Finally lawmakers are effectively tackling Oregon’s predicament—an overwhelming and conspicuous oversupply of cannabis. The state’s cannabis industry is dealing with far more cannabis product than it can sell. State officials have wrestled with the problem for years now, introducing measures that could potentially help solve the riddle of the state’s supply and demand imbalance. A new bill was signed to allow Oregon Liquor Control Commission (OLCC) to put a temporary hold on cultivation licenses until the market can catch up with the overwhelming abundance of cannabis.
Oregon’s cannabis surplus is evident in the drop of prices that consumers see at the dispensary counter. While $5 grams may sound appealing and instantly gratifying to consumers—sadly, it’s a market that cannot sustain itself. The profusion of production licenses creates too much competition, which in turn forces retail costs down. And production facilities cannot reasonably make a profit with cannabis prices that low.
The scope of the oversupply problem is staggering. Earlier this year, the OLCC released a study that estimated the state is sitting on more than a six years’ supply of cannabis. Because the federal government does not allow interstate cannabis commerce, oversupply is a serious issue, especially with a surplus of cannabis as high as Oregon’s.
“The harsh reality is we have too much product on the market.”
One of the approaches to address the oversupply issue is a preemptive measure to pave the way for interstate cannabis commerce. This would theoretically solve the problem by allowing cultivators to sell to buyers in other states instead of continuing to lower prices. Senate Bill 582 would accomplish just that. The bill was sponsored by Sen. James Manning Jr., Rep. Diego Hernandez, Rep. Alissa Keny-Guyer and Rep. Carl Wilson. SB-582 passed the Oregon Senate on May 15 and passed the Oregon House of Representatives on June 11, and it awaits the governor’s signature as of mid-June. But the problem with SB-582 is that the bill is virtually ineffective until the federal government also allows interstate cannabis sales, and it doesn’t solve anything immediately.
The other approach is to simply put a hold on new production licenses in order to slow the cultivation and manufacturing of unneeded additional cannabis and cannabis products. Senate Bill 218 authorizes the OLCC to refuse to issue production licenses for an undisclosed period of time, or “for an amount of time that the commission determines necessary.” SB-218 was passed in the Oregon Senate on April 29 and re-passed on June 6. It passed the Oregon House on May 30. Then finally on June 17, Gov. Kate Brown signed the bill. “The harsh reality is we have too much product on the market,” Gov. Brown said at a press conference before signing the bill. The bill affects production license applicants who turned in their applications on or before June 15. While the oversupply problem isn’t fixed yet, it won’t get any worse for the time being.
The changes aren’t permanent, and the hold is designed to allow the market to stabilize. By Dec. 31, the commission will submit a report after studying the effects of the bill on the cannabis industry. The bill sunsets on Jan. 22, 2022, and new production licenses may be issued after that date or when the OLCC deems it necessary.