“The boom is over”: Colorado cannabis growers hope volatile wholesale market is stabilizing

Entrepreneurs who broke into Colorado’s cannabis industry at the ground level — the growers — have endured economic whiplash over the last two years as the market for wholesale flower experienced volatile swings in price.

The average market rate slumped to a low of $759 per pound in 2018 after peaking at $2,007 per pound in early 2015. That rate has rebounded to $1,316 per pound this month, after five consecutive quarters on the rise, reaching the highest price in three years.

Still, many anticipate the wholesale cost will remain relatively flat in 2020. Or at least they’re hoping it will.

“The boom is over and now we’re looking at a more mature market,” said Christian Hageseth, CEO and chairman of One Cannabis, which expects to produce 14,000 pounds of marijuana in Colorado in 2020.

In the six years since recreational legalization, Colorado’s $7.6 billion cannabis industry has been grappling with stabilization between the forces of supply and demand. And that’s perhaps no more evident than in the wholesale market.

In mid-2018, the number of licensed retail grows in the state peaked at 744, according to data from the Colorado Department of Revenue’s Marijuana Enforcement Division. The influx of new cultivators and crops led to a downward swing in the average market rate, with pounds of flower selling for less than they cost to harvest and process, said Josh Monroe, owner of Fat Face Farms in Denver.

Helen H. Richardson, The Denver PostWorkers sort and trim marijuana plants at the LivWell Enlightened Health cultivation facility in Denver on Jan. 13, 2020.

New state regulations mandating pesticide testing and microbial contamination testing only compounded the problem, forcing many farmers who couldn’t recoup their expenses to shutter. By the end of 2019, Colorado cultivation licenses dropped 8% to 683 businesses, according to the Marijuana Enforcement Division.

“You have to be agile and able to adapt quickly to the really rapidly changing environment,” said Monroe, who’s in the process of selling his 6-year-old indoor operation to industry giant Cannabis One Holdings.

Those who work in the industry are accustomed to wholesale price fluctuations in the fall, when plants from outdoor cultivations are harvested. “Croptober,” as Hageseth calls it, had no noticeable effect on wholesale prices this year, however, due in part to an early freeze and a crackdown on illicit operations, he said.