Will the cost of bud in California go up in 2018 when the new law goes into effect?

Crazy Chester · Aug 17, 2017

I'm starting this thread because I've been considering applying for one of the new California commercial licenses that will go into effect in 2018.

Since I read the new law, I've been thinking it was enacted to destroy the medical marijuana system in California. If the price is too high due to the increased cost of producing and selling it, the black market will be back in California quickly.

For instance:

1. There will be a production tax of $9.25/ ounce of flowers plus an additional 15% excise tax on retail sales of marijuana both adult-use and medical.

2. Required lab testing.

3. Transporter fees.

4. A wholesaler in between the grower/manufacturer and the dispensary.

5. Since it will be a for profit business, there will be no more collective or cooperative "reimbursement," requiring the payment of taxes.

Then, there are the usual costs of production: electrical (industrial rate is around 10.5 cents per kw/hr), water, etc.

I'm leaving out more than I'm including here. Please feel free to identify other costs in producing cannabis in California next year.

I want to figure out what the new cost of producing a pound of cannabis will be.

Perhaps first we should look at an indoor grow operation and then later, outdoor. Once we have an estimated cost of production, we can pretty easily figure out what the retail cost will be (up until now I think it's been around twice the cost of production).

Will there still be money to be made in legal cannabis in California?

Will the price of legal cannabis go up too much, bringing back a profitable but dangerous black market?

rolandomota · Aug 17, 2017

The Black market will never go away especially if everyone can grow and posses and yes their will be money to be made because of the huge state population

weedaholic721 · Aug 17, 2017

Yes,at first, due to demand; then it will drop down low over the following 2-3 years similar to other legal states. A pound of bud at med dispensaries retails for 1500-2000 here in Colorado(can only imagine wholesale), in many rec stores it's cheaper before taxes. There will be money to be made but the prohibition profit margins will disappear.

FunkBomb · Aug 17, 2017

First of all the black market is never going away. Look at what is going on in Colorado. Prices in California could go down but considering the additional taxes and regulations I wouldn't bet on it. This doesn't even begin to figure into things like inflation and interest rates.

-Funk

weedaholic721 · Aug 17, 2017

Black markets go away when its internationally legal. Here in Colorado and everyother legal state I have been too, it's a Grey market. Bud is grown legally through med programs then sold illegally to still illegal states; mainly the east coast but also alot to Texas it seems from the news.

greenpinky · Aug 17, 2017

If it's decriminalized then it's just a open market.. great thread!.. $security,$legal,$permits,$banking,$$$$,
+much more to think about.. just make sure ur product is A+ and don't waste $$. O ya to answer question. Ya prices will be high at first and come down threw time..hopful quickly

DocTim420 · Aug 17, 2017

IMO, pricing is all about "supply and demand". Like a teeter totter, one side goes down the other goes up.

To think the "grey/black" market will disappear is foolish--people don't like to pay income taxes and "work under the table", people don't like paying sales taxes and buy out of state (Amazon) or "pay cash" (off the books sale).

If my locality does not permit cannabis cultivation, unless I move--then I will never qualify for a "state license". Think I am going to fold up and quit?

trichrider · Aug 17, 2017

i tried to figure the price/cost when Colorado was regulating.
trouble is, you don't want to figure the price of a pound because you are going to grow more than a pound.
you want to figure what it will cost to start producing multiples of that, and it ain't cheap!
electricity
water
venue
security
nutrients
media
labor
licenses
genetics/clones
pest control

all lumped in together it becomes quite an investment, not saying you don't have the scratch...but trying to figure the price for a pound before you have the price of producing that pound...well, you may be surprised.

economy of scale. your only saving grace. jmo.

...and, it has to move. meaning top notch.

good luck

Crazy Chester · Aug 17, 2017

Hi trichrider - actually I am trying to figure out the price of producing a pound (or pounds). Retail price is pretty easy to figure out from there.

DocTim420 · Aug 17, 2017

YEP!

Top notch/drawer/shelf buds are usually immune (or influenced to a lessor amount) from the price fluctuations of what most people grow/buy--mediocre bud.

I say this from experience.

St. Phatty · Aug 17, 2017

2017 is going to a Bumper Crop year.

I would wait till December 2017 - Jan. 2018 to see how prices go, before making plans for 2018 grows.

Overall industry revenues are in the ballpark of $75 Billion.

Will industry revenues increase - will people spend more $$ on Cannabis as it becomes much more widely available ?

I don't think so.

That leaves us in a situation where Total Revenues (OG/off balance sheet, and 'official') are basically static/flat.

Yet production increases MASSIVELY.

Sounds like a recipe for significant price drops to me.

Mtn. Nectar · Aug 17, 2017

quality reigns..........along with location/demand sets $............

legal sold ganj will stomp itself with high price.........blk market will rule because of......

ganj on..........

soundman · Aug 17, 2017

I moved out of CA to WA and when WA went recreational they rolled medical into the recreation system. Black market weed is selling less than store fronts.

People are stupid and must like going to a store to pay higher prices for shitty weed. The black market got shut down recently too. Get caught and your way more busted than ever.

Maybe CA will be different but people will use the illegal aspect to drive your price down. You have no other way of selling product.

I hope Im wrong cause I am moving back at some point in the near future. WA sucks balls.

aridbud · Aug 17, 2017

Rarely does anything go down in price. And with testing...more accuracy.
Exception: Wendy's Frosty is/was $.50.

Storm Shadow · Aug 17, 2017

collectives still charge $50-60 an 1/8th for really bomb OGz and the Hype of the Month...

Most shops dont even have next level dank... grow fire and you can stack away

oldchuck · Aug 18, 2017

California already produces 10 times more Cannabis than it consumes. Obviously most of the weed goes out of state to places where it remains illegal because the price is much better. Now with all the newbe big operators suddenly getting entrepreneurial supply will increase. You figure it out. I wouldn't touch it.

Crazy Chester · Aug 18, 2017

Thanks everyone. There's some good insights here.

Another cost I forgot: "track and trace" program. It's designed to track every plant from the nursery to the retail sale, supposedly to cut down on diversion to the black market.

I haven't researched it yet, but I'd imagine it would be pretty reasonable, i.e., some simple software that keeps track of batch and lot and prints out labels you can affix to your plants.

DocTim420 · Aug 18, 2017

Track & Trace (aka cradle to grave) will take a while before it is operative (time lag between "germination" and "harvest"...and coordinating it with the Jan 1 effective date). So, imo, there will be a window of time (6-9 months?) before it can really be "cradle to grave".

I asked my dispensary what to do if I can not obtain a cultivation license (due to my city specifically outlawing cultivation), they said, "Don't worry, we will take care of you."

For every "problem" there is a "solution".

rolandomota · Aug 18, 2017

Track and trace lol like if people really are going to report actual weights of plants

HeriMarry · Aug 19, 2017

As long as it is being taxed, there will be a black market. For instance, cigarettes an shine are still sold on the black market. An since the Marijuana Movement wants to get in bed with the government for legalization an when/if it gets legalized by the feds, that will be a new charge for the undocumented grower, Tax Evasions. Say hello to the ATFC. The war will never end for the free.I only support decriminalization.

The price WILL go up an the government will get richer off our backs. IMO.

Will the cost of bud in California go up in 2018 when the new law goes into effect?

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