Inflation is all over the news, with gas prices soaring, stocks plunging into bear market territory, the war in Ukraine cutting resources, and the pandemic still weighing on the supply chain. But there’s one place consumers don’t see a price hike: the weed store.
The weed industry has not completely escaped inflation. The cost of materials for growing hemp has risen dramatically. Instead, stable prices in dispensaries indicate a high supply of weeds and intense competition. There are so many products in the market that stores are reluctant to raise prices for fear of losing customers in the nearby store. Farmers too.
The start of the pandemic saw cannabis sales soar, as people stockpiled weed and other goods to help them get through the lockdown. There was more demand for the weed than supply at first, and it was not enough to satiate the appetites of the people.
Now the opposite is true. Because of inflation, people tighten their belts and pay extra for gas, food, and other goods. This increased the supply of cannabis products, with a customer base suddenly having less money to spend.
There are a lot of weeds in the market
The competition for customers among cannabis stores is high at the moment because there is an abundance of products on the market. With prices for most other goods in the economy soaring, weed stores have kept their prices the same, simply to lure customers to the door.
“Any one of the shops raises its prices on its own, [it] It would be a bit of a death sentence at this point. “Customers know they have a lot of options,” said Jason Mackie, general manager and buyer at Ganja Goddess in Seattle, Washington. “It’s a dangerous game to raise prices.”
Indicative of the market as a whole, sales seem to have fallen a bit at the Seattle store, but there’s no cause for concern. The shop did not have to cut staff or hours.
“There was definitely a small percentage drop in sales, especially as this continues; gas prices are still going up. As long as that’s the case, I think we’re going to see a slowdown,” Mackie said. other.”
The same is true for farmers. They need to compete with other farmers and cannot afford to raise prices when selling to dispensaries because there are a lot of products in the market. Both farmers and retailers seem to be constrained by current pricing levels at the moment, afraid to raise prices despite their increased outlays.
Mackie said he bought a product from about 60 farmers and sellers and only two raised prices, and one of them lowered prices.
Farmers feel the pressure
The The global supply chain is still in disarray From the epidemic, shipping around the world has shrunk. Any goods coming from abroad face long waiting times and back up on the sidewalk, driving up prices for the simplest items, including those needed to grow and sell cannabis.
“Like just about every industry, we really feel the pressure when it comes to the supply chain,” said Matt Gabori, co-founder of House of Cultivar, a Seattle farmer. “We’ve had to switch vendors for certain things just so we can get the packaging or some supplies we need…everything is more expensive than it was three years ago.”
But with the price of materials needed to grow cannabis rising, so does the amount of money farmers can get for their harvest when they don’t sell it to dispensaries. Again, the abundance of cannabis in the market has created high competition among the growers as well. Farmers keep prices low just to sell the product, forcing them to bear the additional costs of materials.
“I really think where our industry is feeling the crunch is that the cost of all of these things is going up, our cost of production is obviously going up, and the price is staying the same; that means our margins are decreasing,” al-Jubouri said. They were going down, not up, to keep up with inflation.”
Supply chain issues also affected the availability of essential materials. “Things that normally take 60 days [is now taking] Double that amount of time, easily. “We had one packaging container that stayed at the port for probably six months,” al-Jubouri said.
Even the war in Ukraine affects the cannabis industry. Ukraine and Russia Exporting 28% of the world’s fertilizers (Those containing nitrogen, phosphorous and potassium). Wartime trade turmoil and economic sanctions greatly reduced these supplies, and at times the price of fertilizers – this includes those needed to grow cannabis – doubled.
“I can get most of the fertilizer, but the specific fertilizer I want for the summer isn’t available,” said Joe Poulter, owner of Fire Flower, an Oregon farmer. It is estimated that the cost of fertilizers and other materials purchased from agricultural suppliers has risen by about 25% in the past few months.
Plus, the prices for items you might not think about often, but which are essential for growing plants, have gone up in price. For his outdoor planting, Poulter estimates that the 20-gallon pots went from about $6 a pot to about $9.
Gaboury of the House of Cultivar mentioned that coconut, a medium used for growing plants instead of soil, has doubled or tripled in price, because it is sourced abroad.
Multiply these seemingly small increments by hundreds or even thousands of plants for some growing, and that’s a huge extra cost.
What will the weed market do next?
The stock market fell to Bear Market District Last week was not a good sign for the US economy, and the Fed took a big step towards it Anti-inflation Last week, interest rates were raised dramatically to calm the economy.
Right now, retail cannabis prices appear to be stable, but consumers are not buying the same amount of weed, as more of their budget is consumed by gas, food, and other goods that have increased cost due to inflation.
At this point, it’s the cannabis growers who are the most stressed out. Ultimately, farmers may have to raise prices to make ends meet or face going out of business. Higher wholesale prices will likely drive up dispensary retail prices.
But unless all farmers can collectively raise prices, some farmers may be put out of business by others who can still sell at lower wholesale prices.
Aside from the problems of the US economy, another variable in this equation is that the cannabis industry itself is volatile, constantly expanding and shrinking. It is a very competitive industry where operators are setting up shop and going out of business all the time. The emerging market is still discovering itself, even in states that have been selling legal cannabis for several years.
“We haven’t really come to terms with stability,” said Al-Jabouri of the House of Cultivar. “In a state like Washington, we’re a bit more of a mature industry…so I think our roller coaster ride is starting to fade. Our lows and highs aren’t as much as they were before. It’s still variable, but it’s getting lower and lower and more consistent.”
The full effects of inflation on weed prices are yet to be seen, but the market has proven to be resilient and resilient. In the meantime, support your local weed store and farm.