The legalization of recreational and medical cannabis in Oregon hasn’t come out exactly the way everyone expected. Nobody was ready for this turn of events. Weak regulations on pot production plus the countless licenses issued have led to an oversupply of devastating consequences. Weed prices have plunged by 50% in the last years, a major worry for companies, producers, and authorities who don’t want to see the industry damaged by bad policies and bad decisions.
Oregon is one of the U.S. states where pot cultivation and consumption is now legal. Marijuana laws stemmed from the state's need to stimulate a sluggish economy by creating a new public revenue-generating activity based on taxes and fees. One of the main strategies for it was to facilitate the procedures for obtaining licenses and to make them way cheaper. What they wanted by doing this was foster the establishment of a productive environment that would lead the U.S. cannabis sector.
The result, as confirmed by the Oregon Secretary of State's Office, has been a rampant pot overproduction. The consequences, though, haven't been the ones they expected for Oregon is producing way more cannabis than it can actually smoke. Prices have been dropping during these last months –a 50% fall– and pot producers seem to be unable to know what to do with such a glut of supply. 5.9 tons of perfectly usable weed that can't be sold outside the state's borders because U.S. federal laws don't allow them to.
Euphoria gives way to worry
Recreational cannabis was legalized in 2014 although it wasn't until 2016 that the program finally went into full effect. That very same year, a few months before dispensaries began to sell weed, the Oregon Liquor Control Commission started issuing licenses, first, to already existing producers, and, then, to the new ones who showed interest in getting on board too.
What makes Oregon different from the other states is that it never capped the number of production licenses issued, so the producers kept popping up without much concern on the part of the authorities. Until some months ago. In a state with 4 million people, there are 1,107 active pot producers plus 900 seeking licenses from the Oregon Liquor Control Commission.
Simultaneously, a group of state lawmakers decided to lift a restriction that prevented out-of-state investors from controlling stake in the state's marijuana industry. With so few entry barriers and great access to funding, the number of licenses being issued boomed. In fact, despite the official data, it's almost impossible to know exactly how many of them have so far been issued.
In view of this situation, the public authorities, led by the Oregon Liquor Control Commission, opted for a temporary freeze on the issuance of new licenses as well as for increased control over the producers. The result, it seems, hasn't been the one expected and to be blamed for this is the limited number of inspectors devoted to the auditing of the production processes.
The Oregon Health Authority, for its part, has many challenges to meet relating in one way or another to the production of medical marijuana. The Oregon Secretary of State's Office has just released an audit revealing that government agencies don't have the authority to properly regulate therapeutic marijuana, for they have no way to keep constant track of it or make sure it's not used for recreational purposes. The audit also found that most of the available medical weed isn't required to be tested and, in the rare cases that it is, the government lacks the appropriate means to check the results.
One report and four suggestions
Alongside the legalization of weed came the obligation of the Oregon Liquor Control Commission to regularly issue reports on the situation in order to keep lawmakers fully informed about the health of the recreational cannabis industry. This way, the new OLCC report offers clear and comprehensive information about a market that is experiencing a growing glut in its pot supply, but not just that.
It also puts forward four possible policy ideas on how lawmakers can address this issue:
- The first is to do nothing and let the market throw out the businesses that cannot keep up with the pace until a balance between supply and demand is naturally restored. This way, according to this report, many businesses will simply vanish, while others will consolidate. The U.S. Bureau of Labor estimates 40% of all businesses fail within the first four years, and Oregon's marijuana market is still 3 years old.
- The second suggestion is to limit crop sizes so each licensed producer is allowed to grow less weed. However, since there's no cap on the number of licenses each person can get, they'd simply buy more of them and grow more cannabis.
- The third idea is to increase license fees. The trouble is that so far license fees have been very low, so the raise should be remarkably big in order to really make a difference.
- The fourth suggestion is to cap the number of licenses or continue the freeze indefinitely placed some months ago. This decision won't be a warmly welcomed one for no new licenses will be issued, meaning those who decide to apply for one from that moment on will end up empty-handed. Quite unfair, right?
There's one last option, supported by cannabis producers: the end of the export restrictions on weed outside the state's borders. If this was to happen, the excess pot would be sold on other markets, alleviating the consequences of this unexpectedly huge overproduction problem.
For the second consecutive year, Oregon cannabis producers have harvested over 1 million pounds of usable weed; 2.5 million pounds, to be exact. In 2017, almost 2.6 million pounds were harvested too. Although nobody can know it for sure, estimates indicate that Oregon has started off 2019 with a surplus of around 1.3 million pounds of weed. A vast amount of pot and nobody to smoke it.
This figure is, to say the very least, surprising given the state's aforementioned population of 4 million. Official data shows that Oregon smokes between 166,000 and 330,000 pounds of weed every year, with a generalized tendency towards the first figure. If they had taken these previsions into account, then maybe all this wouldn't have got out of control. Besides, these figures don't include the almost 159 tons of edibles, tinctures, and cannabis concentrates.
Legal marijuana grows extend over an area of 195 hectares and generate a market of over $1000 million. One-third of them, though, roughly $300 million, is thought to be moving around in the black market. In fact, the black market is also to be blamed for the negative trend of legal prices. But there's a positive side to it too: people are buying so much weed that Oregon's tax collections are 7% greater than originally estimated for the biennium 2017-2019, according to the Oregon Office of Economic Analysis.
There's no easy fix for this, yet one thing is clear: it's the implementation of different measures what will lead to the best possible solution. The legalization of pot would be the most suitable first step. However, it should be followed by a series of constraints to prevent the state of blissful euphoria from ruining it all.