How do you move mountains of unwanted weed?

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Oregon farmers have grown three times what their customers can smoke in a year, causing bud prices to plummet and panic to set in

A recent Sunday afternoon at the Bridge City Collective cannabis shop in north Portland saw a steady flow of customers.

Little wonder: a gram of weed was selling for less than the price of a glass of wine.

The $4 and $5 grams enticed Scotty Saunders, a 24-year-old sporting a gray hoodie, to spend $88 picking out new products to try with a friend. Weve definitely seen a huge drop in prices, he says.

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Across the wood and glass counter, Bridge City owner David Alport was less delighted. He says hes never sold marijuana this cheap before.

We have standard grams on the shelf at $4, Alport says. Before, we didnt see a gram below $8.

The scene at Bridge City Collective is playing out across the city and state. Three years into Oregons era of recreational cannabis, the state is inundated with legal weed.

It turns out Oregonians are good at growing cannabis too good.

In February, state officials announced that 1.1m pounds of cannabis flower were logged in the states database.

If a million pounds sounds like a lot of pot, thats because it is: last year, Oregonians smoked, vaped or otherwise consumed just under 340,000lb of legal bud.

That means Oregon farmers have grown three times what their clientele can smoke in a year.

Yet state documents show the number of Oregon weed farmers is poised to double this summer without much regard to whether theres demand to fill.

The result? Prices are dropping to unprecedented lows in auction houses and on dispensary counters across the state.

Wholesale sun-grown weed fell from $1,500 a pound last summer to as low as $700 by mid-October. On store shelves, that means the price of sun-grown flower has been sliced in half to those four-buck grams.

For Oregon customers, this is a bonanza. A gram of the beloved Girl Scout Cookies strain now sells for little more than two boxes of actual Girl Scout cookies.

But it has left growers and sellers with a high-cost product thats a financial loser. And a new feeling has descended on the once-confident Oregon cannabis industry: panic.

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The business has been up and down and up and down, says Don Morse, who closed his Human Collective II dispensary in south-west Portland four months ago. But in a lot of ways it has just been down and down for dispensaries.

This month, WW spoke to two dozen people across Oregons cannabis industry. They describe a bleak scene: small businesses laying off employees and shrinking operations. Farms shuttering. People losing their lifes savings are unable to declare bankruptcy because marijuana is still a federally scheduled narcotic.

To be sure, every new market creates winners and losers. But the glut of legal weed places Oregons young industry in a precarious position, and could swiftly reshape it.

Oregons wineries, breweries and distilleries have experienced some of the same kind of shakeout over time. But the timetable is faster with pot: for many businesses, its boom to bust within months.

Mom-and-pop farms are accepting lowball offers to sell to out-of-state investors, and what was once a diverse and local market is increasingly owned by a few big players. And frantic growers face an even greater temptation to illegally leak excess grass across state lines and into the crosshairs of US attorney general Jeff Sessions justice department.

If somebody has got thousands of pounds that they cant sell, they are desperate, says Myron Chadowitz, who owns the Eugene farm Cannassentials. Desperate people do desperate things.

In March, Robin Cordell posted a distress signal on Instagram.

The prices are so low, she wrote, and without hustling all day, hoping to find the odd shop with an empty jar, it doesnt seem to move at any price.

Cordell has a rare level of visibility for a cannabis grower. Her Oregon City farm, Oregon Girl Gardens, received glowing profiles from Dope Magazine and Oregon Leaf. She has 12 years of experience in the medical marijuana system, a plot of family land in Clackamas county, and branding as one of the states leaders in organic and women-led cannabis horticulture.

She fears shell be out of business by the end of the year.

The prices just never went back up, she says.

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The prices just never went back up.

Cordell ran headlong into Oregons catastrophically bountiful cannabis crop.

The Oregon Liquor Control Commission (OLCC) handed out dozens of licenses to new farmers who planted their first crop last spring. Mild weather blessed the summer of 2017 and stretched generously into the fall. And growers going into their second summer season planted extra seeds to make up for flower lost to a 2016 storm, the last vestige of a brutal typhoon blown across the Pacific from Asia.

That storm naturally constrained the supply even though there were a lot of cultivators, says Beau Whitney, senior economist for New Frontier Data, which studies the cannabis industry.

It kept supply low and prices high in 2017 even though the state was handing out licenses at an alarming rate.

It was a hot new market, Whitney says. There werent a whole lot of barriers to entry. The OLCC basically issued a license to anyone who qualified.

Chadowitz blames out-of-state money for flooding the Oregon system. In 2016, state lawmakers decided to lift a restriction that barred out-of-state investors from owning controlling shares of local farms and dispensaries.

It was a controversial choice one that many longtime growers still resent.

The root of the entire thing was allowance of outside money into Oregon, Chadowitz says. Anyone could get the money they needed. Unlimited money and unlimited licenses, youre going to get unlimited flower and crash the market.

As of 1 April, Oregon had licensed 963 recreational cannabis grows, while another 910 awaited OLCC approval.

That means oversupply is only going to increase as more farms start harvesting bud.

The OLCC has said repeatedly that it has no authority to limit the number of licenses it grants to growers, wholesalers and dispensaries (although by contrast, the number of liquor stores in Oregon is strictly limited).

Since voters legalized recreational marijuana in 2014, many industry veterans from the medical marijuana years have chafed at the entrance of new money, warning it would destroy a carefully crafted farm ecosystem.

The same problem has plagued cannabis industries in other states that have legalized recreational weed. In 2016, Colorado saw wholesale prices for recreational flower drop 38%. Washington saw its pot drop in value at the same time Oregon did.

The OLCC remains committed to facilitating a free market for recreational marijuana in which anyone can try their hand at growing or selling.

[The law] has to be explicit that we have that authority to limit or put a cap on licenses, says OLCC spokesman Mark Pettinger. It doesnt say that we could put a cap on licenses. The only thing that we can regulate is canopy size.

The demand for weed in Oregon is robust the state reeled in $68m in cannabis sales taxes last year but it cant keep pace with supply.

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A cannabis harvest at East Fork Cultivars, Oregon.

Whitney says its not unusual for a new industry to attract speculators and people without much business savvy.

Whenever you have these emerging markets, theres going to be a lot of people entering the market looking for profit, he says. Once it becomes saturated, it becomes more competitive. This is not a phenomenon that is unique to cannabis. There used to be a lot of computer companies, but theres not so many anymore.

Across rolling hills of Oregon farmland and in Portland dispensaries as sleek as designer eyewear shops, the story plays out the same: Business owners cant make the low prices pencil out.

Nick Duyck is a second-generation farmer and owner of 3D Blueberry Farms in Washington county. I was born and raised on blueberries, he says.

But last June, Duyck launched Private Reserve Cannabis, a weed grow designed to create permanent jobs for seasonal workers.

By starting up the cannabis business, says Duyck, it keeps my guys busy on a year-round basis.

He invested $250,000 in the structural build-outs, lighting, environmental controls and other initial costs to achieve a 5,000 sq ft, Tier I, OLCC-approved indoor canopy.

Ongoing labor and operational costs added another $20,000 a month.

Weed prices were high: Duyck forecast a $1,500 return per pound. If Duyck could produce 20lb of flower a week, hed make back his money and start banking profits in just three months.

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A gram of weed was selling for less than a glass of wine.

Octobers bumper crop tore those plans apart.

We got in at the wrong time, Duyck says. The outdoor harvest flooded the market.

By the start of the new year, Duyck was sitting on 100lb of ready-to-sell flower an inventory trickling out to dispensaries in single-pound increments.

So he turned to a wholesaler, Cannabis Auctions LLC, which holds monthly fire sales in various undisclosed locations throughout Oregon.

Weed auctions operate under a traditional model: sellers submit their wares, and buyers dispensary owners, intake managers and extract manufacturers are given an opportunity to inspect products before bidding on parcels awarded to the highest dollar.

Duyck sent 60lb of pot to the auction block in December. He had adjusted his expectations downward: he hoped to see something in the ballpark of $400 a pound.

It sold for $100 a pound.

The price per pound that it costs us to raise this product is significantly higher than the hundred dollars a pound, says Duyck. (A little light math points to a $250-per-unit production cost.) Currently, were operating at a $15,000-per-month loss, Duyck says.

If prices dont improve soon, Duyck says he wont be able to justify renewing his OLCC license for another year.

The dispensaries that are out there, a lot of them have their own farms, so they dont buy a lot of product from small farms like us Duyck says. If you really want to grow the product, you almost have to own the store also.

Middlemen store owners without farms are also suffering. Take Don Morse, who gave up selling weed on New Years Eve.

Morse ran Human Collective II, one of the earliest recreational shops in the city, which first opened as a medical marijuana supplier in 2010. At times, Morse stocked 100 strains in his Multnomah Village location.

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A cannabis crop. I think if we let it be a painful moment, and not try to cover it up, were going to be better off for it.

Morse lobbied for legal recreational weed and founded the Oregon Cannabis Business Council.

The shift to recreational was costly. With his business partner Sarah Bennett, Morse says he invested more than $100,000 in equipment to meet state regulations.

By last summer, new stores were popping up at a rapid pace. Morses company wasnt vertically integrated, which means it did not grow any of its own pot or run a wholesaler that might have subsidized low sales.

Competition around us was fierce, and the company started losing money, and it wasnt worth it anymore, Morse says. At our peak, we had 20 employees. When we closed, we had six.

Prices went into free fall in October: the average retail price dropped 40%.

Morse couldnt see a way to make the numbers work. Human Collective priced grams as low as $6 to compete with large chains like Nectar and Chalice, but it struggled to turn a profit.

When youre the little guy buying the product from wholesalers, you cant afford to compete, he says. Theres only so far you can lower the price. Theres too much of everything and too many people in the industry.

So Morse closed his shop: We paid our creditors and that was that. That was the end of it.

Despite losing his business, Morse stands behind Oregons light touch when it comes to regulating the industry.

Its just commercialism at its finest, he says. Let the best survive. Thats just the way it goes in capitalism. Thats just the way it goes.

Just as mom-and-pop grocery stores gave way to big chains, people like Morse are losing out to bigger operations.

Chalice Farms has five stores in the Portland area and is opening a sixth in Happy Valley. La Mota has 15 dispensaries. Nectar has 11 storefronts in Oregon, with four more slated to open soon.

Despite the record-low prices in the cannabis industry, these chains are hiring and opening new locations, sometimes after buying failed mom-and-pop shops.

The home page on Nectars website prominently declares: Now buying dispensaries! Please contact us if you are a dispensary owner interested in selling your business.

Nectar representatives did not respond to a request for comment.

Mason
Mason Walker, the CEO of East Fork Cultivars.

Because the federal government does not recognize legal marijuana, the industry cannot access traditional banking systems or even federal courts. That means business owners cant declare bankruptcy to dissolve a failed dispensary or farm, leaving them with few options. They can try to liquidate their assets, destroy the product they have on hand and eat the losses.

Or they can sell the business to a company like Nectar, often for a fraction of what theyve invested.

This time last year, it was basically all mom-and-pop shops, says Mason Walker, CEO of Cave Junction cannabis farm East Fork Cultivars. Now there are five or six companies that own 25 or 30%. Stores are selling for pennies on the dollar, and people are losing their life savings in the process.

Deep-pocketed companies can survive the crash and wait for the market to contract again.

What this means is, the market is now in a position where only the large [businesses] or the ones that can produce at the lower cost can survive, Whitney says. A lot of the craft growers, a lot of the small-capacity cultivators, will go out of business.

Oregon faces another consequence of pot businesses closing up shop: leftover weed could end up on the black market.

Already, Oregon has a thriving illegal market shipping to other states.

US attorney for Oregon, Billy Williams, has said he has little interest in cracking down on legal marijuana businesses, but will prosecute those shipping marijuana to other states.

That kind of thing is whats going to shut down our industry, Chadowitz says. Anything we can do to prevent Jeff Sessions from being right, we have to do.

Ask someone in the cannabis industry what to do about Oregons weed surplus, and youre likely to get one of three answers.

The first is to cap the number of licenses awarded by the OLCC. The second is to reduce the canopy size allotted to each license Massachusetts is trying that. And the last, equally common answer is to simply do nothing. Let the market sort itself out.

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Up in smoke: opinions vary about what Oregon must do to address its weed surplus.

Farmers, such as Walker of East Fork Cultivars, argue that limiting the number of licensed farms in Oregon would stunt the states ability to compete on the national stage in the years ahead.

Were in this sort of painful moment right now, says Walker, but I think if we let it be a painful moment, and not try to cover it up, were going to be better off for it.

Walker and other growers hope selling across state lines will someday become legal.

Every farmer, wholesaler, dispensary owner and economist WW talked to for this story said that if interstate weed sales became legal, Oregons oversupply problem would go away.

Under the current presidential administration, that might seem a long shot. But legalization is sweeping the country, Donald Trump is signaling a looser approach, and experts say Oregon will benefit when the feds stop fighting.

The thing about Oregon is that it is known for its cannabis, in a similar way to Oregon pinot noir, Whitney says. For those who are able to survive, they are positioned extremely well not only to survive in the Oregon market but also to take advantage of a larger market assuming things open up on a federal level.

Looking for more great work from the Portland, Oregon, alt-weekly paper and website Willamette Week? Here are some suggestions:

Read more: https://www.theguardian.com/society/2018/may/09/how-oregon-grew-too-much-marijuana-to-sell