Wholesale Flower Pricing Leveling Off

Cannabis buds in a jar with money in the background.

Many factors influence cannabis flower pricing, including regulation, supply and demand, and how weather conditions impact crop yield. The number of licenses also influences the price and the fewer the businesses, the lower the supply, and the higher the rates for flower. 

The flower is a very popular mode of consumption with many new strains being added daily and eye-catching cannabis flower packaging adding to the appeal. Prices across the nation for flowers often vary widely, depending upon the maturity of the market. New markets often see high prices for flowers due to a growing number of patients entering the market.  

Highest and Lowest Marijuana Prices in 2019 

LeafLink reported that prices for cannabis fell in most states and categories in 2019. Smokable flower prices dropped nationwide and LeafLink believes this was likely due to the availability of all the non-flower related products as these two markets reached maturity.  

According to LeafLink, Alaska was the most expensive state to buy cannabis due to high logistics and shipping costs and Washington was the cheapest due to product over-saturation.  

Newer medical cannabis programs – higher prices

New programs, such as Ohio and Pennsylvania, are seeing high prices for flower, bolstered by the number of new patients entering the market. 

The regulations of states determine the economic potential of the market. In Pennsylvania, for instance, the state has limited licenses and there is a strong demand for medical cannabis. Prices per pound of flower wholesale are currently $6,400-$7,000 and Pennsylvania experienced $132 million in first-year sales

It’s a little more than a year since Ohio saw the legalization of medical cannabis. Patient dissatisfaction was high in the first year of the program and sales numbers for the year fell well short of Pennsylvania’s. Some still believe Ohio could become a leading cannabis market.

In states like Ohio, Maryland, and Missouri, further growth and expansion are likely to take place although the growth will eventually slow. By the time patient enrollment slows down, these states are likely to have adult-use cannabis laws. 

Oversupply followed by an upward surge in mature adult-use legal states

Some established adult-use legal states, such as Oregon, Washington, and Colorado, had serious oversupply issues last year. Even established states that capped the number of growing licenses had concerns about the oversupply of dried flowers. 

High tax rates had a part to play in this. Illicit producers don’t pay taxes and this means they slow the transition of consumers to legal channels and the oversupply of legally grown cannabis worsens. For instance, when California opened its doors to recreational cannabis sales, its cannabis sales contracted, showing just how much of a deterrent high tax rates can be. 

In August 2019, Seaport Global, an investment bank based in New York and New Orleans, released a report about wholesale cannabis pricing in Oregon, Washington, and Colorado.

These are the three adult-use cannabis markets that have been going the longest. It found that wholesale prices per pound had been going up since mid-April. A separate report by Confident Cannabis, focusing solely on the Oregon market, also showed an upward trend. 

Seasonality couldn’t fully account for the upward surge. Possible contributing factors could have been some cultivators going out of business as well as hot and dry weather contributing to lower yields and more cost for growers who were forced to irrigate.

Growers were also stockpiling supplies to wait for better prices. Other possible contributing factors could have been growers pivoting to growing hemp or limiting production. 

Growth stabilizing and slowing in older markets

Other older markets, such as New Mexico and Arizona, have seen growth stabilize or slow. In New Mexico, the wholesale flower is selling at $2,000-$2,400 per pound and prices have remained relatively stable since last year despite a rise in the patient count. 

There are presently about 83,000 patients enrolled, which is an increase of about 68%. One reason why New Mexico has not seen a drop in wholesale prices is due to the state-mandated plant limit

In Arizona, large-scale facilities are improving production, so supply is up but demand has also become higher with more patients entering the system. At one stage, there were over 100 unlicensed online delivery service listings but they were removed in January 2020. The top shelf price per pound of flower in Arizona is about $2,400. 

In Massachusetts, wholesale cannabis flower is selling at about $4,200 a pound on average. This is approximately 25% higher than it was a year ago. Demand is outstripping supply in Massachusetts due to the Cannabis Control Commission’s slow pace of approvals. 

Massachusetts remains one of the most attractive cannabis markets in the country and the slow and pragmatic licensing approval could be a model to follow for states that go green for adult use in 2020. 

In Oklahoma, over 4,500 growers have licenses and there are no limits on licensing. However, retail demand is also starting to rise as more medical cannabis cards are issued every week. 

What happens when demand outstrips supply? 

With the legalization of cannabis for adult use in early 2020, Illinois is a prime example of what happens when demand outstrips supply. Retail sales hit $40 million in the first month – a very strong start for an adult-use market. What once used to be a medical cannabis market of 100,000 patients has increased to a market of eight million residents of legal age to buy cannabis. 

Add to this the almost 100 million tourists visiting every year and supply is tight. Wholesale cannabis suppliers are selling out their inventory of flowers each week, and supply is unlikely to catch up anytime soon.

A final word

Price levels vary widely across the country and largely depend on the maturity of a market. New markets see high prices and older programs see some high prices too but they tend to level off as a market matures. 

Cannabis businesses want to be profitable and this means they have to become more stable and sustainable. Focusing on good business practices and producing high-quality products is essential for businesses that want to continue to succeed in a competitive market.

Leave a Reply