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Subject:  Re: Handout to our 2019 Investment Conference Date:  11/19/2019  12:11 PM
Author:  DTBoojum Number:  3743 of 3775

We were in Denver last April. We saw cannabis being sold in dispensaries for about $100 out the door, including taxes. Outdoor grown, but supposedly pretty good. That comes out to $3.53 per gram, all in with taxes.


Ok, here's a question I can't answer, but maybe you and your son who also has some inside knowledge of the industry can help me with: Why is it so expensive to grow marijuana?

I referenced an article a few days ago that said prices should come down to $1 a gram, and I thought there were some good arguments there. But even that price is very high compared to other legal products, like herbs used for cooking.

I thought of comparing something like basil, for instance. If anything, basil is a plant that is more fragile than marijuana, as anyone who has grown both at home knows. It is a high value product, often grown in greenhouses, and like marijuana, most of it is dried. You can buy it retail on Amazno for about $6 for a 3 oz. bottle, or $2/ounce, or 50 times cheaper than the cheap marijuana in your Denver dispensary. Perhaps that's not a good comparison: basil leaves are mostly what is used, and for marijuana, the high value part is the flowers.

So take some flower like calendula, which tastes a bit like saffron. You can buy a pound for $32, so it's also about $2 an ounce, still 50 times less than marijuana. Saffron itself is notoriously expensive (something referred to as 'red gold'). You can buy a pound for as little as $500 (a little over $1 a gram), but saffron doesn't just come from flowers, it comes from the 2-3 tiny stigmata on the crocus stativus flower, which is apparently very difficult to grow and to harvest. It takes about 150 of these crocus flowers (450 stigmata) to get one gram, and the tiny stigmata have to be harvested by hand. Marijuana should be relatively easy to grow and harvest, and yet it still costs almost as much as saffron or more.

I can understand that there are higher costs when you're making an illegal product, like the threat of raids, the need maybe for protection money, the higher markup because of the risk, etc. But once marijuana is legal, as we both expect, what is to prevent marijuana wholesale prices coming down by another order of magnitude? Any ideas?

dtb
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