Strong Marijuana Harvest Will Drive Down Prices

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For the week ended Friday, May 22, the spot price for a pound of cannabis was $1,825 unchanged from the prior week. The futures price for November 2015 was also unchanged at around $1,250 a pound.

As with many agricultural product, weather has played and will play a role in prices through the summer and beyond. Colorado’s cool, wet spring is expected to decrease the volume of the late summer harvests from outdoor growers. New greenhouse operations could also see reduced yields over the next several months. In California, the long-term forecasts anticipate a cooler and drier harvest season in the late summer and early fall. The price watchers at Cannabis Benchmarks write:

A high-yielding California harvest with little crop loss to mold, combined with the inevitable flood of Colorado greenhouse production, even if it is ultimately lower than projected, perpetuates the downward trend of the forward curve as summer draws to a conclusion.

In other words, marijuana is going to be cheaper, and that’s clear from the forward price curve.

We noted last week the impact of legal sales on government receipts in Colorado. In 2014, the British government began counting sales of illegal drugs and prostitution in GDP totals. The country relies on estimates, of course, using  a demand-side estimate for illegal drug activity and a supply-side estimate for prostitution activity. In 2013, the last year for which detailed numbers are available, British citizens spent £6.68 billion on “Narcotics” and £5.84 billion on prostitution. How much of the drug spending went for marijuana is unknown.

A 2014 study by the Rand Corporation estimated that marijuana sales in the U.S. in 2010 amounted to $40 billion. About 80% of that total was attributed to daily or nearly daily use of cannabis. Now that sales are legal in nearly half the states, the federal government is leaving money on the table by not making sales legal-and taxing them-all over the country.

Our price check at PriceOfWeed.com shows little change from last week. The average price for an ounce of high-quality marijuana in Colorado is currently $241.32, down just 6 cents from the prior week. In California the price of high-quality marijuana is given as $241.93 (up 1 cent), compared with $297.13 (down $1.09) in Florida, $317.30 (down $0.69) in Georgia, $326.18 (down 23 cents) in Texas, and $231.59 (up 4 cents) in Washington, the only other state besides Colorado where recreational use of marijuana is legal.

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