The cannabis industry is in the midst of fall harvest, which has market watchers bracing for a price decline in the fourth quarter.
While U.S. spot wholesale flower prices “has been holding steady for the last three weeks,” according to the most recent report from Cannabis Benchmarks, the firm forecasts a discount of 6.2% heading into November.
The report noted that the November 2023 Implied Forward is expected to dip to $960 per pound, down from the $1,023 per pound this week.
Wholesale Prices Fall
Prices declines are not uncommon in the fourth quarter, as product from outdoor grows flood the market, but this year’s affect may not be as traumatic as some, according to Cannabis Benchmarks.
“It’s likely markets in which outdoor growing takes place are waiting to gauge the size and quality of this year’s crop, which available data and anecdotal reports have indicated will be significantly smaller than those in recent years,” Cannabis Benchmarks wrote. “While outdoor harvests have been occurring already, it will take several weeks for the product to be dried and make its way to market.”
Retail Prices Fall Too
Prices have already been falling for cannabis consumers, who have also had to face pressure from broader inflation trends. Cannabis purchases in the fourth quarter will be competing with holiday shopping where a dollar won’t go as far as it used to, leading to a more budget-conscious customer base.
For example, in Illinois, Cannabis Benchmarks wrote that the average price of items sold at adult-use retailers continued to decline as the volume of items sold climbed. In September, items sold were up 19.1% year-on-year, while the average item price fell 10.3% in the same period, from $42.25 in September 2022.
BDSA Retail Sales Tracking showed that the equivalent average retail prices (EQ ARP) dropped a whopping 32% from their peak in Q3 2021 to Q2 2023.
“This price decline, in concert with continued inflation, which has increased costs for labor and materials for licensees, has made the industry even more competitive,” BDSA noted. “In turn, this has put significant strain on brands and retailers that already had to deal with razor-thin margins.”
Competition
Ultimately, as more states legalize and more stores open, the landscape becomes more competitive. The competition to get shoppers in the doors is resulting in lower prices.
Not only are licensed operations competing against each other, but they are also competing against the illicit market that typically sells at lower prices.
And for cannabis producers, this year’s harvest doesn’t look like it will help pricing either.
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