Since legalization, the cannabis industry has been booming. Manufacturers, retailers, producers, and more all form part of an incredible cannabis industry. Whitney Economics, a global leader in cannabis and hemp business consulting, data, and economic research, has just announced the release of its 2022 U.S. Cannabis Supply Report.
Supply, Demand And More
The Whitney Economics report assesses the U.S. cannabis supply at both the national and state levels. Their report also includes the illicit supply of cannabis, so we get a good idea of the total demand and supply in America.
Their calculations conclude that the current cultivation capacity is greater than the total demand if the cultivation is utilized at 100% capacity. Current cannabis sales nationally are expected to reach $29.3 billion by the end of 2022 and are predicted to reach over $80 billion by 2030.
Currently, the difference in supply between legal and illicit cannabis is quite similar. However, expectations are set for legal supply to become greater than illegal supply by early 2026.
Supply volumes are expected to approach 50 million pounds by the end of this year.
While current supply figures do promise a healthy market, they also warn investors and business owners of what to expect in the future. Since the current supply outweighs demand, we can expect to see prices for cannabis products drop to meet the current demand levels.
If you’ve been looking to invest in the cannabis industry, this is an important factor to keep in mind since current price estimates may not be entirely accurate based on future supply predictions. (Read more on cannabis supply and regulations here.)
What To Expect
With the way current trends are moving, we can expect prices to decrease to meet the demand needs of the market.
With that being said, the market overall is expected to continue to grow year over year, so while prices may decrease slightly over the coming few years, the market itself should remain on an upward trend over the coming years.
In addition to that, once prices meet their equilibrium, we may see an increase in demand, bridging over into new markets and expanding the market further.
While future predictions are fairly accurate when it comes to the cannabis industry, the current price slump may be of concern to smaller manufacturers and retailers.
We’re likely to see an increase in competition from cannabis growers by means of streamlining their supply chain operations, negotiating better prices for larger orders and ordering select products that customers are using.
Legal growers and manufacturers also have to compete with the current black market and illicit cannabis sales, which dig into the legal industry’s market share by undercutting costs and working on thinner margins.
While competition is generally good for industry overall, the health of competition in the cannabis industry may be problematic over the coming few years. Companies may find themselves fighting harder to win customers, and smaller growers and retailers might have to buckle up for a potentially rough ride ahead.
At The End Of The Day…
When it’s all said and done, the cannabis industry is expected to continue growing for the next eight years at quite a rapid pace. While, like with any industry, external factors like inflation, economic downturns, supply chain issues and other factors will temporarily affect the overall health of the industry, the key is to look at the industry over the long term in order to make better predictions.
Temporary downturns may affect businesses and producers in the short term, but the overall benefits of cannabis and its uses mean that this industry is still one of the fastest-growing in the country.
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