Since outdoor grows only go to market once a year, Croptober deeply impacts the market price of marijuana.
Marijuana prices had been on the decline since 2020, but Croptober sank prices at a faster rate than prior declines last year. The average price for an ounce of adult-use recreational marijuana flower in September 2022 was $109.88. By January 2023, it had sunk to $80.16 per ounce. In August of this year, the most recent available data from the Michigan Cannabis Regulatory Agency, the prices had recovered more than 17 percent to $94.16 per ounce.
“There are almost 2 million more plants in pots (indoor and outdoor) at this time this year versus last year,” said Miles Baker, a cannabis attorney at Detroit-based Dickinson Wright. “It’s very possible Croptober shows some price compression like we’ve seen in the past. Historically, people have thought of Croptober as crashing the market. But we’re also seeing a price recovery and it will be interesting to see how much of a price compression happens and whether growers and retailers really absorb the influx.”
Mike Elias, CEO of Marshall-based indoor grower Common Citizen, one of the largest cannabis operations in the state, believes companies are more stable in 2023 and Croptober’s impact will be muted.
“While there are 40% more plants in production compared to last year, the increased demand, which has risen by 66%, has led to a 32% increase in sales,” Elias told Crain’s.”This suggests the market has become more diversified with indoor and greenhouse operations producing year-round. Consequently, Croptober may not have the same massive impact on pricing as before.”
Elias said last year outdoor-grown marijuana would be on the wholesale market for as low as $300. This year, he expects the low end to be between $400- and $500 per pound with some growers seeking as high as $700 per pound.
305 Farms in Lawrence, an indoor grow 14 miles southeast of Grasshopper Farms that produces several licensed vape brands including Rohan Marley’s Lion Order, is hoping for the low prices Croptober generates.
305’s products are typically expensive and categorized in the “top-shelf” market of cannabis. The 25-acre campus can only produce about 40% of the company’s distillate needs, said founder Jan Verleur. The company relies on the oversupply and lower prices Croptober produces.
“If you have brand loyalty around strains and you’re focused on top-shelf cannabis, there’s not a lot of outdoor that competes with you. Less than 10% of what comes out of October will directly compete with top-shelf products,” Verleur said. “We can’t grow enough on our farm to meet our current output needs, so we have to buy in the open market. Because of Croptober, there will be buying opportunities for us in Q4 to lower our cost of goods.”
Verleur, who also owns operations in California, said Michigan consumers are more price-conscious, seeking value more than peers in California.
“This is a bang-for-your-buck type of state,” Verleur said. “The value market is like 60% of the market at least. I can only operate in about 15% of the state’s stores. So it’s beneficial to us to have that outdoor product to supplement and keep our costs contained.”
Grasshopper, however, battles the price seasonality with standard wholesale pricing, allowing it and its customers predictable accounting. Grasshopper wholesales its flower within a range of $500 to $700 per pound, or $31.25 to $43.75 per ounce.
“Our value proposition is that we’re going to have a price all year round,” Bowden said. “We don’t lower our prices due to market supply, but we also don’t raise the prices in the summer. We’re a fair price the whole time.”
Marcelo Vazquez carries a bin of harvested cannabis at Grasshopper Farms in Paw Paw, Mich. on Oct. 2, 2023. (Nic Antaya for Crain’s Detroit Business)
Those higher prices, if it can sustain them, allow Grasshopper to reinvest. Bowden said the company analyzes the market and tries to keep its production 5% below what the total market demand is for its products to maintain pricing.
With demand rising, the company is ready to expand on its 160-acre property — it currently allows neighboring farmers to plant and reap corn on its acreage, though this might be the last year it does.
“We think our demand is about 40,000 to 42,000 pounds a year,” Bowden said. “We’re at about 20,000 to 25,000 pounds right now. So either next year or the following planting season, we plan to double to 80 acres.”
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