Oversupply, high taxes forces some legal growers in California to let their bud turn bad: Report

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Oversupply is not a new issue in the cannabis industry.

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In 2019, when there was reportedly a shortage of legally grown cannabis in Canada, industry experts predicted that would soon turn to a glut , a situation that had previously unfolded in some legal states. Still, Canadian licensed producers rushed to acquire massive facilities with huge yield potential, even without any demonstrated demand for their products. Then the predictions came true .

And though California is now five years into legalization, Forbes reports some growers have had to let their bud turn bad this year due to high taxes and a flood of suppliers.

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Citing figures from the California Department of Taxation and Fee Administration, Forbes reports that California growers were set to grow more than 1 million pounds (453,592 kg’s) of cannabis this year.

That’s a huge amount of pot, but it’s not just the competition that California growers need to worry about. According to Forbes , taxes are due in California as soon as cannabis products enter the supply chain. This year, growers are charged US$9.65 per ounce, which adds up to more than US$150 ($191) a pound. That would be okay if pounds were still fetching US$1,600 ($2,047) or more but with oversupply reducing pot prices to as little as US$300 ($383) a pound, it’s now a problem.

That’s been the case this year for Mendocino County grower Blaire Auclair, who grows her cannabis under the ‘Radical Herbs’ brand.

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Auclair told CBS San Fransico earlier this month that overproduction by large farms has led to her product selling for about US$300 a pound and almost half her revenue is now going to taxes.

“There’s county taxes, there’s city taxes, it’s like, every chance somebody gets and it’s not a little bit — it’s a lot,” she said. Once all the costs for labour are factored in, harvesting a $300 pound just isn’t worth it for some growers.

According to Katz, the oversupply, high taxes and extensive regulations are simply too much for every grower to navigate.

“All of these things are combining to create what’s really an existential crisis and another in a series of extinction events for these small cannabis operators,” she said.

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