A lot of regular cannabis consumers might question what the big deal is over pricing marijuana, but it is a very big deal to a business world and a regulated market. Forecasting prices and setting expectations is everything in business. Investors demand to know what their return might be and the people of New Leaf Data Services LLC have taken it upon their shoulders to try and provide that answer.
The illegal market has been comfortable with widely varying prices knowing full well that a dime bag could be a different size from transaction to transaction. If the legal marijuana market is ever really going to fit into mainstream business, varying quantities and huge spreads in prices are unacceptable. Between the geographic gaps in states with legal marijuana laws, medical versus recreational cannabis and the illegal market, the volatility of the cannabis market blows away the riskiest of futures contracts. Check out this interactive map of state market capitalizations for cannabis prices: https://goo.gl/e4DLoa
Cannabis firms still deal almost exclusively in cash to avoid a paper trail or because they have almost no access to banks and financial services. Because it’s illegal to transport the drug across state lines, prices and available products vary widely in different regions based on whether a state has both medical and recreational markets and the number of licensed dispensaries and producers.
Last week, spot prices for flower in Alaska were $5,496 per lb, while prices in Colorado and Oregon fell to historic lows of $1,008 and $1,166, respectively, according to New Leaf.
Legal pot prices are also impacted by supply and demand fluctuations in the illegal market, and the spread between the two can vary.
In California, regulated market prices are more than $1,000 per lb, whereas prices for illegal weed can be as low as $500 per lb, estimated Scott Davies, a California cultivator. Legal market marijuana tends to be more expensive because supplies are more restricted and because it is taxed.
“Consider each state to be a different country when it comes to their laws, amount of licenses issued, what the qualifying conditions are for entry into their medical program, as well as what the political climate and current illicit market looks like,” said Nic Easley, one of New Leaf’s market consultants.
The guys at New Leaf Data Services LLC, have taken on quite the task in trying to price the cannabis market for the industry. It may be a brilliant business move, but they are likely working around the clock to try and tie all the variables together. What do you think it will take to even create some sort of stability in the price of cannabis?