While states throughout the U.S. continue to embrace the new legal wave of cannabis, it doesn’t eclipse the strife within the industry. Over the past few years, the industry has faced issues around oversupply, falling prices, stringent regulations and distribution problems, among others, which often fall especially heavy on cultivators.
Now, new research findings show exactly how these employees are faring in the current climate. According to the third edition of the U.S. Cannabis Cultivator survey from Wells Fargo, a majority of growers have a grim outlook on the current state of the cannabis market, as reported by Green Market Report.
Majority of Cultivators Feel Negatively About State of Industry
The survey, including responses from more than 400 growers across eight U.S. states, found that 58% of growers said they feel “bad” or “terrible,” in reference to the current cannabis market. Specifically, 34% answered that “I feel terrible. Things look awful,” while 24% said “I feel bad. Things don’t look good.”
Additionally, 31% of respondents said they feel “okay,” while only 9% of cultivators said they feel “good” and 2% said they feel “great” about the current state of the market.
The survey also looked at responses by state, finding that California (which also has the highest number of growers) felt most negative about the current market, with 66% of cultivators expressing a “bad” or “terrible” outlook on the market. Most of the negativity was because of falling wholesale prices, with 34% of respondents citing this as their main source of stress, followed by restrictive regulations at 29% and lack of distribution avenues at 10%.
As the largest cannabis market in the world, California saw a dip in cannabis sales in 2022, the first since adult-use sales launched in 2018. The loss is likely due to a decreased price per pound of cannabis across the state.
Falling Prices a Main Obstacle for All Cultivators
California growers weren’t the only group to express concerns about falling prices.
Approximately 87% of cultivators said they are selling wholesale flower for $1,250 per pound or less, up from 83% and 74% at the same level in fall and spring 2022, respectively. Perhaps even more shocking, a majority of cultivators also reported selling flower at $750 per pound or less, below the average breakeven price of $800 per pound. This ultimately makes profitability a challenge for many growers.
This assertion reflects a recent survey from Whitney Economics, which found that only 24.4% of cannabis operators in the U.S. are profitable. The consulting and research firm also signified that there is little relief in sight for operators, forecasting seven quarters of slower-than-normal growth in the future. Also nodding to some of the concerns of cultivators, the survey noted that the success of cannabis businesses is largely dependent upon the regulatory structure of the states in which they are operating, among other factors that may be beyond their control.
In It For the Long Haul
While the current outlook may seem bleak, cultivators widely indicated that they wouldn’t be leaving the industry anytime soon. The survey found that only 19% of growers planned to partially or completely exit from the industry, a decrease from 22% and 27% in fall and spring 2022, respectively.
This persistence could prove problematic, potentially exasperating oversupply issues and causing continued price drops. The survey found that 42% of cultivators plan to increase cultivation over the next 12 months.
However, the report also shows that growers are investing in nutrients (65%) and soil (45%), essentially looking to optimize production while keeping costs low. To hammer in that point, few cultivators planned to drop cash on high-cost items like lights (32%), irrigation systems (30%) and extraction equipment (16%).