Two of the first states to broadly legalize marijuana took different approaches to regulation that left Oregon with a vast oversupply and Colorado with a well-balanced market. But in both states prices for bud have plummeted.
A new Oregon report by law enforcement found nearly 70 percent of the legal recreational marijuana grown goes unsold, while an unrelated state-commissioned Colorado study found most growers there are planting less than half of their legal allotment — and still meeting demand.
The Oregon study released by the Oregon-Idaho High Intensity Drug Trafficking Area — a coalition of local, state and federal agencies — includes the medical and general-use markets and the illegal market, despite gaps in data on illicit marijuana grows.
The Colorado study, released Aug. 2, focuses on the legal, general-use market, and researchers at the University of Colorado Boulder’s business school and a Denver consulting firm had access to state tracking data to produce the first-of-its-kind analysis.
The law enforcement study noted Oregon still has a serious problem with out-of-state trafficking and black market grows — and the top federal law enforcement officer in Oregon demanded more cooperation from state and local officials in a strident statement.
“What is often lost in this discussion is the link between marijuana and serious, interstate criminal activity. Overproduction is rampant, and the illegal transport of product out-of-state — a violation of both state and federal law — continues unchecked,” said Billy Williams, U.S. Attorney for Oregon. “It’s time for the state to wake up, slow down and address these issues in a responsible and thoughtful manner.”
The tandem reports nevertheless offer different case studies for California and other pot-friendly states as they ramp up their legal pot industries. They also underscore some key differences in how broad legalization was handled that have helped shape differently evolving markets in each state.
Colorado sales of broadly legalized marijuana began in 2014, roughly two years before Oregon allowed marijuana to be sold at non-medical retail stores. And from the beginning, Colorado had stricter regulations for its growers than Oregon did.
Colorado gave existing medical marijuana growers the right of first refusal for licenses, cutting down right away on a potential source of black market production. The state also requires growers to show they have sold 85 percent of their output before allowing them to expand their growing operation, said Beau Whitney, senior economist at national cannabis analytics firm New Frontier Data.
“That was the right approach, and we’ve made that recommendation to other state regulators to do that because if you exclude the medical folks from entering the market, then there could be propensity for diversion” to the black market, he said.
“Colorado has done a good job in sizing the market. In Oregon, it’s going to take a while for that balance to be established.”
Oregon didn’t give existing medical marijuana growers priority over new applicants as Colorado did, and it also didn’t cap licenses. That created a perfect storm of endless licenses for all comers paired with less incentive for medical growers to enter the new industry.
The Pacific Northwest state also had to contend with a long-entrenched culture of illegal marijuana cultivation along its border with California, where there are near-perfect outdoor growing conditions. That tradition of illicit marijuana has created a nightmare for law enforcement agencies in rural, heavily forested counties already stretched thin by budget cuts.
Read about cannabis commerce on the North Coast: nbbj.news/cannabis