Plunging pot prices spawn growing efficiencies

Plunging pot prices spawn growing efficiencies

The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge and an opportunity for companies that can help cut production costs.

Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories. In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market. Supply is surging as growers expand and install the latest agricultural technology.

“Anybody that is investing in this sector or starting a business in this sector needs to be doing so with the understanding that the price of cannabis is going to drop precipitously,” said Troy Dayton, chief executive officer of Oakland, California based Arcview Group, a marijuana investor consortium.

The focus on efficiency can cut production costs for some indoor growers to less than $300 a pound from more than $1,000, said J. Chandler, vice president at Cultivation Technologies in Boulder, Colo.

“If you want to compete on a price game, you have to use versions of our technology to do cheap jerseys it,” Chandler said. “Everybody is putting in irrigation systems, so that’s good for us.”

Cultivation Technologies also sells high efficiency lights from Canada’s PL Light Systems, which compete with Gavita, a Dutch company purchased this year by Scotts Miracle Gro Co. cannabis cultivators.

That means growers in cloudy coastal Oregon or frigid Maine must use technology to create the warm, sunny conditions favored by pot plants, and they need to do it as efficiently as possible.

The drive toward efficiency isn’t cheap. Brian Lade, owner of Smokey Point Productions in Arlington, Wash., started growing marijuana in a garage at age 17.

He endured police raids and a few days in jail before the state voters legalized pot in 2012. Now he’s raised $25 million to expand his 15,000 square foot warehouse operation to 135,000 square feet.

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