To say there’s a lot of weed in the Oregon market right now is an understatement.
With about five million pounds of cannabis grown in 2021, that’s enough for every person — and child — to have their own 1.25 pounds of weed, according to Dan Isaacson, co-owner of the cannabis company One Gro, which grows and packages bulk products for consumers.
This isn’t the first time that Oregon’s weed industry has had an over abundance of cannabis. With so much cannabis on the market right now, growers are struggling to stay open with small profit margins and a strict tax system. And some of the state’s locally owned dispensaries are feeling the effect of low-priced weed in combination with consumers surviving a sluggish economy.
Federal lawmakers could ease some of these issues, such as allowing interstate commerce and banking. But Isaacson says time is running out. “You have a market that is imploding at the moment,” he says.
Outdoor-grown cannabis sells for about $100 a pound on a good day right now, Isaacson says. It costs about $70 to grow it, before taxes. And taxes are where the costs add up for farmers, he says.
In 1982, Congress passed the 280E tax code as a way to crack down on taxpayers, citing business expenses in trafficking controlled substances — such as weed. The law was meant to target drug dealers, according to a 2021 report by Congressional Research Service, a nonpartisan service that operates within the U.S. Library of Congress.
Because of that bill, Isaacson says cannabis growers can’t write off business expenses like any other agricultural entity. “A farm has tons of fertilizer, and I’ve got labor, I’ve got netting, I’ve got rent,” he says. “So as a farmer, I have a ton of things to write off.”
The last time that Oregon’s growers produced too much cannabis, retailers weren’t hit as hard, Isaacson says, but this time, things are different with an economy on the brink of a recession and high inflation, where consumers are exercising caution with their budgets, affecting retailers.
Janice Grossman, chief of operations at Oregon’s Green Rush dispensary in north Eugene, says the whole cannabis industry is failing. The Eugene cannabis market has more corporate dispensaries than ever, and many of those companies can afford to have their own grow sites and set lower prices, she says. “Instead of a race to survive, it’s a race to the bottom,” she says.
Grossman says her dispensary sells cannabis products sourced from local grow sites, many of whom are smaller enterprises than the corporate farms. The quality of those products may be better than the corporate-owned dispensaries, but they are more expensive.
If locally owned grow sites and dispensaries close, Grossman says corporate-owned businesses will increase the weed prices. “The reason why they’re driving prices down is to cut us out and swallow us up,” Grossman says. “What’s going to happen is that prices are going to go sky high because they achieved the goal of getting rid of us.”
The state of Oregon could take action to save cannabis businesses.
Grossman says that the Oregon Liquor and Cannabis Commission could exercise more judgment in granting dispensary permits, so it doesn’t overwhelm communities.
According to permit data provided by OLCC, the number of permits has continued to increase since 2016. For retailers, in 2017 there were 488 and as of September 2022, there are 812. OLCC spokesperson Mark Pettigrew says that cities and counties have had the opportunity to opt-out of recreational marijuana but cannot selectively decide who can and where one can be opened.
Grossman says the federal prohibition on cannabis makes banking more expensive for dispensaries and growers. The few banks and credit unions that cannabis businesses can work with take out a significant percentage, she adds.
Sen. Jeff Merkley is still working to pass the SAFE Banking Act and says the Senate is closer to passing the bill. Merkley says the bill would end the cash-only economy of the cannabis industry and should have more support based on how many states have legalized weed.
“We should have 74 sponsors because we have 37 states that have a cash economy that’s good for money laundering and organized crime and robberies,” he said in a recent visit to EW. “This whole way of banning banks in cannabis is crazy.”
Cannabis growers will have to wait on interstate trade. Although Gov. Kate Brown signed Senate Bill 582 in 2021, the federal government has to allow such commerce to occur. But if it does act, Isaacson says Oregon’s weed would be popular in other states with its remarkable terroir and climate.
“You could supply cannabis to every legalized state,” Isaacson says. “Given where it’s coming from, it will be higher sought than anything else grown domestically.”
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