Stonernomics Update

Back in 2015 I asked “Legal marijuana questions: (1) why does it cost more than spinach?

Here’s an update from The Guardian, “How do you move mountains of unwanted weed?”:

He invested $250,000 in the structural build-outs, lighting, environmental controls and other initial costs to achieve a 5,000 sq ft, Tier I, OLCC-approved indoor canopy.

Ongoing labor and operational costs added another $20,000 a month.

Weed prices were high: Duyck forecast a $1,500 return per pound. If Duyck could produce 20lb of flower a week, he’d make back his money and start banking profits in just three months.

Duyck sent 60lb of pot to the auction block in December. He had adjusted his expectations downward: he hoped to see something in the ballpark of $400 a pound.

It sold for $100 a pound.

It still seems to cost more than what we pay for spinach:

a gram of weed was selling for less than the price of a glass of wine.

The $4 and $5 grams enticed Scotty Saunders, a 24-year-old sporting a gray hoodie, to spend $88 picking out new products to try with a friend. “We’ve definitely seen a huge drop in prices,” he says.

Across the wood and glass counter, Bridge City owner David Alport was less delighted. He says he’s never sold marijuana this cheap before.

“We have standard grams on the shelf at $4,” Alport says. “Before, we didn’t see a gram below $8.”

How much of that is taxes? At what point can I declare victory for predicting that growing marijuana wouldn’t yield more profit, or have a higher pre-tax wholesale cost, than growing other plants? Not quite yet, presumably. From what I can tell from a quick search, whoelsale spinach is about $2 per lb. Thus, wholesale marijuana even in these depressed times is 50X the price of spinach. But I can’t figure out why!

7 thoughts on “Stonernomics Update

  1. I am not an expert on growing pot, but it’s my understanding that was gets harvested are only the flower buds and not the whole plant, unlike spinach. Also I think it takes longer to grow than spinach.

    Probably a closer comparable would be hops (actually a related species). Hops sells for maybe $10 to $20/lb. – more than spinach but less than marijuana. Marijuana is often grown indoors under artificial light to keep out thieves and the eyes of the authorities. This is obviously much more expensive than growing stuff outdoors in a field. I think the cultivation also requires a certain amount of hand pruning, etc. which also raises the cost vs. spinach.

    If it was really that cheap and simple to grow I think you would see more people growing their own and I don’t think that is super common.

  2. I cannot answer your question, but your question an be applied to very much all prescription medicines. And to make matters more complicated, you can buy the very same medicine, made and sold by the very same company, at much lower price in a different country than in the USA.

    I know this first hand because I know a family who pays $10 for a medicine they get from Lebanon vs. $250 if they get it from a local CVS here in the USA. The pharmacist in Lebanon is a friend and he tells us he gets his shipment of the medicine directly from USA.

  3. What a great day it will be when all Americans can buy directly from Lebanon and all the drug stores go out of business!!!

  4. Some thoughts:

    1. Supply is still lower than it possibly could be to the uncertain nature of the legality of cannabis-based businesses (the Feds might change their minds about not trying to enforce the law at their level).
    2. Prices, like the best buds, are sticky, and it will take a while for the new normal to establish itself.

  5. Taxes yes, but more so regulation. IIRC in Colorado (and probably other states modeled on it), the chain of custody for a bud of legal wacky terbacky is as strictly managed as that for the Jesus nut on your R44. You need to be able to track a gram bag back to the store that sold it and the specific plant at the grow house that it came from.

    Also, marijuana is much more intensively cultivated than anything, even Cabernet grapes in the heart of Napa valley, because there is a market for the increase in quality this produces. Unlike spinach, which is grown in a field with possibly some irrigation and harvested by heavy machinery, weed is typically grown in hydroponic grow houses with artificial light, so you’re looking at the costs for all the gear, huge amounts of electricity for light and HVAC, fertilizer, and a significant amount of semi-skilled labor.

    I can’t think of anything else that gets this treatment–farmed morels, maybe? If people were willing to pay $50 for a perfect piece of spinach, then you’d see similar methods applied. In fact, Japanese department stores sell strawberries cultivated this way for $50+ per pound because people give them as gifts.

  6. I’m told, from a friend, that cannabis crops are grown indoors to produce the high-quality products that have been engineered. Female plants are separated from the males to keep them producing buds (ie: they are always in “heat”). Different crop strains need to be kept in separate air-tight spaces to avoid cross-pollination and maintain their unique characteristics. Any stray pollen from lower quality plants (even other species) can ruin a crop for generations to come.

    Growing it in open fields, as spinach is, produce junk-quality low-potency crops.

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