Falling prices to be expected with the legalization of cannabis

One of the impacts of cannabis legalization in Canada is expected to be a significant price decline. This is at least the point of view of James Eaves, economist and professor of management at Laval University.
Eaves was attending a conference Tuesday on the effects of legalization on the business world. “In all liberalized markets, there has been a rapid decline in prices and an increase in choice. In Colorado, since 2015, the price of wholesale cannabis has decreased by 50%. In Oregon, the drop is only 40% for the last six months! “, He said, figures in support.

Even in Canada, the price of cannabis has already fallen by 40% between 2015 and today. “In British Columbia, the government is now offering $ 2.50 to $ 4 a gram to producers,” says Eaves.

Bankruptcies

The perverse effect of this fall in prices, however, is likely to be … the bankruptcy of several producers. “Canada currently has the capacity to provide twice its domestic demand [in cannabis]. The big producers are ready, they have this capacity, but they are not using it yet and they are waiting for the export market to open, “says Eaves.

He recalls that in some American states where cannabis is legal, lowering prices below $ 700 or $ 800 a pound creates problems for some producers.

“In Canada, when the price reaches $ 2 a gram, there will be a lot of producer bankruptcies. They are currently targeting a cost of production around $ 1 per gram to be able to continue to do good business even when the market drops, “says Professor Eaves.

However, he maintains that it will still be important to keep prices low to avoid competition from the black market, which will still remain in place. “For example, in Washington, the black market is still very important because the taxes are too high. Even here in Canada, 90% of people with a medical license would still be using the black market. ”

Products of the future

In terms of products that are likely to increase in popularity, James Eaves cites the preloaded spray cartridges, which allow you to consume without smoking a bit like electronic cigarettes. This market has increased by 400% in places where cannabis is legal.

“There are also preseed joints, whose popularity is up by 121%. Products like this, which are easy to consume, will be in high demand, “he says.

Cultivate at home

Gabriel Bélanger, a junior engineer and Cannabis Professional Series teacher at Kwantlen Polytechnic University in British Columbia, spoke about other aspects of cannabis legalization in the business world.

He believes that to get rid of the black market, it will allow people to grow at home, which will invariably lead to lower prices.

Mr. Bélanger did not hide that he was in favor of legalization, if not the decriminalization of all drugs. “Instead of treating people who are addicted like criminals, treat them as people who need help.”

municipalities

Gabriel Bélanger also mentioned that the attitude of municipal governments already plays a lot in the cannabis market in Canada. For example, even though drugs are still not legal in the country, cities in BC are selling licenses to clinics and their police officers are turning a blind eye to their operations.

Paradoxically, in Quebec City for example, all the clinics that tried their luck were visited and closed by the police a few months after their opening.

“There are also municipalities, like Weedon, that are very excited about hosting producers and others, not at all,” says Bélanger.

Share Button