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Rising Supply Forces Marijuana Prices Down

The expansion of growing operations and open competition among firms is driving down the price of cannabis.

The Economist reports falling marijuana prices as a result of increasing supply, with a pound dropping from $2000 to $1300 in Colorado. The factors are varied -- growing operations have expanded following legalization, markets operate more openly, and the risk inherent to criminal activity is no longer being factored into the price. Due to these predictable factors, many observers have believed it inevitable that costs would fall. While this does mean that the amount of revenue per pound is lower, it is also a sign of the increasing legitimacy of the product -- marijuana is beginning to trend downwards to being priced more like a regular commodity rather than an illegal drug. Furthermore, lower prices are probably a good sign for companies further along the supply chain that purchase their marijuana from growing operations.

In the same article, The Economist reports that despite the changes in the legal environment leading to expanded production, federal regulations have driven some firms to list in Canada (even if their primary focus is in American production). That means these changes in the market may be less apparent to some American investors who haven't looked north.

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