Marijuana has become a multi-billion dollar industry within a short period of time. With legalization efforts pushing the substance around the U.S. as well as other countries around the world, it seems as though the marijuana takeover is in full effect.
The market has managed to bring billions back from the once massive black market on cannabis which has resulted in a massive influx of investments and taxes to various state governments. When viewing the industry, one might not even consider the amount of money that goes into growing cannabis. We have to consider the legal efforts, real estate budgets, contractors and so on when looking at the budding industry. One of the main benefits of this is that often times, the money invested stays within the local economy. This can help to boost employment as well as help with local issues by providing a taxable product.
One of the other effects of the new cannabis industry on a local level is police efforts. With laws allowing the use of cannabis, police officers can spend their time fighting violent crimes and other drug-related issues as opposed to the relatively non-violent nature of marijuana-related offenses.
Cannabis has in turn been able to help create thousands of new jobs and millions in tax revenue for various governments. One study has shown that for every dollar spent on cannabis, $2.40 in economic activity was spent behind the scenes. All of this may seem pretty great, but there are some issues to consider when looking at this from a holistic point of view.
One of the issues is that the demand for cannabis has remained high, but prices have shot up due to taxes and a whole list of issues in the industry. This has meant that some consumers are choosing to continue utilizing the cheap prices of the black market. This has somewhat hurt the market as predictions for demand have in some cases been wrong, leading to the closing of some businesses and a fear of overproduction.
This issue is in the process of being solved as many large producers of cannabis are helping to lower costs dramatically. In Oregon for example, some wholesalers of cannabis are selling their product for as low as $100 per pound. This actually presents a secondary issue believe it or not. When growers at a large scale can produce pot for so cheap, it, in turn, hurts the smaller guys in the industry who have more capital intense projects and the higher costs that come with lower scales. Many states have chosen to begin taxing cannabis off of the price per pound of the substance. This means that tax revenue has fallen along with the falling prices of cannabis. States have in some cases, been unable to anticipate the dropping prices and have seen their taxable amounts drop quite substantially.
The dropping of prices has fortunately created a new side of the market. Many producers of cannabis on a smaller scale have decided to take this as an opportunity to specialize their product. This means that more and more companies are beginning to produce craft cannabis that is fully vertically integrated. This can mean higher margins for companies as well as a better product for the individual. This is likely one of the better solutions to the aforementioned problem, but the real issue could undoubtedly be solved in the years to come.
Cannabis is still considered to be quite an infant market as it has only been in full effect for a few years. With the coming changes to legislation and the findings of new methods to produce cannabis, it seems as though these issues could begin to pan out in the near future. For now, cannabis is still an economic game-changer for the states in the U.S. alone and it doesn’t seem to be slowing down any time soon.
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