Oklahoma, Oregon and California have the most potential to gain from an increase in interstate trade that will result from de-scheduling federal marijuana, says a University of Nevada Las Vegas white paper released this month. According to the analysis, the states with the lowest large-scale production cost and highest economic potential per capita are in a stronger position than other state-legal marijuana markets.
If cannabis is ever fully removed from the federally controlled substance list, the paper by Californian economist Dr. Robin Goldstein of University of California Davis’ Cannabis Economics Group will be based on a simple principle: the companies that can produce cannabis the most cheaply are the ones that could dominate the nation’s cannabis industry.
Goldstein’s report “Where Will Weed win?” titled, “What Locations Are Most Likely to Win in a National Price Competition?” stated that the locations where marijuana can be grown most easily and most inexpensively are most likely winners.
Price competition will immediately be the first and most significant effect of interstate trade. Goldstein writes that the initial contrast between domestic and imported pricing might shock some states. When a legal Illinois grower, who sells weed in Illinois at $1,500 a pound to Illinois retailers, is competing with Californian weed that has 30% THC for $150 a pound in ‘gated markets,’ the Illinois legal producer feels immediate pressure to protect his business by lobbying state officials to adopt protectionist measures to prevent out-of-state competition.
Goldstein analyzed the costs of production in every state with a functional marijuana market and ranked the top 25 in order as far as which he believes are most likely to benefit from full federal cannabis legalization, with Oklahoma – perhaps surprisingly to some – in the top spot, followed by Oregon at number two, and California picking up the bronze medal.
Goldstein stated that Oklahoma is “America’s most effective legal marijuana system,” and it has “vast potential” compared with New York which was ranked number 24.
Goldstein said that low-end wholesale costs are dropping 40% annually and could continue to fall until they reach the lowest prices in America. Goldstein wrote that the success of “no-nonsense” small-government approaches to weed control in Great Plains states such as (Oklahoma) and Montana has left New Yorkers #24 scratching their heads, and they are planning vacations at dude ranches.
Goldstein contrasted this by writing that New York was “a lesson on how not to legitimize”.
Retailers have finally started to appear in cities. However, they are only allowed to sell licensed weed. Goldstein writes that illegal smoke shops sell imported marijuana.
Alaska was the state that ranked #25 in Goldstein’s ranking. Goldstein noted “dim prospects of interstate exports.”
California has the lowest wholesale price, $150 per pound. Illinois’ lowest price in the same time period, by comparison, is $1,555 – more than 10 times higher,” Goldstein also noted in his analysis. Michigan had the lowest wholesale cannabis prices, according to Goldstein.
The economist did not only analyze wholesale prices; he looked at the retail prices of each state. Oregon topped the list, followed by Oklahoma, and Colorado.
The ranking was based on the per capita income of each state, and this is what gave Oklahoma, with its 4 million people, a higher weight than California, with 39 million. This, coupled with low production costs, other expenses, etc., also played a role.
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