Oregon Marijuana Prices Dive — and Sales Soar

Rampant overproduction in Oregon's market for legal, recreational marijuana has produced a 50 percent drop in prices, according to state economists. That widely documented collapse has been tough on farmers and retailers - but a boon for consumers.

A new state analysis finds the price collapse sparked a big uptick in marijuana purchases and a corresponding increase in associated tax revenue, the Oregonian/OregonLive reported .

"Lower prices are helping to drive the volume of sales higher and induce black and medical market conversions into" the legal, recreational market, said Josh Lehner of the Oregon Office of Economist Analysis.

Recreational marijuana sales in Oregon will be nearly $543 million this year, up 29 percent from 2017 and well above economists' expectations, forecasts show.

When Oregon legalized marijuana four years ago, expectations were enormous for the newly legal market. The state created incentives for producers to leave the black market, leading to overproduction and the ensuing price decrease.

A state study found the retail cost of a gram of marijuana plunged from $14 in 2015 to $7 last year.

Recreational marijuana remains a small industry, relative to the size of Oregon's economy. For comparison, economists note that cigarette sales are 40 percent higher than marijuana sales. But legal marijuana is growing fast - state forecasts suggest it will be a billion-dollar market in 2025.

While Oregon has no general sales tax, it does levy a 17 percent sales tax on marijuana. Marijuana taxes generated nearly $70 million in revenue last year and are forecast to generate nearly $90 million in 2018.

State forecasters believe marijuana may eventually play a more important role in the state's economy.

"The real economic impact from recreational marijuana will come not from the growing and retailing, which are low-wage and low value-added market segments," economists wrote in a revenue forecast issued last week. "It will come from higher value-added products like oils, creams, and edibles, in addition to niche, specialty strains."

The rise of marijuana in Oregon could evoke the emergence of craft brewing in the state, the economists wrote, with value-added production augmented by a cluster of suppliers and support industries.

"The long-term potential of exporting Oregon products and business know-how to the rest of the country remains large," economists wrote, "at least once marijuana is legalized nationwide."