Feature Image

Will California Have a Surplus or Shortage of Marijuana When Adult Use Sales Begin?

California is taking steps to prevent a marijuana shortfall when its recreational marijuana program launches next year, but at least one industry leader believes that growers are producing too much.

California is making an effort to prevent a marijuana product shortage when the state’s recreational marijuana market comes on line January 2. Lori Ajax, director of the California Bureau of Medical Cannabis, has said her agency plans to provide temporary, four-month licenses to some marijuana growers, testing labs, and cannabis distributors to ensure that supply will be able to meet demand for the state’s upcoming $1.6 billion recreational marijuana market.

California made the decision to issue more licenses after Nevada’s recent launch of its recreational program, in which the state nearly ran out of marijuana after less than two weeks. The state had an estimated $3 million in sales in its program’s first three days.

Ajax’s goal is to issue enough licenses “so we don’t have a break in the supply chain.” Licensing to grow, test, distribute and sell marijuana for recreational use in California is required by law to begin January 2, after 56 percent of state voters approved the Adult Use of Marijuana Act last November.

One California marijuana industry leader, however, believes that state growers are producing eight times the marijuana needed. Hezekiah Allen, executive director of the California Growers’ Association, is concerned that growers, who are not allowed under federal law to send cannabis to other states, will be encouraged to sell their product illegally.

“We are producing too much,” Allen told the Sacramento Press Club recently at a panel discussion. He said that state-licensed growers “are going to have to scale back. We are on a painful downsizing curve.”

Allen believes marijuana growers may even opt out of the industry, and others won’t apply for state permits.

Recreational and Medical Marijuana

Also on the panel was Ajax and Joseph Devlin, chief of Cannabis policy and Enforcement for City of Sacramento. Devlin said he estimates California production is five times what state consumption will be. While Ajax agreed that some cultivators might need to scale back, she reiterated her agency’s need to make sure that supply is adequate.

“For right now, our goal is to get folks into the regulated market, as many as possible,” Ajax said. She then added, “There are some people who will never come into the regulated market,” referring those that will face enforcement actions for growing without the proper license.

California is also currently organizing its new state Department of Tax and Fee Administration, which will be responsible for collecting marijuana cultivation and excise taxes. Richard Parrott, a manager for the agency, said he expects to be ready when sales begin.

“We believe we are on track to meet our implementation dates,” Parrott said.

Under California’s law, adults ages 21 and over are legally allowed to possess and transport up to an ounce of marijuana and cultivate up to six cannabis plants for personal use.

California is one of eight U.S. states to legalize recreational marijuana. Once its market is online, it’s expected to be by far the largest adult use industry in the nation. Marijuana production in California, despite being illegal at the moment, is already worth more money than the state’s next five leading crops combined.

Keep up with the growing cannabis market by regularly visiting our news page.