How to Solve Oregon’s Cannabis Surplus Problem
For the average cannabis consumer, the idea of “having too much weed” is considered a good thing. However, for the state of Oregon, “having too much weed” can create problems that negatively affect the industry.
Currently, this is a major problem for the State. They have issued too many licenses allowing numerous players to produce cannabis excessively. The current consumer to production ratio within state is creating a surplus that is driving down the retail prices of cannabis. Great for the consumer, bad for the industry.
With profit margins plummeting, this would mean that some businesses will reach a point of unsustainability when it comes to maintaining staff and so forth.
However, Oregon’s Cannabis problem isn’t really a problem with too much weed, but rather restrictions on where that weed can go.
Supply and Demand Basics
What’s currently happening in Oregon is that their local consumer-base are not consuming the product fast enough to diminish the supply before getting restocked. This creates a surplus which then can translate into several different scenarios.
Considering that cannabis isn’t legal everywhere, states that do not have legal cannabis on the books provide incentive for black market players to turn profit. If you want to increase the value of something, make it illegal.
With too much weed just sitting there, there are many individual players that would take the risk to sell weed to illicit markets. This in turn sustains the black market, which is supposed to compete with the legal market. However, Oregon’s legal market cannot engage with the “out of state market” precisely due to the illegality of the substance within these “prohibition states”.
Loss of Revenue
What happens when products sit on shelves? The businesses lose money. If you have products that aren’t selling, you’re not making money.
With a surplus, and few options to unload the surplus, it translates into loss of revenue. It’s also important to understand that cannabis does have a shelf life. Even though it’s an amazing plant, air, temperature and light will affect the cannabinoids and change them over time.
Thus, there is a time limit on how long you can store cannabis before it needs to be converted into something else. In order to compensate, the market unloads cannabis at cheaper prices, but that drives down profit margins.
For businesses that do not have large profit margins to play with, this could result in them going out of business if the problem persists for too long.
Sure, some of you might say that this is just market dynamics and you would be right. However, the market is artificially being influenced due to policy in other states. The solutions to Oregon’s problems comes through a national legalization effort that would solve everyone’s problems.
Imagine a World…
Where Oregon might have too much weed, places like Florida and Las Vegas are almost always running low. What would happen if Oregon had the legal right and avenue to ship their surplus to these states?
Interstate commerce is the logical next step when enough individual states have opted in for legal cannabis. Some states simply have a higher capacity and more experience than other states. This isn’t saying that places like New York wouldn’t be able to grow their own, but in terms of labor costs and available land, Oregon has a lot more resources available.
Every state doesn’t necessarily need to create the infrastructure for growing weed. Just like wine isn’t produced all over the United States, it only makes sense that certain states place a higher importance on the production of cannabis due to geography and experience.
If Oregon could sell all of their cannabis to other states legally, the “surplus problem” simply would not exist. In fact, it would be an additional revenue stream creating thousands of jobs in the process.
Once more, the problem lies not within the cannabis industry, but rather the legal restrictions placed by an outdated policy created by career criminals.
Currently, the Surplus Problem is a problem merely because of the inability to transport it across state lines, which would be a violation of Federal Law. In those instances, the feds would have complete legal jurisdiction to intervene in the processes.
This in turn doesn’t motivate the legal industry to participate with interstate commerce, leaving it solely in the hands of black market players.
Imagine a world, where these restrictions were lifted and legitimate businesses could import and export cannabis as they pleased. Where states that would normally not have access to a consistent production of cannabis could supplement demand by obtaining supply out of state.
Imagine the tax revenue associated with this national infrastructure of cannabis commerce. This is the future of the industry, and as more states are legalizing, we’re seeing how the policies of old are inhibiting a multi-billion-dollar industry from truly taking flight.
Hopefully, over the course of the next few years, we will see not only the birth of interstate commerce, but international commerce as well.