Oregon will need legislative help to curb the oversupply of marijuana, according to the Oregon Liquor Control Commission.
Marijuana growers have produced enough cannabis to last the state 6 1⁄2 years, according to the 2019 Recreational Marijuana Supply and Demand Report, presented to the state House Committee on Economic Development on Wednesday.
Lawmakers can decide to limit the number of growers licenses approved, raise license application fees or do nothing and let the market absorb the 2 million metric tons of wet, untrimmed marijuana harvested in 2018.
That harvest number could double, if all the pending license applications were approved by the OLCC.
Rep. Daniel Bonham, R-The Dalles, a vice chair of the committee, said that he’d like to see resources reallocated to eliminate overproduction.
“I think that the state is doing what it should to keep enforcement funded and to make sure there is a legal process for this product,” Bonham said Thursday. “I am definitely a supply and demand guy, but that said, if you don’t enforce laws that eliminate black markets and mitigate leakage, the traditional market functions will be distorted.”
Even if consumption grows, at the current rate, there will be an overabundance, the report stated. The 40-page report outlines the supply and four possible solutions:
• Let the industry establish its own equilibrium. The U.S. Bureau of Labor Statistics says that 20 percent of all businesses fail in the first two years, and 40 percent fail in the first four years. When the legal recreational market was created it was designed for low barriers to entry to encourage the illicit market to become legal.
• Restrict the canopy size and ratio of plants in growing facilities for all four license tiers.
• Increase license fees. In June, the OLCC hit the pause button on processing new license applications. Yet, before the pause, there was a spike in application submissions, the report states.
• Place a moratorium on new licenses for the recreational market based on market conditions. This would limit supply by controlling the number of operators allowed to produce marijuana, the report states.
Neither Colorado nor Washington, two states that made recreational marijuana legal before Oregon voters passed Measure 91 in 2014, have an oversupply. In Colorado, the report states, regulators enforce producer canopy allotments by making them demonstrate there is a market for what they produce. This has resulted in supply being much closer to demand, the report states.
Gary Bracelin, an owner and founder of Tokyo Starfish, a vertically integrated retail outlet in Bend, supports letting the market find its footing versus more government regulation. He also said that exporting Oregon-produced cannabis to other legal states could offset the oversupply.
“It’s letting the market work itself out based on the laws of supply and demand,” Bracelin said. “In the end, the consumer will be the deciding factor. Some business will survive and some will die. That’s the way it goes in any maturing industry. I believe in the free market and the law of supply of demand.”
— Reporter: 541-633-2117, email@example.com