Wholesale Comparisons: Colorado Vs. Oregon

By Beau Whitney, VP and Senior Economist, New Frontier Data

There has been no lack of buzz recently about Oregon's oversupply of cannabis, with concerns first fueled by the state's own regulating agency. Back in January, the Oregon Liquor Control Commission (OLCC) reported that the state was producing 2x more cannabis than people were consuming, and how more than six years' worth of supply was wasting away on shelves and at farms.

Conversely, headlines out of Colorado lately have celebrated that state's breaking the billion-dollar barrier for tax revenues generated since its adult-use program was rolled out in 2014.

What has gone largely missing amid the narratives, though, is a noteworthy comparison of how those respective markets' price declines compare to one another, and to those in other legalized states.

As it has happened, while Oregon has seen the price of cannabis flower and trim (i.e., "usable marijuana") decline 64% at the wholesale and retail levels from October 2016 to March 2019, Colorado, too,  has seen a steep decline in the prices of its products throughout a 60% drop from January 2015 to April 2019.

Oregon's woes are directly attributable to the (originally unlimited) number of licensed cultivators in its program. Colorado had guarded itself against such a glut by requiring any cultivator requesting an increase in growing capacity to demonstrate proven demand for their previous crop. If the respective regulatory approaches seemed trivial, their results created a comparative chasm.

That being noted, prices in Colorado nevertheless saw significant declines, too. Why? Because large amounts of capacity had also been brought online in the Centennial State, though not to the extent of the critical mass in Oregon. Colorado officials found that it took until 2017 for the state's pre-existing illicit market to effectively get absorbed into the regulated market, and for its legal supply to effectively meet demand. While consumers generally prefer products from legal dispensaries, drawbacks to regulations or delays in licensing processes can include the slow adoption of a legal program from an established illicit market.

While the pace of price declines has not been mirrored between the two states, March 2019 marked the first time that Oregon's wholesale prices were on par with Colorado's. Still, the states' price declines are not linear: When Oregon experienced sharp declines in late 2017 and early 2018 due to a record harvest which flooded Oregon's market, seasonality was also reflected in the wholesale pricing.

Seasonality occurs in many retail and wholesale environments, and prices fall relative to the amount of supply in the system. Corn on the cob, for example, is much cheaper in the summer than in wintertime; the same dynamic applies for cannabis.

The post Wholesale Comparisons: Colorado vs. Oregon appeared first on New Frontier Data.

Posted In: New Frontier DataCannabisMarkets

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.