Wholesale Cannabis Prices Sky-High in Colorado, Dampening Fears of Crash

http://mjbizdaily.com/wholesale-cannabis-prices-sky-high-in-colorado-dampening-fears-of-crash/

In early 2015, a number of Colorado’s longtime marijuana industry insiders predicted an impending price crash for wholesale cannabis.

But the crash failed to materialize this summer as feared. In fact, the opposite trend is playing out: prices have skyrocketed in recent months.

In October, the online marijuana wholesale marketplace Cannabase saw recreational product being moved for as much as $3,000 per pound at one point. That’s up from a maximum price point of $2,200 per pound in January and February, Cannabase CEO Jennifer Beck said, and an average sale of about $1,900 early this year…

These are wholesale prices, from $187.50 per ounce ($3,000 per pound) to $118.75/ounce ($1,900/pound). That’s about $6.70 per gram and $4.20/gram.

Now, how much do you pay per ounce/gram? We’re looking at a pretty hefty mark-up from the wholesale price to the retail price. What kind of profit margin are we looking at? For comparison, Apple’s profit on an iPhone is estimated to be around 60% (although I’ve seen a percentage as high as 75%):

http://www.digitaltrends.com/mobile/iphone-cost-what-apple-is-paying/

Sorry, I digress, back to the article…

Cecelia Gilboy, a longtime wholesale operation based in Boulder, said she’s seen the exact same trend. She chalks it up mainly to a new microbial testing requirement that went into effect Oct. 9 for recreational cannabis…

The microbial testing rules are so strict that Gilboy heard secondhand from growers that 70% of the wholesale rec product in the state was knocked out of the market because it couldn’t meet the new requirements…

New Mexico’s program is also facing new testing rules, but not all the dispensaries have implemented them. While most of the producers have been promising a price reduction (almost since the program’s inception, 8 years ago), that has never materialized. Since the testing requirements are hard to accomplish with only one authorized testing lab (the last I heard), the effect of the new regulations on pricing has yet to be seen.

But the supply and pricing issues really began well before the new testing requirements took effect in October, and the medical side of the market has experienced supply issues too.

There was a medical cannabis shortage in Colorado Springs – one of the state’s largest MMJ markets – over the summer, Beck said. Faced with that challenge, a lot of dispensaries in the region bought up most of the wholesale product that was available at the time.

When the standard “dry season” of August to October hit in Denver, there was even less product available than usual.

“In July, we had record high consumer sales,” Beck pointed out. Since then, she said, prices on average have increased 35% for recreational cannabis and 33% for medical…

For example, Cullen said the quality of cannabis grown outdoors near Pueblo that has already hit the market is “pretty mediocre.” …

http://www.theguardian.com/society/2015/oct/19/pueblo-colorado-legal-marijuana-industry-migration

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