Our View
Our View
Don’t bank on your ‘pot of gold’ growing medical marijuana
NEWS FLASH!!! To all the entrepreneurs out there waiting with baited breath to get in on this new business venture now being hashed out by state lawmakers and the Arkansas Medical Marijuana Commission – BEWARE.
As we all know, Arkansas voters approved the cultivation and distribution of “pot” for certain medical purposes but before withdrawing life savings in hopes of getting in on this “pot” venture listen up.
Okay, we’ve gone over the basic details so far but what many wide-eyed opportunists might not know is the increasing supply and plunging price of legal “pot” are turning into a major disaster for growers.
The fact is that prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in large indoor farms.
We were interested to read a recent story in the Bloomberg News that pointed out in Colorado, the average price sought by wholesalers has fallen a whopping 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014.
The state’s “pot” regulators say supply is surging as growers expand and install the latest agricultural technology.
A marijuana investor consortium based in Oakland, Calif., is warning anybody that is investing in starting a cultivation or distribution business needs to be doing so with the clear understanding that the price of cannabis is going to drop “precipitously”.
This is being revealed as Arkansas lawmakers and members of the state’s “pot” commission are setting up a process of issuing licenses to dispensaries and cultivation facilities as well as adopting rules for overseeing the facilities.
Bear in mind, there is much concern among Arkansas politicians making absolutely sure the application fees, taxes as well as specific annual charges cover the cost the state will incur in overseeing and regulating this business. It has been made clear that the citizens and taxpayers will not be held responsible for covering any of the expenses of enforcement or regulating either the cultivation of this “pot” or its distribution from a set number of “pot” shops that will be located throughout the state.
It was also interesting to learn from this story that retail prices are also dropping. For instance, Marijuana shops in Colorado collected an average $6.61 per gram in November, down 25 percent from the first quarter of 2014.
Efficiency will play a major role in profitability and sustainability and the advice from those individuals already in this business are saying efficiency isn’t cheap. For instance, the owner of a production facility in Arlington, Wash., started growing marijuana in a garage at age 17. He endured police raids and a few days in jail before the laws changed. Now he’s raised $25 million to expand his 15,000-square-foot warehouse farm operation to 135,000 square feet.
That’s enough space to pump out 1,700 pounds of buds monthly from dozens of custom-bred strains such as Dirty Girl and Cinderella’s Dream, up from 100 pounds. While production has increased by 16 times, employee count is up only fourfold to 100 all due to economies of scale and automation.
It will be important for this state’s “pot” commission to take all this into account as they work through their process of hashing out all the specific details.
BIBLE VERSE
I am the LORD, and there is none else, there is no God beside me: I girded thee, though thou hast not known me: That they may know from the rising of the sun, and from the west, that there is none beside me. I am the LORD, and there is none else.
45:5-6
Isaiah
