Oregon's Cannabis Conundrum: Facing the Impact of Oversupply on Industry and Policy, Once Again
Oregon's cannabis industry is grappling with an oversupply issue, leading to a host of financial troubles. Lawsuits, liens, and companies considering exit strategies are becoming increasingly common. The core issue? An abundance of cannabis driving down prices and squeezing the margins for producers, processors, and intermediaries.
State economists, including Mark McMullen and Josh Lehner, keep a close eye on the sector, especially since cannabis tax revenues are pivotal for funding drug treatment services under Measure 110. After a period of declining production in 2023, hopes for industry stabilization were dashed by the latest forecast released on November 20.
The report revealed a significant increase in the October outdoor harvest, up 15% from last year. "Through the first nine months of the year, the marijuana harvest was nine percent lower than a year ago, and 15 percent lower than the record crop back in 2021," the economists noted. Just as market prices were stabilizing, this surge in supply hit the industry hard.
Beau Whitney, an independent economist in Portland, highlights the timeliness of the supply spike as particularly problematic. His ongoing industry survey shows more than a third of respondents struggling with tax payments and even more grappling with debt. The chain reaction has retailers, wholesalers, and producers all feeling the pinch. "People are walking away from cannabis licenses or selling them for pennies on the dollar," Whitney observes.
Tax delinquencies in Oregon's cannabis sector are rising, with tax collections falling short in recent quarters. This financial strain is not just an industry concern; it affects broader initiatives like Measure 110, Oregon’s drug-decriminalization program. The initiative relies heavily on cannabis taxes, about two-thirds of which are earmarked for addiction treatment services. Thus, the current situation with low prices and high delinquencies poses a threat to Measure 110's foundational goals.
Whitney suggests that state intervention, similar to Colorado's approach of reducing the number of licensees or their capacity, could help stabilize prices. However, Mark Pettinger, a spokesperson for the Oregon Liquor and Cannabis Commission, points out that the current scenario stems from deliberate policy choices and federal constraints.
Pettinger explains that the state, industry leaders, and officials had hoped Oregon would become a major cannabis exporter following federal legalization. "The oversupply we’re seeing underscores the dilemma in all states where marijuana is legal—it’s the equivalent of an Iowa corn farmer only being able to sell his crop within Iowa," he says, highlighting the challenges of state-restricted cannabis commerce in a potentially nationwide market."
State economists, including Mark McMullen and Josh Lehner, keep a close eye on the sector, especially since cannabis tax revenues are pivotal for funding drug treatment services under Measure 110. After a period of declining production in 2023, hopes for industry stabilization were dashed by the latest forecast released on November 20.
The report revealed a significant increase in the October outdoor harvest, up 15% from last year. "Through the first nine months of the year, the marijuana harvest was nine percent lower than a year ago, and 15 percent lower than the record crop back in 2021," the economists noted. Just as market prices were stabilizing, this surge in supply hit the industry hard.
Beau Whitney, an independent economist in Portland, highlights the timeliness of the supply spike as particularly problematic. His ongoing industry survey shows more than a third of respondents struggling with tax payments and even more grappling with debt. The chain reaction has retailers, wholesalers, and producers all feeling the pinch. "People are walking away from cannabis licenses or selling them for pennies on the dollar," Whitney observes.
Tax delinquencies in Oregon's cannabis sector are rising, with tax collections falling short in recent quarters. This financial strain is not just an industry concern; it affects broader initiatives like Measure 110, Oregon’s drug-decriminalization program. The initiative relies heavily on cannabis taxes, about two-thirds of which are earmarked for addiction treatment services. Thus, the current situation with low prices and high delinquencies poses a threat to Measure 110's foundational goals.
Whitney suggests that state intervention, similar to Colorado's approach of reducing the number of licensees or their capacity, could help stabilize prices. However, Mark Pettinger, a spokesperson for the Oregon Liquor and Cannabis Commission, points out that the current scenario stems from deliberate policy choices and federal constraints.
Pettinger explains that the state, industry leaders, and officials had hoped Oregon would become a major cannabis exporter following federal legalization. "The oversupply we’re seeing underscores the dilemma in all states where marijuana is legal—it’s the equivalent of an Iowa corn farmer only being able to sell his crop within Iowa," he says, highlighting the challenges of state-restricted cannabis commerce in a potentially nationwide market."
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