Wholesale prices for medical cannabis plummeted in Michigan after a change in regulations that prevents caregivers from selling into the recreational market caused them to offload large amounts of flower.
Several cannabis industry experts say that, before the change in the law, wholesale pounds of medical marijuana flower were selling for around $4,000 a pound.
But that price fell to $1,800-$2,200 a pound in the past few weeks, which will negatively affect any grower that’s selling into the medical market.
The state’s Marijuana Regulatory Agency issued a bulletin earlier this month mandating that caregiver-produced or -derived product could not be sold into the adult-use market effective April 8.
Before the change, Michigan caregivers supplied roughly 60% of the adult-use and medical marijuana for the state.
“The medical side of the equation is seeing fairly significant price reductions,” said Vishal Rungta, president and CFO of C3 Industries, a vertically integrated cannabis company based in Ann Arbor.
“There is more product than there used to be, mostly on the medical marijuana side.”
Rick Thompson, owner of the Michigan Cannabis Business Development Group in Flint, said two years ago the state’s medical marijuana was sourced almost exclusively from MMJ caregivers and sold for as low as $2,000 a pound.
As caregiver marijuana was gradually phased out and commercially cultivated cannabis was introduced into the regulated system, the price spiked to as high as $5,000 for premium flower, according to Thompson.
And, despite the higher prices, the coronavirus pandemic didn’t slow sales.
The state’s cannabis industry was labeled as an essential industry and production continued at nearly an uninterrupted flow despite retail sales being diminished by physical-distancing and isolation protocols, he added.
“We have entered the time where (medical) supply is beginning to outstrip demand, and prices are falling,” Thompson said.
“When isolation protocols are lifted, the cannabis industry will be the first in the state to recover from the crisis.”
He believes the upward trend in sales and production the industry experienced before the coronavirus crisis will resume.
“When demand for (medical) commercial cannabis ramps back up, wholesale flower pricing will rebound somewhat, but the industry will not see pricing averages of $4,000 pound or higher ever again,” Thompson added.
Robin Schneider, executive director of the Michigan Cannabis Industry Association, partially attributed the decrease in wholesale pricing to an increase in production.
“It’s also important to take into account that, due to the serious supply shortages we experienced early on, our state has allowed caregiver product to supplement licensed supply so long as it can pass testing,” she added.
The state is in the process of phasing out caregiver product and shifting to a fully licensed and regulated market by October 2020.
Bart Schaneman can be reached at [email protected]
For more of Marijuana Business Daily’s ongoing coverage of the coronavirus pandemic and its effects on the cannabis industry, click here.
