Workers should feel confident about the industry they serve. The third edition of the U.S. Cannabis Cultivator survey from Wells Fargo shows that 58% of cannabis cultivators have negative feelings about the industry. They stem from issues like falling prices, distribution problems, oversupply, regulation obstacles, and more.
Results of the Survey Revealing Cannabis Cultivators Have Negative Feelings About the Industry
The survey showing cannabis cultivators have negative feelings about the cannabis industry recorded responses from over 400 growers across the United States. 58% said they felt “bad” or “terrible” about the current state of the cannabis market. 31% said they feel “okay”. Only 9% said they feel good about the market, and just 2% recorded their feelings as “great”.
The survey also broke down responses by state. It found that California, the state with the most growers) had the most negative feelings about the cannabis industry. 66% said they had a “bad” or “terrible” outlook on the industry.
Most negative feelings about the cannabis industry in the state were due to falling wholesale prices. 34% said reduced wholesale prices were their main source of stress. 29% pointed to restrictive regulations, and 10% stated lack of distribution was causing them tsuris.
California is the largest cannabis market in the world, but it experienced a decrease in sales in 2022 for the first time since it was legalized for adult use in 2018. The decline is likely due to dropping cannabis prices.
Falling Prices are to Blame
California cannabis cultivators aren’t the only ones with negative feelings about the cannabis industry thanks to falling prices.
About 87% of surveyed growers stated they sell wholesale flowers for $1250 a pound or less, an 83% increase from the fall of 2022, and a 74% increase from the spring of 2022. Many cannabis cultivators reported selling flowers at $750 a pound or less, just under the breakeven price of $800. This shocking statistic shows how difficult it is for cultivators to make a profit.
The numbers are backed by a recent Whitney Economics survey which found that only 24.4% of cannabis operators in the United States are profitable. Findings predicted that there was little hope of improvement in sight. It forecasted below-average growth for the next seven quarters.
It further noted that cultivators’ success is contingent on regulation measures in the states they operate as well as other factors that are beyond their control.
A Look to the Future
There are many cannabis cultivators with negative feelings about the cannabis industry. Survey findings are bleak. But most cultivators say they don’t plan to leave the industry any time soon.
Only 19% said they planned to leave the industry partially or fully. These statistics mark a 22% decrease from the fall of 2022 and a 27% decrease from the spring of 2022.
While some may applaud cannabis cultivators for their persistence, others note that it could make issues worse. It may continue to contribute to oversupply which leads to price drops. The survey also found 42% of growers plan to increase cultivation over the next year causing supply issues to go through the roof.
On the bright side, the survey also revealed that 65% of growers are investing in nutrients and 45% are investing in soil. These investments will boost production and keep costs down. They are a more cost-efficient alternative to lights, irrigation systems, and extraction systems. Cannabis cultivators say they will cut down on those items by 32%, 30%, and 16%, respectively.
Problems Leading to Negative Feelings About the Cannabis Industry
Oversupply is one of the issues contributing to negative feelings about the cannabis industry. It’s a big problem on the West Coast where great growing conditions and no shortage of cannabis knowledge have led cannabis cultivators to produce, produce, produce. The problem is, there aren’t enough buyers.
Some growers are even funneling out their supply to the black market to make ends meet.
Cannabis cultivators are hoping the government steps in with weed legalization measures. If weed was federally legal, bank restrictions would ease up providing more access to loans and credits. It would make it easier for growers to make money.
Politicians are trying to make life easier for growers with the SAFE Act. The bill would put provisions in place that protect financial institutions that work with marijuana businesses. Institutions would not be penalized for providing loans or opening accounts with businesses in the cannabis industry.
There were hopes that the SAFE Act would pass legislation in the summer. But the latest news states that an attempt to make that happen in the next few months is ‘wishful thinking’.
Supply Chain Issues Contribute to Negative Feelings About the Cannabis Industry
Supply chain issues also contribute to negative feelings about the cannabis industry. There are several factors involved, such as:
- Outdated Inventory Management: Many distributors rely on outdated inventory management. They use fax, emails, and spreadsheets instead of supply chain software. The reliance on outdated solutions leads to supply chain bottlenecks and slows down growth.
- Materials Shortages: Supply chain issues around the world are causing materials shortages in the cannabis industry. Steel is a material in short supply. It is often used in the storage, treatment, processing, filtration, shipping, and distribution of cannabis products. High tariffs and import challenges are impacting access. Petroleum, which is used to protect cannabis products in various stages, is hard to come by thanks to the increased demand for crude oil.
- Shipping Logistics: The combination of outdated inventory management, material shortages, intrastate regulations, and poor planning contribute to shipping logistic issues.
- Intrastate Distribution: The rising demand for cannabis has led to overwhelmed ports and high-pressure deadlines. A solution would be to gain state approval to allow packaging and shipping facilities to reside in the same warehouse. However, this would be pending state approval which is not easy to come by.
Unfortunately, many cannabis cultivators have negative feelings about the cannabis industry. Hopefully, the best solutions will emerge, and businesses will thrive. In the meantime, companies can only wait it out or move on.