Report: Easy Access to Weed Glut Forcing Some Marijuana Companies to Close

The capitalistic principles of supply and demand seem to be firing on all cylinders in the realm of recreational marijuana sales — perhaps too well.

In states like Michigan, where the number of cannabis-grow operations in the recreational market have doubled in the past year, the prices for the respective marijuana products have gone down substantially for customers, Politico reports.

That's good for consumers, but not necessarily rosy information for distribution companies that relied on marked-up pricing to increase revenues when marijuana was illegal in the state, according to the publication.

"With the glut of supply and with so many licenses, it's setting up businesses for failure," Beau Whitney, an economist speaking of the Michigan marijuana market, told Politico. "Nationally, very few people are making a profit in this industry."

Over the past two years, the price of marijuana in the recreational market has dropped about 75% — from nearly $400 per 1 ounce to less than $100 for the same amount, according to LeafLink, a website that tracks wholesale transactions.

BDSA, a cannabis analytics firm, also reports that Colorado's marijuana prices have dropped by 51% over the past two years.

Additionally, the price of 1 pound of weed has plunged by 36% in Massachusetts and 46% in Missouri over the past year, according to LeafLink.

Those market dynamics, according to Politico, are "exacerbating an already grim financial outlook for weed companies, even as sales are expected to reach roughly $30 billion this year" — more than double the sales volume from three years earlier.

Among the suggestions for curbing recent sales trends: Industry officials are calling for a moratorium on cultivation licenses three years after the state launched a recreational market, according to Politico.

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