Inflation Hits the Cannabis Market and Prices Are Getting Higher
Is it time to stash your weed?
In June, U.S. inflation hit a four-decade high, with the consumer price index climbing 9.1% from the previous year. This represented the biggest gain since the end of 1981, according to Labor Department data, and reported by Bloomberg. This mostly impacted gasoline, rent, and food prices.
"Rather than cooling down, inflation is heating up," said Sal Guatieri, senior economist at BMO Capital Markets. "While a pullback in gasoline costs in July and reported retail discounting will help tamp down the flames, the broad pressure in the core rate, led by plenty of inertia in rents, suggests inflation may not peak for awhile, and might remain stubbornly high for longer than anticipated."
Cannabis is the one industry that often took pride in being recession-resistant, but what about inflation?
Weed and inflation
Leafy recently reported that as gas prices go through the roof, stocks plunge, the war in Ukraine affects resources and the COVID pandemic still impacts the supply chain, weed prices have remained the same. The report however noted that the cannabis industry has not completely dodged inflation. For one, the cost of equipment used to cultivate marijuana has increased significantly.
One thing that explains why cannabis prices stayed the same during this period is the COVIC pandemic. How? When the outbreak started, people rushed to buy as much weed as possible, fearing they'd run out. That was before marijuana was deemed essential business in many states. This led to cannabis companies not being able to meet the demand and therefore increasing production. Then, having to deal with oversupply, dispensaries kept prices the same as inflation rates in other sectors climbed.
Unfortunately, this is apparently about to change...inflation is coming for the marijuana industry.
Weed prices could rise by 10 Percent
According to a recent survey from a national cannabis accounting and advisory firm GreenGrowth CPAs, 1 in 4 cannabis operators announced plans to raise their prices.
Nearly half of the survey participants said cannabis business has dropped over the last 12 months.
"The cannabis business landscape is ever-changing," stated GreenGrowth founder & CEO, Derek Davis. "And, in order to provide accurate financial data to our clients, we have to consider the economic impacts of rising inflation costs, as well as other factors that can impact the business performance of cannabis companies. Through surveying our customers and cannabis operators in general, we're able to compile enough data to provide a detailed analysis of how cannabis operators are feeling the economic pressures of today."
Marijuana CFOs signaled a plan to raise prices by at least 10% this year, writes Green Market Report.
What is interesting is that, aside from supply chain challenges as the main reason, more than 40% of cannabis companies surveyed blamed the Biden Administration for trending inflation challenges and more than 30% blame the "lingering effects" of the Trump Administration.