Cannabis Supply Issues Loom Over New York

With adult use now legal in New York and New Jersey, local weed providers need to step up to the plate or risk not being able to meet the wave of demand.

Planning is in full swing on both sides of the New York/New Jersey border as local cannabis suppliers race to get their facilities in order to meet what is expected to be a "tidal wave" of demand for recreational weed in the coming years.

In New York, an abandoned state prison complex is about to be converted into a farming facility whilst, not 40 miles away across the New Jersey border, Big Pharma company Merck is going to turn an old industrial complex into a cannabis growing super center.

While this buzz of activity seems normal after such law changes as entrepreneurs and pharma companies jump on the weed bandwagon, a deeper look reveals that these states are already struggling to keep up with demands for medicinal marijuana, without adding recreational use into the equation. Existing and new providers will have a huge job ahead of them to meet all local needs in the coming years.

The New York Metropolitan area alone is the most densely populated area in the U.S.A with over 20 million residents, equating to around 6% of the entire population. A successful recreational and medical weed market could inject as much as 4.5 billion dollars into the local economy over the next 2 years. That is, if demands can be met.

Currently, with its medical cannabis sector restricted to products such as oils and tinctures (whole, dried flower is not allowed under today's scheme), only around 150,000 patients from a possible 13.5 million are registered meaning demand has so far been modest. This is expected to change dramatically with the legalization of recreational use with experts anticipating a boom in requests and sales.

Right next door, New Jersey has long exhibited a product shortfall, highlighted in the past by lobbyists and politicians who have stated that patients' need for dried cannabis flower and oil products has been a struggle to meet. This issue has been exacerbated more so since the onset of the pandemic and demand rose exponentially across the country.

The encouraging news is that since last March, supply of flower and oil products has doubled in New Jersey. Whilst alleviating the strain somewhat, dispensary owners say that they still often sell out of popular strains and the President of the New Jersey Cannabis Trade Association has agreed that there is very little stock to go around.

Each State for Themselves

Not all states are in this predicament with more established markets, such as those in Oregon, actually trying to manage an oversupply. Unfortunately, they are unable to help states like New Jersey by onselling excess product due to what is still largely seen as one of the biggest issues facing the growing industry.

Federal law still deems cannabis illegal within the U.S.A, so transportation over state lines of any weed product is a federal crime. All products sold within a state must be cultivated and manufactured there or imported from overseas under strict licensing agreements.

These federal laws are often seen as the main issue for individual states starting out in the medical or personal marijuana industry slowly. Farming is a process that takes time and products need to be refined and perfected before hitting the shelves.

Home farming is not an option in New Jersey as legislation does not allow it and in New York, a person can only grow up to 6 plants for personal use.

Green Thumb Industries is one of the many Multi-State Operators (MSO) currently working out of both New York and New Jersey, attempting to ride the wave of the growing industry in both states. Ben Kovler, founder and chief executive has, in the past, expressed that it would be foolish of a company to not be investing in producing their own product to meet shortfalls.

Green Thumb is currently awaiting final approval to move into the former men's prison in Warwick NY, which is fast becoming a cannabis hub for the area.

Why 'hub', you may ask? Warwick's former correctional facility is already home to competitors of Green Thumb Industries as Citiva has already moved in and UrbanXtracts have set up a cannabis testing lab and CBD extraction facility. The irony of using the prison site, which was most successful during the war on drugs, has not passed Warwick's residents by.

Another avenue New York is looking into for help is their booming industrial hemp industry. If established farmers there wish to expand into medicine, they may help with the upcoming wave of demand as CBD oil can be extracted from hemp (although THC is not as prevalant). Established farms, lower running costs, and environmental impacts could mean this is a viable option for some farmers.

Building Legislation to Last

As businesses move forward, both states will continue to review industry regulations in the coming months. Social justice is expected to frame all legislation in New York and New Jersey relating to the cannabis industry as the states attempt to ensure demographics affected the most by past criminal justice inequality are able to benefit from the influx of tax dollars.

Balance is important for the industry as, whilst large companies should absolutely be able to jump-start something for themselves, a monopoly should never become the case and new entrants into the market are important for diversity.

There are around 10 licences for medical marijuana companies active in New York currently but there is a crucial need for newcomers as active providers struggle to keep up with demand. Once personal use takes off, more vendors will be essential to help keep up supply.

Whilst New Jersey has doubled output for medicine this year, expansion is also being held up in the state with technical glitches, court appeals, and the fact that the 12 current providers have not expended at the rate that some would have liked.

This has naturally lead to shortcomings in stock, lines at stores (exacerbated by Covid-19 regulations), buying caps for customers, and a dearth of particular strains that patients find work for them best.

Now, before legal recreational adult use is able to take off, dispensaries are going to have to prove they can provide enough product for medical customers as well as non-medical ones and some don't think that dispensaries, no matter that the number of those has tripled in recent times, can manage it.

There is a new urgency to kick start production in the hopes that, not only will supply be up to meeting demand, but also that a larger influx of products into the market (namely flower) will drop overall prices. In New Jersey, the shortage means that patients are paying between $350 and $450 per ounce for flower, which is far higher than in other states that have more mature markets.

Good news does seem to be on the way though, with reports that good yields are beginning to be harvested across these two states and some dispensaries are starting to lift purchase caps on flower for their customers.

Grow facilities, now aware of the larger demand, have plants in the ground in larger quantities and the hope is, in the long run, patients will have easier access to strains that work for them, and new recreational customers will no longer have to meet dealers in back alleys and instead talk to a registered professional in a dispensary.

Hopefully, existing and new suppliers can keep up with the growing demand for easily available and quality weed. Only time will be able to tell us for sure.

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Gabrielle Gross
Gabrielle Gross

Gabrielle is based in Sydney and has an extensive history in broadcast media. An interest in the growth of local cannabis industries has led to her seeking further education and involvement in that sector where possible.