Tuesday, May 18, 2010

Bad for the growers, great for the customers. Actually, not that bad for the growers, in the long run.

Marijuana growers in California (the only state discussing legislation to make pot completely legal for any purpose, medical or recreational) are getting worried. Why? Because, with legalization on the horizon, market prices are falling. And the pot growers don't seem to understand why, or that they shouldn't really be worried after all.

Let me explain: the quoted price of a pound of pot ($5,000) is artificially inflated to cover the risk involved for the grower and the seller--if they're caught and convicted, they go to jail.

When marijuana is legalized, the risk goes away. Prices will fall to more reasonable levels. I understand how that can worry the growers, but it just goes to prove that they're either smoking their product (and profits), or haven't had enough education to understand supply and demand: as the price goes down, demand goes up. As the product is decriminalized, those who wanted to try it, but didn't want to break the law are going to start trying it, pushing demand up further.

In the end, the pot growers are likely going to see far higher income, despite lower profit margin, because of much higher volume sold.

2 comments:

  1. Good analysis.......

    Back in the day, my formula was:

    Buy the POT at $800 a pound.

    Allocate an amount for personal use.

    Sell at a price that returns $1600.

    Simple business.

    (The statue of limitations to bust me, has run out....)

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  2. Thanks. I had a friend that grew his own, and would let his friends have some for free if they'd smoke with him (since he didn't like smoking alone). He was the only pot dealer in town, and the two town cops didn't bother him because he turned in anyone going into the harder stuff (either sales or use) because "that shit's dangerous."

    Best thing about legalization is that the growers can start using modern large-scale farming techniques to maximize their profits, and quality and potency will likely become a bit more uniform for buyers.

    Honestly, I don't see any downsides to legalization. The whole "but the junkies will just vegetate in their parents' basement" argument won't apply any more than it already does for those who use irresponsibly. Most of the people I know don't smoke irresponsibly, any more than those I'm friends with *drink* irresponsibly. There's always a few idiots, and legislating morality doesn't do anything to prevent their idiocy.

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