Cannabis glut in the Portland market

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Was in a meeting yesterday .. looks like the bloom is off the bud on the Cannabis at least as it relates to growing the flower.... prices quoted were down to 400 a lb.. from 2500.00

what are other seeing out there..

is the future of this in the OILs and medicinal .. not the actual flower and weed ???

not a user personally other than my wife likes some of the rollons for her arthritis.

I know there was a big rush to buy warehouse space.. not sure if you can make a profit selling it at 400 a lb.

my thought was once it became more main stream the bigger players jump in and it goes all the way down to the price of tobacco.. why not ? right ? why artificial high prices.. ???? am I wrong ?

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Gordon Forbes

Investor · Roseburg, OR · Member since 2015 · 34 posts · 48 votes

I remember when all the little growers (who were the ones always going to jail) thought heaven had arrived on earth when it was legalized. They thought they were gonna do well. It won't take long till the mega factory farms put all the local growers out of business. And that includes you mid sized "lease a 50,000 sq ft warehouse" growers.

Can you grow anything (corn, wheat, soybean) in competition with agribusiness once agribusiness has had time to ramp up production? Enjoy the short lived niche opportunity while it lasts.... or has already passed.

Even the local dispensaries won't want to deal with local growers because the consumer will soon want potency and purity testing, consistency, and name branding etc., and the dispensaries will stock what sells and that will be "Willie Nelson's Best Weed" and not your "grown down on 5th street" brand. You want your margins to be even smaller?, then sell to the wholsalers who supply the name brands. A few locals will get a "Craft Beer" type niche following... a few.

Some locals will try to "grow it cheap and sell it on the street" meaning bypass the dispensaries who won't stock their stuff. That's still illegal.

Over time the "food industry" will eat its way up the "food chain" and take over the processed product categories one by one too, and for the same reasons.

At a moments notice, if the federal government decides to play rough, all they have to do is pass some legislation (or just threaten) to revoke the charter of any bank that accepts money from any pot related bussiness.

The money in weed, just like the easy money in crypto currencies, has already passed by... IMHO.

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Dennis Wasilewski
Real Estate Agent · Philadelphia, PA · Member since 2017 · 184 posts · 87 votes
8y
I would guess the money moved to the end/user distribution & boutique products - oils, edibles, pain reducing compounds, etc. Growing the plant has become commoditized, it would seem.
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Jay HinrichsBusiness Member
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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Dennis Wasilewski:

I would guess the money moved to the end/user distribution & boutique products - oils, edibles, pain reducing compounds, etc. Growing the plant has become commoditized, it would seem.
that's what I am thinking.. going to look at a plant today.. ( after salmon fishing on the Willamette )
not really interested but my buddy who is developing it wants me to look at it.. and since its his boat I am obligated.
although he got a master lease from the city for his facility so the city is buying off on it..
I am just wondering though as all this stuff becomes main stream it seems like the prices are going to drop like a rock.
kind of like when my Dad bought a hand held calculator for 300 dollars that you can now buy for 99 cents LOL>
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Robert J.
Rental Property Investor · Eugene/ Springfield, OR · Member since 2012 · 99 posts · 69 votes
8y
There will always be a demand for the flower and plant but I do think there is a lot of competition in the area. Oils will definitely be a key product especially with all the vape pens and ecigs where you don’t need a giant setup to be able to have stronger concentrates. Think that still bodes well for the warehouse sector though because you’ll have to manufacture it somehow and at scale you’ll need bigger machines
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David Song
Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
8y
I was interested in the secondary processing and was worried about the legal liability from the fed. We do pharmaceutical research in the lab. All the equipment and knowledge are there to do those extraction and quality control. Cannabis is just a simple herb. Was checking on raw material suppliers and market for those secondary product. Never involved in those before.
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Jay HinrichsBusiness Member
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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Robert J.:

There will always be a demand for the flower and plant but I do think there is a lot of competition in the area. Oils will definitely be a key product especially with all the vape pens and ecigs where you don’t need a giant setup to be able to have stronger concentrates.
Think that still bodes well for the warehouse sector though because you’ll have to manufacture it somehow and at scale you’ll need bigger machines
well going to check out one today.. I know there Is a lot of venture capital being rasied in CA right now. and someone I knew from the turn key space.. He was a Army doctor got into writing scrips about 10 years ago in SOCAL and has made bank.. better than writing Opiod scripts
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Gordon Forbes
Investor · Roseburg, OR · Member since 2015 · 34 posts · 48 votes
8y
I remember when all the little growers (who were the ones always going to jail) thought heaven had arrived on earth when it was legalized. They thought they were gonna do well. It won't take long till the mega factory farms put all the local growers out of business. And that includes you mid sized "lease a 50,000 sq ft warehouse" growers.
Can you grow anything (corn, wheat, soybean) in competition with agribusiness once agribusiness has had time to ramp up production? Enjoy the short lived niche opportunity while it lasts.... or has already passed.
Even the local dispensaries won't want to deal with local growers because the consumer will soon want potency and purity testing, consistency, and name branding etc., and the dispensaries will stock what sells and that will be "Willie Nelson's Best Weed" and not your "grown down on 5th street" brand. You want your margins to be even smaller?, then sell to the wholsalers who supply the name brands. A few locals will get a "Craft Beer" type niche following... a few.
Some locals will try to "grow it cheap and sell it on the street" meaning bypass the dispensaries who won't stock their stuff. That's still illegal.
Over time the "food industry" will eat its way up the "food chain" and take over the processed product categories one by one too, and for the same reasons.
At a moments notice, if the federal government decides to play rough, all they have to do is pass some legislation (or just threaten) to revoke the charter of any bank that accepts money from any pot related bussiness.
The money in weed, just like the easy money in crypto currencies, has already passed by... IMHO.
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Sergiu Ionita
Real Estate Agent · Social Circle, GA · Member since 2015 · 116 posts · 53 votes
8y
Jay Hinrichs Catch anything? I grew up fishing the Willamette and Columbia rivers.
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Jay HinrichsBusiness Member
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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Sergiu Ionita:

Jay Hinrichs Catch anything? I grew up fishing the Willamette and Columbia rivers.
In progress. Us and 200 other boats. It’s slow. Seals are doing well though
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Sergiu Ionita
Real Estate Agent · Social Circle, GA · Member since 2015 · 116 posts · 53 votes
8y
I hate those seals with a passion..Well good luck to you!
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Marianne C.
Investor · Portland, OR · Member since 2012 · 29 posts · 9 votes
8y
It's just like anything else, there's the Folgers and the Stumptown. The market seems to have space for both top-shelf and the bottom-shelf (the $400/lb). Lean operations and smart business decisions are important as margins continue to shrink. Over the past year flower has decreased from 60% of the market to 50% of the market, so oils and edibles are increasing their share. My guess is that the next year will see a lot of producers exiting the business and some consolidation (m&a) activity.
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Jordan Beckett
Rental Property Investor · Eugene, OR · Member since 2017 · 16 posts · 4 votes
8y
Jay Hinrichs Oregon currently has more MJ than it knows what to do with, it’s not just Portland, and a supply glut has been causing prices to tumble. There are only so many buyers, and crossing state lines to sell carries extra risk. Southern OR has been farming MJ forever, but the recent rush to gobble up EFU land and build growsites has pumped the market full. The OR permit and MJ industry is still young and going through growing pains, I’d expect a lot of small time growers to get squeezed out by larger operations in the future. No different than cattle ranching, unless you enjoy doing it small time as a hobby, you gotta scale to make a profit.
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Steve Haight
Las Vegas, NV · Member since 2014 · 732 posts · 137 votes
8y
Jay,
The docs made bank on scrips, now no scrips required so there goes that stream of income!! Goes back to supply and demand? I would analyze each state seperatly. I remember when Colorado became legal years ago, my friends in Pueblo where making bank leasing units to growers for grow opts left and right, now there is nobody in that space in Pueblo. Jay you best at real estate anyway ha ha. Lets us know what you discover!!
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Randy Johnston
Residential Real Estate Broker · Beaverton, OR · Member since 2014 · 335 posts · 149 votes
8y
@Jay Hinrichs As part owner of a grow operation. I'm finding that for indoor grow, the prices are in the $800 to $1500 (depending on the quality) a pound. The $400 a pound you quoted would probably be for a low-quality flower from an outdoor grow.
@Dennis Wasilewski You are correct, the dispensaries and extractors have seen more of a boon with the lower prices. For the most part, they are still getting the same price per gram as before, but are paying 50 - 60 percent less for the flower.
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Karen MargraveBusiness Member
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Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
8y
My thoughts are that people have always been able to buy pot when they wanted it. People have always grown it. In Northern CA (the real northern CA) Shasta, Trinity, Humboldt counties with the hot weather and long seasons, there's plenty of cartels out in the forests growing, alongside legal growers now, With growing pot becoming legal, many of those that once bought from others can now grown their own. Others will continue buying illegally, and many will buy from dispensaries.
The competition has increased, amongst growers, but there's still a limited number of buyers. Like everything, the large manufacturers and distributors (more likely tobacco and alcohol manufacturers) will swoop in and take the cream off the top. Those "craft growers" that have a niche that is more labor intense, complex, etc. will still be able to grow and have a market.
As with everything, the government will be getting in, regulating and taxing it until there is no profit to be made.
Just my .02 , no research.
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Kevin FoxPro Member
Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
8y
@Jay Hinrichs
I think there are several reasons for the significant drop, but the two biggest in my opinion are related to financial theory and the current legislative landscape.
For one, think back to the most elementary concept in investing - return is a measure of risk.
With MJ becoming legal, it would be reasonable to assume that the return investors demand will drop with the decreased level of risk associated with the business.
Second, it is my understanding that it’s currently much easier to attain a license to grow/wholesale than it is to retail (especially in a brick & mortar environment).
In my opinion, that is likely to cause a systemic imbalance between the supply and true long-term demand. (This is reflected in your comments about suppliers seeing 50-60% decreases in their sales prices while retail prices have gone virtually unaffected)
Not only will growers be limited to fewer potential customers, but I suspect that a lot of those who tried and failed to get into the industry on the retail side elected to enter on the supply side for the time being in order to get their foot in the door.
So, if my theory is correct, that would mean the current dynamic is causing the appearance of a much lower demand and a much higher supply than you would otherwise see in a completely laissez-faire economy.
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