This Tuesday, Oct. 10, 2017 photo shows hemp plants in a field at the University of Virginia Wise in Wise, Virginia. As marijuana farmers in Oregon say a flood of supply is killing their businesses less than three years after recreational cannabis was legalized, economists say it’s a warning to Canada. THE CANADIAN PRESS/AP-Steve Helber

This Tuesday, Oct. 10, 2017 photo shows hemp plants in a field at the University of Virginia Wise in Wise, Virginia. As marijuana farmers in Oregon say a flood of supply is killing their businesses less than three years after recreational cannabis was legalized, economists say it’s a warning to Canada. THE CANADIAN PRESS/AP-Steve Helber

Oregon’s flooded recreational pot market a cautionary tale to Canada

‘In a broader sense, we are adding legal production to an already robust illegal production’

As marijuana farmers in Oregon say a flood of supply is killing their businesses less than three years after recreational cannabis was legalized, economists say it’s a warning to Canada.

Stephen Easton, professor of economics at Simon Fraser University and senior fellow at the Fraser Institute, says large fluctuations in price and supply are bound to happen when you create a legal market where an illegal market already exists.

“There is no reason to think it won’t happen here as well. In a broader sense, we are adding legal production to an already robust illegal production,” Easton said.

“Consumption may simply not increase in proportion to our ability to grow.”

Robin Cordell, owner and grower at Oregon Girl Cannabis Company, said she saw the influx of supply coming on social media that would choke out her farm.

“I saw just massive fields planted on Instagram, just huge acres and I just knew that was going to be the result,” she said in an interview.

While she once sold her pot to a wholesaler for $2,200US per pound, she said that dipped to $600 per pound.

Cordell said she’s planning to pull the plug entirely on recreational pot and focus on medical marijuana and hemp products until new markets open up across the country.

“I think I am going to actually give up my licence and wait for nationwide legalization to happen, just because the market is terrible,” Cordell said.

Oregon’s inventory of marijuana is staggering for a state its size. There are nearly 450,000 kilograms of usable flower in the system, and an additional 159,000 kilograms of marijuana extracts, edibles and tinctures.

The Oregon Liquor Control Commission, which regulates the industry, said some of the inventory of flower goes into extracts, oils and tinctures, which have increased in popularity, but the agency can’t say how much.

Yet the retail price for a gram of pot has fallen about 50 per cent since 2015, from $14 to $7, says a report by the Oregon Office of Economic Analysis.

The regulatory framework emerging in Canada already looks a little different.

There are 104 licensed marijuana producers in Canada, including 57 in Ontario and 22 in British Columbia.

As of May 11, Health Canada had received 1,974 applications from producers and had refused 268, while others were in progress, incomplete or withdrawn. The entire application process takes more than a year to complete.

Under the federal government’s proposed approach to cannabis, regulations would not prescribe a limit on the amount of cannabis a producer cultivates under a standard licence.

“However, the Minister of Health could establish a production limit as a condition of the licence if there were reasonable grounds to believe that a licensee was producing more cannabis than this licensee was able to sell, and that the excess inventory was at risk of being diverted to an illegal market or activity,” a November 2017 consultation paper by Health Canada says.

Werner Antweiler, professor of economics at the University of British Columbia’s Sauder School of Business, said market fluctuations will depend on whether the government restricts licensing and prices.

If left up to the free market, prices can drop to almost nothing, temporarily, he said. The market typically corrects itself over time, with smaller-scale producers that have higher production costs exiting the market and larger-scale producers being able to survive the roller-coaster because they work in economies of scale.

“If you want to prevent prices from dropping dramatically, there can be regulations in place that maintain a minimum price of some sort. That’s easier to do if the distribution channel is regulated,” Antweiler said.

But he said price controls can backfire.

“That said, the danger is then, if prices are regulated and we have players trying to sneak around them and provide their product illegally at a lower price, that could lead to an undermining of the idea of liberalization, which is getting the market into the legal domain and preventing an illicit market from surfacing,” he said.

“It’s much better to get it right from the beginning,” he said, and decline to licence more producers than the estimated demand can support.

One Canadian producer says he’s not too worried about being pushed out of the market the way producers are in Oregon.

“I think it’s a function of a far more relaxed regime,” said Dan Sutton, CEO of Tantalus Labs based in Maple Ridge, B.C. “Right out of the gate, you’ve got a far more sophisticated production regulation regime, which inherently applies a barrier to entry.”

Tantalus Labs is a small-batch producer, which grows unique strains and only harvests about 100 plants at a time, he said.

Sutton is counting on recreational consumers to pay more for a higher quality product, which could mean unique strains, cannabis with a “farm to table” story or organic cannabis that has been meticulously cared for.

“In Oregon, while there are massive over-supplies of commodity-grade quick and easily grown cannabis, there are still cannabis products that sell for $15 or $20 a gram at the dispensary level,” Sutton said.

“All cannabis is not the same.”

The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Joseph Albert Brooks, 94-years-young pf Prince Rupert offers traditional prayers and smudging to the sick. (Photo: K-J Millar/The Northern View)
Heart of our City: Joseph Albert Brooks keeps smudging and praying for others

94-year-old Tsimshian elder just wants some help washing his floors

Land along Prince Rupert’s waterfront, PID 012-247-391, where residents say excessive industrial train noise is stemming from, has been found to be owned by the City of Prince Rupert and is not federal land like first presented, Prince Rupert Environmental Society stated on June 17. (Image: supplied by Land Title and Survey, Govt. of BC.)
Error found on land titles map may assist city with noise control enforcement of industry

Prince Rupert residents had been told there was no municipal jurisdiction to enforce noise bylaws

Department of Oceans and Fisheries has announced as of July 19 chinook salmon is not to be fished in certain areas in BC tidal waters until July. Spring chinook salmon are seen swimming. (Photo courtesy Michael Humling, US Fish & Wildlife Service)
Chinook Salmon limits set to zero in some BC tidal waters

DFO implement restrictions to protect Chinook Salmon

Visitors to a pop-up temporary aquarium in Prince Rupert will have the chance to see marine ecology from July 21 to Aug. 15, like this viewer watching sea anemones at the Ripley’s Aquarium in Toronto. (Photo: K-J Millar/The Northern View)
Prince Rupert pop-up aquarium will bring sea level to eye level in July

A permanent peak to reef ecology centre is in the planning stages by North Coast Ecology Society

Prince Rupert’s Ellen Wright and Graeme Dickens jam out during filming the two Ring System Studio concerts to be broadcast on television during June. (Photo: supplied, H. Cox)
Ring System Studio sounds on television

Two concerts by the Prince Rupert music school will be broadcast in June

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

RCMP crest. (Black Press Media files)
Fort St. John man arrested after allegedly inviting sexual touching from children

Two children reported the incident to a trusted adult right away

Barbara Violo, pharmacist and owner of The Junction Chemist Pharmacy, draws up a dose behind vials of both Pfizer-BioNTech and Oxford-AstraZeneca COVID-19 vaccines on the counter, in Toronto, Friday, June 18, 2021. An independent vaccine tracker website founded by a University of Saskatchewan student says just over 20 per cent of eligible Canadians — those 12 years old and above — are now fully vaccinated. THE CANADIAN PRESS/Nathan Denette
At least 20% of eligible Canadians fully vaccinated, 75% with one dose: data

Earlier projections for reopening at this milestone didn’t include Delta variant

This undated file photo provided by Ernie Carswell & Partners shows the home featured in the opening and closing scenes of The Brady Bunch in Los Angeles. Do you know the occupation of Mike Brady, the father in this show about a blended family? (Anthony Barcelo/Ernie Carswell & Partners via AP, File)
QUIZ: A celebration of dad on Father’s Day

How much do you know about famous fathers?

Emily Steele holds up a collage of her son, 16-year-old Elijah-Iain Beauregard who was stabbed and killed in June 2019, outside of Kelowna Law Courts on June 18. (Aaron Hemens/Capital News)
Kelowna woman who fatally stabbed teen facing up to 1.5 years of jail time

Her jail sentence would be followed by an additional one to 1.5 years of supervision

Cpl. Scott MacLeod and Police Service Dog Jago. Jago was killed in the line of duty on Thursday, June 17. (RCMP)
Abbotsford police, RCMP grieve 4-year-old service dog killed in line of duty

Jago killed by armed suspect during ‘high-risk’ incident in Alberta

The George Road wildfire near Lytton, B.C., has grown to 250 hectares. (BC Wildfire Service)
B.C. drone sighting halts helicopters fighting 250 hectares of wildfire

‘If a drone collides with firefighting aircraft the consequences could be deadly,’ says BC Wildfire Service

A dose of the Pfizer-BioNTech COVID-19 vaccine is pictured at a vaccination site in Vancouver Thursday, March 11, 2021. THE CANADIAN PRESS/Jonathan Hayward
NACI advice to mix vaccines gets varied reaction from AstraZeneca double-dosers

NACI recommends an mRNA vaccine for all Canadians receiving a second dose of a COVID-19 vaccine

A aerial view shows the debris going into Quesnel Lake caused by a tailings pond breach near the town of Likely, B.C., Tuesday, Aug. 5, 2014. THE CANADIAN PRESS/Jonathan Hayward
Updated tailings code after Mount Polley an improvement: B.C. mines auditor

British Columbia’s chief auditor of mines has found changes to the province’s requirements for tailings storage facilities

Most Read