Outdoor-grown cannabis is selling on Michigan’s legal market for as low as $250 a pound, driving a fracas of industry consolidation and a high stakes legislative attempt to bring prices back up to a more profitable level.
Michigan is going through a massive price consolidation, say operators, and regulators report this year will be the state’s biggest croptober yet, so last week the state’s biggest growers, the Michigan Cannabis Manufacturer’s Association (MCMA), began lobbying the state legislature to put a halt on new grower licenses. A bill has not yet been introduced.
Last summer, outdoor flower was selling for an average of $525, said Jason Crockett, founder of cannabis wholesaler THCBD Source, who sells for ten outdoor growers and another two dozen indoor growers. Also, more of Michigan’s outdoor growers are gearing their product towards high-end flower.
“Last couple of years, a majority of outdoor was grown for processing. This year growers decided to do shelf flower, taking tops of plants, drying it, and getting ready to go to stores,” said Crockett. “About a third will go to shelf, the other two thirds will go to dry or frozen biomass.”
This fall’s steep price drops have wiped out margins for many growers, many of whom had been selling indoor flower for between $700 and $1,000 a pound last summer, according to Crockett and Michigan operators interviewed by Grown In.
Now, MCMA, which declined to speak to Grown In, is pushing state legislators to ban further grow licenses, according to reporting from Crain’s Detroit Business, and confirmed to Grown In by lobbyists active in Lansing.
“The large majority of licensees, including our members, support the concept of pausing grower licenses,” said Robin Schneider, executive director of the Michigan Cannabis Industry Association (MiCIA), the state’s largest cannabis trade group. “We did not put in a bill request but may end up supporting legislation depending on what the draft looks like.”
State regulators do not have authority to pause licensing, according to state law. Last month, the Cannabis Regulatory Agency devoted their regular quarterly public meeting to a train of operators testifying in favor of a grow license moratorium. Since then, the agency has gotten a new director and has had little public to say on the matter.
“We’re taking into account the information shared by stakeholders at our quarterly hearing last month,” said agency spokesperson David Harns last week.
Passage of any change in Michigan’s cannabis laws are extremely challenging, since they were established as the result of a popular referendum, and as such, would require three-quarters majorities in both chambers for passage. With that in mind, MiCIA’s Schneider is doubtful a new law will pass.
“Anything is possible but it would take a supermajority and a bipartisan effort with very little time left this session. This would mean that everyone would need to be in agreement and the lobbyists would all need to cooperate,” said Schneider.
Even if a grow license moratorium passed, some operators believe it would have little impact, since this year’s croptober is already well underway.
“You live in Florida and the hurricane is on its way. So you brace for impact,” said Redbud Roots founder Dave Murray. “I think it’s too late, the damage is already done, if they wanted to do something it should have been done years ago. There’s too many growers, there’s a massive amount of outdoor.”
Even if a moratorium on new licenses were imposed, it’s unclear exactly how such a moratorium would work. Michigan works on a two-step award process, where applicants receive clearance to seek a municipality’s license approval in step one, and then obtain the actual license from the state in step two.
State regulators are not allowed to report the number of stage one applicants, said CRA spokesperson Harns. But a quick tabulation by Grown In found it would be at least many dozens of entities.
It is unknown if the state could legally bar those who have begun the application process from obtaining licenses. If a moratorium were passed, but state one applicants were allowed to move forward, a moratorium would have little impact.
“Who is in the two-step phase? This doesn’t slow anything down for a year and half,” said Murray. “Once it gets passed, it’s another six months to implement, and then another twelve months to take effect. You get a huge number of operators come onto the market. It’s already too late.”
It’s all about market forces, cash on hand, and ensuring you have low operating costs, argues Murray, a former commodities trader.
“If you’re running at a loss now, may God have mercy on your soul. You better have some cash and investors that will support you and the changes you’re making,” he portended.
