The Struggle Between Supply and Demand in a Highly Regulated Industry
After recreational use of marijuana was legalized in California last year, cultivators from around the state have increased and expanded rapidly to gain from this highly profitable industry. As the industry matures, more producers enter the market, from small scale to fully industrialized levels.
Although the demand for marijuana in California is high, it has not been high enough to meet the increasing supply. According to the LA Times, the state of California is currently producing eight times the amount of marijuana that the state would use in a year. Other sources like the New York Times put this number at about three times the amount.
The issue here is finding a legal way to use the excess supply. Although the law has been passed in California for recreational use, recreational marijuana can not be purchased legally until January 1, 2018. It is also illegal to export the marijuana to other states, which forces suppliers to turn to the black market.
In contrast to California’s oversupply of marijuana, the state of Nevada is facing the opposite issue. After just three weeks of being legal recreationally, the 47 dispensaries have almost sold out completely. After realizing the large potential for taxable income and demand for the industry, Nevada’s governor has declared the issue a state of emergency. The shortage is primarily caused by a lack of licensed suppliers in the state. Dispensaries in Nevada must purchase their supply from a state licensed supplier.
With tight regulation surrounding the industry, matching supply and demand can be very difficult to achieve. Lawmakers and Businesses must be able to work together in order to reach the full potential of this industry.