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California wholesale cannabis prices will initially increase with the implementation of Proposition 64 (the Adult Use of Marijuana Act), presuming its passage on election day, November 8, predicts Cannabis Benchmarks, a division of New Leaf Data Services, LLC.

California - Jonathan Rubin, Cannabis Benchmarks: "Quote" [LinkedIn]
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Jonathan Rubin, Cannabis Benchmarks:
“It is likely that there will be an increase in wholesale prices in the short run”

The prediction, analysis and rationale are contained in the firm’s new white paper, “After the Gold Rush: California, Cannabis & the Election.”

AUMA is a lukewarm measure legalizes cannabis use for adults, enacts a new series of taxes and reduces the penalties for common marijuana “crimes.” The measure builds upon the Medical Cannabis Regulation and Safety Act (MCRSA), which became law in 2015. MCRSA defined a set of rules covering licensing, tracking, taxing and reporting of cannabis cultivation and sales statewide.

Cannabis Benchmarks predicts wholesale prices will increase in the short-term after implementation of MCRSA and – presuming passage – AUMA, based on a series of scenarios evidenced earlier in Washington, Colorado and Oregon. In those states, markets were “transitioned” and expanded (well, forced, in Washington’s case), from lightly regulated medicinal usage to parallel medical and recreational markets with stricter oversight.

For example, when Oregon began its early recreational sales program on Oct. 1, 2015, wholesale cannabis prices increased from $1,737 to $1,941 a pound (from August to October 2015) as wholesale buying activity increased. At that time, prices in Oregon rose above the national average. In October 2016, wholesale prices in Oregon again increased as rules on product testing went into effect. Testing createda bottleneck due to capacity limitations at accredited and licensed laboratories.

From August to October 2016, wholesale prices in Oregon rose more than 12 percent, from $1,491 to $1,677 per pound, according to Cannabis Benchmarks®.

“What our data and analysis reveal is that as MCRSA and AUMA are implemented, it is likely that there will be an increase in wholesale prices in the short run,” said Jonathan Rubin, CEO of Cannabis Benchmarks. “Longer term, prices will stabilize as market forces reach equilibrium. This will afford existing cultivators and early entrants the opportunity to optimize their operations and secure their competitive position.”

The complete report is available for free download at California, Cannabis & The Election.

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