not even break the ice. The truth is marijuana prices are plunging in the Centennial State.
Wholesale prices crashed from a median of $2500 per pound in October 2015, to $1500 in August 2016 according to The Motley Fool. This is not a result of healthy competition. For as long as Colorado holds back on new cannabis licenses – and fails to put a cap on the number of plants per grower – the monopolistic few will flood the market, drive prices down, and effectively snuff out the hopes of potential new entrants.
This is vintage America. When last did you visit a non-franchise restaurant or store in a big city? Do you remember the independent gas stations? Consumers are the winners now. From experience, we know prices will rocket once we reach a state of limited, oligopolistic competition.
We wonder how the Colorado treasury will react to this. They have been reaping a bountiful harvest, with gross income from marijuana licensing and tax touching $135 million in 2015. This is proving useful for education, law enforcement and drug abuse programs. Will they stand by and watch? They may have planned for more.
There appear to be four options in Colorado at present. These are ride out the situation, invest in marijuana stock, buy out a license holder, or enter a peripheral market like paraphernalia or processing. The smart money could turn out on the latter if the marijuana market follows the trail of alcohol. There are going to be many offshoots of the emerging culture. The trick is to spot them and stay ahead of the curve.
This is not to say the overall marijuana map in the U.S. is gloomy. When the folk in Washington finally listen, and state governors vote accordingly we are going to see a step change. The supply market will democratize and the independents will benefit. Marijuana users have always been on the left of the establishment.