California Marijuana is So Copious, It Could Cause a Market Crash

So much weed is being grown in California, it could create a bubble that will soon leave us set up for bust. There are too many marijuana farms, too much product and not enough demand. It has the potential, according to Vessel Logistics, to result in an an industry collapse. This is obviously something to which marijuana businesses and our Los Angeles marijuana business lawyers are paying close attention.

The research firm/marijuana distribution company, crunched the numbers to learn nearly 1,150 acres of cannabis farms have a permit by the state. Those farms can generate an estimated 9 million pounds of the crop annually, yet the wholesale marked for the drug in the state – just realistically at this point – is about 2.2 million pounds. That means even if cannabis farms cut their production by half – we would STILL have an overstock.

In a typical trade situation, we’d look to offload that excess to markets in other states selling less. But we’re forbidden to do that by federal and state law. The drug remains a Schedule I narcotic, which our Los Angeles marijuana lawyers know that neither farmers nor distributors can ship this product across state or international lines without breaking serious felony drug trafficking laws – even when those states allow the drug to be used and sold legally.

California Not The Only One Dealing With Cannabis Surplus

Overproduction of marijuana is an issue in several other states. An Oregon state audit revealed that state is generating twice as much cannabis as the legal and medicinal market can support – and that’s on top of the fact the state already has more than a year’s worth of supply just sitting on shelves.

That is going to have significant consequences for the state’s economy. It has investors and shop owners nervous and buyers worried that with a market collapse, all the local marijuana businesses will soon fold.

Los Angeles marijuana lawyers know this could be the beginning of the end for marijuana prohibition.

Evolving Federal Law on Legal Cannabis in the U.S.?

At this point, 33 states in the U.S. adopting rules to allowing medical marijuana cultivation, use and sales. Another 10 states allow the drug recreationally. It certainly no longer fits the bill of a Schedule I narcotic, which, per the U.S. Drug Enforcement Administration, has no accepted medical use and a high potential for abuse. Its cohorts in that category include LSD, methamphetamine and peyote. The chips just don’t stack up.

Still up until now, growers with temporary state marijuana permits leaned on the black and gray markets to sell their overstock. Sometimes this included those that couldn’t quite meet the requirements of the state’s pesticide testing program or those where black market buyers were willing to pay a higher price. We are/will be seeing a whole lot less of that now when growers finally obtain their permanent permit and licensing, as they are then subject to the California Track-and-Trace program, which follows the buds from seed to sale, at every phase of the supply chain. That program is expressly for the purpose of ending practices like black market sales, but those with temporary permits aren’t subject to it.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

California is growing so much marijuana it could crash the market, March 2019, By Andrew Sheeler, Sacramento Bee

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Legal Marijuana Toke Prompts Pentagon to Review Security Clearance of Tech Billionaire, March 17, 2019, California Marijuana Lawyer Blog