Michigan Cannabis Industry

Thanks to Mlive for this:

LANSING, MI — A rapidly growing number of marijuana plants are reaching toward high-wattage grow lights across Michigan.

This has resulted in slowly decreasing retail prices for both medical and recreational marijuana. The price reductions come following a spike after the opening of the first recreational marijuana shops in December.

Nearly 8,600 pounds were sold between the two markets in May 2020 alone, versus about 3,000 in January, according to Marijuana Regulatory Agency monthly reporting.

“I think (prices) will continue to drop just in the short term because we do see increases in production on the adult-use side,” Marijuana Regulatory Agency Director Andrew Briso told MLive in June. ” … Where it settles long term, I couldn’t really say what is going to be the price two years from now (or) five years from now when supply is adequate.

“What we need to be cautious about and be wary of is what happened in Oregon … where the scale shifted and there was oversupply, because then the price kind of bottoms out.”

While the recreational market continues to grow rapidly, Brisbo said the majority of the recreational product continues to come from marijuana originally planted under medical marijuana licenses, which are more abundant.

Michigan allows companies to transfer medical marijuana product for recreational sales after it’s been in inventory for 30 days.

As of July 13, Michigan’s marijuana industry — including medical and recreational businesses — was licensed to grow 511,500 plants, a figure that accounts for a quickly escalating number of grow licenses in both markets.

Based on a low-end estimate of a quarter pound harvested per plant with three grow cycles per year, that equates to a potential annual production of approaching 400,000 pounds of usable marijuana. If that was sold for an average of $410 per ounce, the average retail price for recreational marijuana in May, that could generate nearly $2.6 billion in total sales.

However, many plants are destroyed for a variety of reasons, such as not meeting strict state limits for yeast and mold or chemical, before they make it to harvest. Nearly 1.6 million plants have been destroyed since December, according to Marijuana Regulatory Agency data.

The total plant count allowed under a license doesn’t include young plants that are less than eight inches tall or eight inches wide, under the new industry rules put in place last month.

A March 2020 report released by Michigan State University economists William Knudson and Steven Miller estimates Michigan’s recreational “adult-use” industry alone in several years will eclipse $3 billion in sales annually with a total economic impact of $7.85 billion and the creation of 23,700 jobs in the state.

As of June 1, the total licensed plant figure was 426,000, representing a 20% increase in less than two months, based on monthly statistical reports published by the Marijuana Regulatory Agency and analysis of licenses listed on the state’s website.

The bulk of the licensed plants, 336,500, are licensed to be grown as medical marijuana. The remaining 175,000 plants are licensed in the recreational market, which launched on Dec. 1.

Grow licenses breakdown:

  • There are seven recreational class B grower licenses able to grow a total of 7,000 plants. Each license allows for 1,000 plants.
  • There are 78 active recreational class C grower licenses allowing for a total of 156,000 plants. Each license allows for 2,000 plants.
  • There are six excess recreational marijuana grower licenses allowing for a total of 12,000 plants. Each licensed allows for 2,000 plants.
  • There are 39 medical class A grower licenses allowing for a total of 19,500 plants. Each license allows for 500 plants.
  • There are five medical class B grower licenses able to grow a total of 5,000 plants. Each license allows for 1,000 plants.
  • There are 208 active recreational class C grower licenses allowing for a total of 312,000 plants. Each license allows for 1,500 plants.

“We can grow a pretty hefty amount of plants — about 16,000 is what we’re licensed for — and we do use most of that licensing,” said Evart-based Lume Cannabis Director of Cultivation Kevin Kuethe. ” … Depending on your cultivation style, one plant can mean a quarter of a pound of finished product or once plant can mean … 10 pounds of finished product. It just depends …

“Our cultivation style in this commercial setting, we tend to run higher volume of plants and vegetate them for a shorter period of time just because in my professional experience it’s been the best return for quality and yield per square foot that we can get … “

Each plant is harvested when it reaches between 4-6 feet tall, said Kuethe, who’s operated commercial grow facilities in Arizona, Oregon, California and Nevada before relocating to rural central Michigan.

The grow facility has thousands, “if not tens of thousands” more young marijuana plants that don’t contribute toward the facility’s total grow limit, Kuethe said.

It’s not uncommon for large marijuana companies to possess numerous grow licenses in order to increase production capacity. About 90 companies account for the 208 class C medical licenses that had been issued as of Monday.

For example: Diamondale-based Green Peak Innovations has 13 class C medical licenses; Green Standard Cultivation in Bangor holds a dozen and LivWell Enlightened Health of Warren has 11.

“We have growers where they just have one or two (licenses) and they’re sort of a small business but they’re fully vertically integrated and just grow for themselves,” Brisbo said. “ … And then we have growers that have multiple licenses … I would say more than five, whose essential focus is to be a market supplier across the board and establish brands that they provide to every store.

” … I think there’s still room in the market for various models of all sizes.”

Lume Cannabis is one of the vertically integrated, self-sustaining companies. It holds 10 recreational licenses to operate retail and medical marijuana stores across the state, as well as a processing license to convert harvested marijuana into other products.

The company has plans to at quadruple its grow capacity over then next two years, said Kuethe. “We expect to do well over 10,000 pounds (of retail-ready marijuana) in 2020.”

“I wouldn’t be shocked if we have 50 licenses or so … ” Kuethe said. “It seems to me like (the Marijuana Regulatory Agency) want you to have a license and the more they can give, the more they’ll get paid for them since there’s an annual fee and the taxes associated.”

The state charges $40,000 for each initial class C or excess grow license it issues.

Annual renewal fees fluctuate from $30,000 to $50,000 per license based on total sales.

The finished products won’t likely be sold anywhere except within the Lume Cannabis chain of stores.

I don’t think we’ll be able to keep up with (demand at) our own stores,” Kuethe said. ” … I think the goal is to just keep up with what we can do now and if we get to that point (when we have surplus) we’ll be able to provide flower to the market.”

The recreational marijuana market hit a milestone in June when weekly sales for the first time surpassed medical sales.

Based on the current pace of recreational marijuana growth, an MSU analysis of the industry projects tax revenue to reach $495.7 million, derived from a 10% excise and 6% sales tax, within “several years.”

Michigan Marijuana Regulatory Agency (MRA)

https://www.michigan.gov/mra/

 

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