Oklahoma's Medical Cannabis Industry Faces Major Downturn

Oklahoma's once high-flying medical cannabis industry has experienced a sharp decline in the past three years. Some new insights reported by Tulsa World show the results of consolidation and they’re not pretty.

Adria Berry, director of the Oklahoma Medical Marijuana Authority (OMMA) since May 2021, noted, "I think it's still really painful in the industry right now. I don't know when we're going to see the end of it." Licensees are struggling, borrowing money, and investing capital to stay afloat in the state medical cannabis industry.

Industry Contraction

The OMMA reports a significant reduction in licensed marijuana growers and dispensaries:

• July 2021: 8,247 growers and 2,274 dispensaries.
• July 2023: 3,471 growers and 2,023 dispensaries.

Tax revenues followed a similar trajectory, peaking in FY 2021 but steadily declining since:

• FY 2021: Excise taxes at over $66 million, state and local sales taxes at $82.75 million.
• FY 2024: Excise taxes dropped to $46.5 million (first 11 months), state and local sales taxes to just over $60 million (first 11 months).

Available report on OMMA website shows current licensing information updated to July 1, 2024.

Oversupply And Price Declines

Jeff Henderson of Pyre Farms said the wholesale cost of lower-end marijuana might be as low as $10 to $20 an ounce, whereas $100 per ounce is needed to sustain indoor operations. Henderson added that while the state now enforces regulations better, like the "seed-to-sale" tracking, the oversupply remains from earlier years. "There's just not enough money to go around for everyone to survive."

Oklahoma’s market led to an oversupply of cannabis that pushed prices down. It is not an isolated case. It seems to be the way the cannabis industry arrives at an economic equilibrium, after overflowing the markets. A recent report on Colorado illustrates the same phenomena. The actual decrease in licenses and operators that comes after consolidation become apparent in tax collection.

Read Next: Colorado’s Cannabis Sales Figures Paint Dismal Picture Of A Pioneering Industry, Here’s What Went Wrong

Controlling Illicit Cannabis Competitors

Another aspect of market regulation that broadly affects the industry is competition with the illicit market. This is also a concern for Oklahoma operators. Adria Berry highlighted ongoing efforts to stabilize the market, including potential production limits. The state has made progress in shutting down illegal operations, filing over 3,300 administrative cases since implementing "seed-to-sale" tracking. The Oklahoma Bureau of Narcotics and Dangerous Drugs (OBNDD) has also shut down over 1,000 illegal farms and seized over 700,000 pounds of marijuana since 2021.

Berry says he remains hopeful but acknowledges the need for continued improvement: "We're doing way better than when we started out, but we have a ways to go to become truly a mature, well-regulated market with safe products."

As prices find their place, industry operators will likely be pushed to improve their production systems. While turning a profit in this circumstances can be tricky, eventually some will get there, while others will succumb trying.

• Read Also: Up-To-The-Minute Market Data Drives Profits For Cannabis Retailers & Investors: Here’s How To Get Instant Updates