California legalized recreational cannabis at the end of 2017 and shops opened in January 2018. The state remains relatively inexperienced and is, therefore, adjusting to balance the supply and demand and counter the still tough black market. The biggest problem remains to be the backlogs on licenses.
However, the state is still
How much recreational cannabis was sold in California in 2018?
California sold $1.2 billion worth of recreational cannabis in 2018. The sales were delivered by the state’s 650 licensed retailers by the end of the year with nearly 200 of those retailers joining in the 4th quarter.
Out of the $1.2 billion, the state earned $82.3 million in sales taxes, apart from the $127.9 million in excise taxes and another $18.1 million in cultivation taxes in 2018. This year, California will impose an additional 15 percent excise tax on all purchase of cannabis and another 15 percent for the cultivation and harvest of cannabis.
California is producing too much weed
Unlike Canada which now faces supply shortage after legalizing recreational cannabis in October 2018, California is facing oversupply. According to a study from Vessel Logistics, California has more than 1,142 acres of cannabis that are legally allowed to produce marijuana.
These farms can produce as much as nine million pounds of marijuana every year. The problem is that the legal market can only consumer 1.8 million to 2.2 million pounds per year. The report said that cutting their production in half would still result in oversupply within this year.
The oversupply problem is heavily rooted in the backlogs of licenses given to businesses. This issue started to take shape within the first three to six months of legalization.
Thousands of temporary licenses set to expire
There were more thousands of cannabis companies that were issued temporary licenses in 2018. Each of these licenses is valid for 120 days with an additional 90 days given for extension.
As of March 14, an analysis of state licensing found that 10,000 permits are due to expire in six months. They can no longer be extended for this year. While the three agencies responsible for issuing permits – California Department of Food and Agriculture (CDFA), Bureau of Cannabis Control (BCC) and Department of Public Health (DPH) – have issued a total of 124 annual licenses as of March 20, it still remains to be disproportionate to the number of businesses that are going to lose their licenses.
State lawmakers are currently debating the SB-67 which would allow extension of temporary permits until the end of 2019 and issue annual permits until July 1, 2020. Until all concerned parties support the legislation, all businesses with temporary permits fear being compelled to shut down.
Worse, these businesses, especially the growers and cultivators, may be compelled to sell products to the black market.
Cannabis black market remains to be strong
In a recent SB-67 meeting, Senator Mike McGuire warned legislators that failure to extend deadlines for licensing issuance will further strengthen the still strong illegal cannabis market.
“We are left with no other alternative. If we do not pass this bill, we are going to see thousands of Californians … falling into the illicit market,” the senator said in one of the hearings held this month
With the present oversupply and without enough legal businesses to buy their produce, farmers are already left with no choice. They have bills to pay and families to feed; it’s no surprise if waiting for permits is the least of their priorities.
(Featured image by karacheo via Shutterstock)
Peruvian Mining Companies Urged to Focus on Redouble ESG Certification Efforts
Experts recently said that the ESG certification of mining companies with operations in Peru will become increasingly important. They also...
Safeguarding Your Business Funds in Periods of Economic Uncertainty
The dust hasn’t yet settled from the 2023 banking crisis, and another closure could very well be right around the...
Audax, a Low-Risk ESG Company According to Morningstar Sustainalytics ESG Rating
In summary, Audax has demonstrated its leadership in sustainability and ESG performance by earning an "ESG Low-Risk Company" rating from...
VR Bank Bamberg-Forchheim Celebrates Seven Successful Crowdfunding Projects
The VR Bank Bamberg-Forchheim eG not only initiates and maintains the online platform, but also acts as a donor. Because...
Alarming Campaign Absenteeism Jeopardizes Bill Regulating Recreational Cannabis in Colombia
The bill regulating recreational cannabis must pass a total of eight debates, divided into first and second rounds: four and...
Markets2 weeks ago
An Interesting Volatile Week for the Stock Markets
Fintech2 days ago
Citi Announced a $6 Million Loan to Sempli for SME financing
Biotech1 week ago
AbolerIS Pharma Closes a Round of €27 Million Led by Caixa Capital
Business4 days ago
Current Woes in Bonds Promise Future Grief for Stocks: Focus on Dow Jones