Michigan’s recreational marijuana industry is experiencing oversupply, and wholesale prices for cannabis flower are down, according to a new report from MJBiz Daily.
Prices of wholesale recreational marijuana in Michigan are now as low or lower than those in older adult-use states like Colorado and Washington, where legal sales of cannabis have been around longer, and more mature markets have developed.
New markets ramp up quickly and undercut new businesses because they’re hungry for market share. Unfortunately, this creates incredibly unstable market conditions, threatening the future of legal cannabis in Michigan and even nationwide.
What Happens When The Market Is Oversaturated?
Over-saturation is a situation where there is more supply than demand for a product, which drives down prices and cuts into company profits. This can be good for customers, who get discounts on the product, but it’s bad for companies that need to make money to operate.
Eventually, this will either shrink the market or create an imbalance between supply and demand. If it shrinks the market, it will keep things balanced—but if it creates an imbalance between supply and demand, it could lead to a shortage of the product and push prices up as consumers scramble to get their hands on what they want.
The best way to avoid oversaturation is by keeping an eye on production levels and adjusting them accordingly. If you notice that there is more supply than demand in your industry, it’s time to scale back production until things balance out again.
But while oversaturation can be avoided with careful planning, sometimes it happens anyway—and when this happens, industries often experience shortages instead of just balancing themselves out again. When this happens, prices tend to rise dramatically as companies scramble to make up for their losses.
Marijuana In Michigan
As the state of Michigan continues to implement new regulations, it is becoming increasingly clear that producers in the state are unprepared for the impact of these changes.
In March, regulators implemented new rules, including lower application fees and the removal of licensing tiers that will further open up the market. But these changes have come too late for many producers who have already invested significant amounts of time, money, and resources into growing marijuana.
Michigan has no limit on how much cannabis can be produced or cultivated by a single producer or grower. This means that some growers produce so much marijuana that they actually cannot sell it all before it goes bad, leaving them with nowhere to turn.
The state is attempting to vertically integrate its market by requiring all producers to grow their own plants from seeds instead of purchasing them from other companies. However, this requirement may not be enough to prevent growers from losing money by producing too much marijuana than they can sell legally at this point in time.
What This Means For Consumers
The cannabis industry is booming, and it’s only going to get bigger.
But in the long term, that’s not good news for consumers—and it might actually be bad news for the industry itself. The reason? Oversaturation.
Right now, there are more companies producing cannabis than ever before. This means that consumers will enjoy low bulk prices on their favorite products—for now. But as more and more companies enter the market, they’ll all be competing for a limited number of consumers. This means that eventually, prices will go up as supply goes down.
That’s not all: With so many producers looking for new customers and so many customers looking for new products, it will become harder and harder for smaller companies to break into the market or even stay afloat once they’re there. Eventually, the market will become more vertically integrated and shut out small or newer businesses from emerging at all—which means less competition for consumers and higher prices for everyone involved in production.
It is clear that the nationwide oversaturation of cannabis has put a strain on the industry and its stakeholders. Michigan, however, is experiencing the worst of it.
As a result of this situation, both new, emerging cannabis companies and established businesses alike are struggling to make ends meet. The state of Michigan will be forced to find solutions to this issue in order to save its economy and prevent further damage.
The only way to save everyone from this crisis is for all Michiganders to smoke weed. We need everyone in the USA to get high as much as possible so that we can take back control of the market and protect the industry.
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