Why does cannabis still cost so much?

The $40 benchmark price for a bag of marijuana in the US is hurting the marijuana industry even as oversupply and excessive regulation eliminate any margins for cannabis producers and some retailers.

If you’ve purchased cannabis in the US anytime over the past several months, years, or even decades, you’ve likely noticed that while specials come and go, the rough price of an eighth of an ounce of weed has hovered reliably around the $40 mark. In some states, the average price is closer to $50, and top-shelf (or greedy) stores might ask for $60, but it seems like you should still expect to pull out a few Andrew Jacksons when it’s time to buy a bag. It’s been this way for a long time.

“We used to pay $60 [in the mid-to-early 1990s], but that’s about right,” agreed Walter Wood, a California-based grower and co-founder with his partner Judi of the Sol Spirit Farms brand.

For some reason, the $40 threshold is a concrete benchmark resistant even to inflation and a mark that retailers across the country recognize as meaningful for consumers.

Pricing has as much to do with psychology and conditioning as it does market forces, but the remarkable stability of retail cannabis prices begs a question—and also spells trouble for small and medium-sized producers in the cannabis industry, where more than one-third of businesses claim they’re not profitable, according to a recent survey.

In mature, flooded markets such as California’s, where the price of a sungrown pound of cannabis on the wholesale market has plummeted from thousands of dollars in the pre-legalization and medical-only eras to $500 per pound (or less), most of these savings have not been passed onto consumers. And in the instances when they look like they are—with your $90 ounce of shake or your $25 discount on the eighth—what you’re really seeing is dirt-cheap production costs, experts agree.

“Prices are down and continue to be down, and yet we’re largely not seeing that reflected on store shelves,” said Michael Katz executive director of the Mendocino Cannabis Alliance, an advocacy group for sungrown farmers in that legacy cannabis-producing county.

[Original Source]