Is Cannabis Price Spike Coming?

Marijuana could get more expensive after a series of massive fires in Northern California wiped out as much as a year’s supply for some industry growers.

The fires scorched dozens of the region’s marijuana farms, including those in Sonoma County and in Mendocino County, — part of the Emerald Triangle. The number of farms burned is expected to “increase significantly” as evacuation orders are lifted and growers return to their homes. The Emerald Triangle produces the majority of the United States’ marijuana, an estimated 60%, and its obliteration means serious repercussions for both the legal and black markets fueled by the area’s production.

The crop harvested later this month would have supplied California dispensaries through the end of 2018. The situation could create a shortage of marijuana in the state just months ahead of California’s launch of a recreational marijuana market. Tamar Maritz, regional director for California at marijuana data insights company BDS Analytics, said Californians could expect to see prices rise as much as 10 to 20% in the aftermath of the fires

BDS Analytics found that in Colorado, Washington, and Oregon, a “major disruption in the supply chain” created price increases in a magnitude of 10% to 20%, according to Maritz. The breakdowns varied from regulatory changes that shorted supply, to the debut of a recreational market. Those states saw prices return to normal one to three months after the event.

The going rate nationwide for legal, non-medical marijuana is about $11 per gram or $34 for an eighth of an ounce, according to MJCharts. Using case studies from states with fully legalized marijuana, California could see the price of pot increase roughly $2 more per gram or $7 more per eighth of an ounce after the price hikes set in.

The fires came at one of the worst times for the marijuana industry. Harvest takes place between the months of September and November, and most grows provide crop for the entire year.

California produces over half of the marijuana consumed in the US. According to county surveys, there are between 3,000 and 9,000 marijuana farms in Sonoma County, where the fires hit hard. The number of farms in Mendocino County, where the illicit market thrives, is unknown.

Both the California Cannabis Industry Association and the California Growers Association reported “several dozen” members that lost their farms in the blazes.

Smoke-exposed crops are more vulnerable to disease, which could lead to unhealthy levels of mold, mildew, and fungus. The marijuana might also smell like fire, which causes it to lose value if it’s meant to smell like “lemon haze” or “blueberry kush,” according to the San Francisco Chronicle.

“High-intensity fires” like the current ones in California, tend to decrease site productivity.” It’s unclear how long these changes on the once-fertile soil will last,” says research by Northern Arizona University.

Still, the fires reached only a small section of the Emerald Triangle, which also includes Humboldt County and Trinity County. Local dispensaries that source their inventory from the counties affected by the fires are more likely to experience higher prices.

Marijuana extraction companies, which process marijuana plant material for oils and concentrates, could also have trouble getting their products to market, according to Forbes.

Maritz, of BDS Analytics, added that the full extent of the damage will be unclear until farmers collect what’s left of their grow and send samples to marijuana testing facilities.