The wholesale marijuana market will head into 2020 with average market rates on an upswing, especially for bud. At $1,316 average for a pound of bud, Jan. 1, 2020 will mark the fifth straight quarter in which pot rates increased and the first time since April 2018 that the rate has been above $1,000.

The new average market rate, or AMR, for bud marks an almost 32-percent increase from last quarter, which began in October, and a more-than 68-percent increase from January 2019, when a pound of weed on average commanded only $781.

“The AMR is the median market price of each category of unprocessed retail marijuana that is sold or transferred from retail marijuana cultivation facilities to retail marijuana product

manufacturing facilities or retail marijuana stores,” according to a release from the Colorado Department of Revenue. “The January 1 AMR was calculated based on retail marijuana transactions from August 1, 2019 through November 30, 2019 in [the Marijuana Enforcement Division’s] marijuana inventory tracking system. AMR is an estimate of the typical prices of each category of unprocessed retail marijuana that is sold or transferred from marijuana grows to product manufacturers or stores.”

That estimate is then used to levy the mandatory 15-percent excise tax on recreational marijuana, per state statute, explained Renée Grossman, proprietor of High Q dispensaries in Snowmass Village, Carbondale and Silt.

“The AMR is used to determine the excise taxes that the state collects from cultivation,” she said, adding that High Q isn’t particularly impacted by AMRs because “we only buy flower that’s grown in living soil, so that’s always been more expensive, and it’s always been a little more scarce. For my customers, it’s fortunate. We’ve chosen not to pass any of that cost onto our consumers.”

Other dispensary chief executive officers agreed that customers should not expect to see immediate price increases in 2020.

“We’ve been able to hold constant for the locals,” Best Day Ever CEO and founder Michael Gurtman said, noting that his business is particularly sheltered from rising AMRs because the operation grows its own product at its Glenwood Springs farm. “I’m not sure what that’s going to do with edibles in the future. I think the market is … I think it’s going to hold, even though the wholesale went up so much.”

Green Dragon co-CEO Alex Levine, too, said that while if product costs continue to rise at steep trajectories that “at some point, yeah,” customers will eventually feel that at the cash register, but that’s not going to be the reality in the New Year.

“We’re going to eat that cost,” he said of the new AMR. “At Green Dragon, customers shouldn't expect to see an increase in the immediate future.”

While a $1,316 median price for a pound of bud is the highest it’s been in six years, that number is considerably lower than when the commercial sale of marijuana to the general public began Jan. 1, 2014. At that time, the AMR for a pound of bud was $1,876, where it remained throughout the year before actually increasing to a high of $2,007 in January 2015.

By July 2018, the AMR for bud had plummeted to $846 before bottoming at $759 in October that same year. National headlines painted pictures of an oversaturated wholesale market. While not an economist by profession, Grossman noted several possible reasons for the increased 2020 median prices.

“They’re doing a backward look [when the state calculates new rates], so there’s typically a lag. There was a major correction in the market this past fall; there were a few things that contributed to that,” she said. “We heard — and I haven’t confirmed this — that something like 20 percent of the licenses for cultivation did not renew. Because wholesale sells so low, there were a lot of companies that went underwater.”

Additionally, an October early-season freeze in Pueblo, where some of the largest grow operations in the state exist, caused real losses that impacted the market. One wholesaler that owns dozens of acres for outdoor production estimated a $7 million loss — about 20,000 plants — due to subzero temperatures and several inches of snow, according to a Marijuana Business Daily Report.

“There was a huge crop loss in the Pueblo area; they had a couple million dollars of crop loss,” Grossman said. “District 8 went out of business in April. Bonsai had a big recall in September [that impacted] like 144 stores throughout the state.”

An Oct. 14 announcement from the Denver Department of Public Health and Environment alerted that Bonsai Cultivation, one of Colorado’s largest commercial cannabis providers, issued a voluntary recall after plant samples failed mold testing.

“[All of that] resulted in a huge sudden shortage of supply, and wholesale prices rose ... in September,” she said. “It was like overnight.”

Gurtman, too, remembers that upswing.

“The numbers got really high,” he said. “We were able to keep our pricing through that time, but prices have jumped a ton.”

Levine also acknowledges the new numbers serve as a market correction — “maybe too much of an overcorrection” — but he also thinks that as a median price point for a commodity, the AMR for wholesale marijuana products can be skewed because there’s no accounting for differentiations in quality among the categories.

“The highest [bud] I’ve seen recently is $1,800 [per pound], but the lowest is almost free, like $400,” he said. “It’s clearly skewing higher. That’s not a scientific thing, but that’s my take on it.”

Still, in some ways, the correction may signal the market is stabilizing, which would be a relief for business owners throughout the industry.

“Ultimately, it’s good for the industry because you do want things to kind of settle out at a place where everyone can make money — but there is also right now a lot of money coming into the industry, so it’ll be interesting to see how things change in the next couple of years,” Grossman said.

For Grossman’s part, she’s in the process of joining many of her local competitors in insulating her business from the wholesale market altogether.

“If they’re integrated, [the AMR] won’t hurt them as much as people like us who always buy from the wholesale market,” she said. “We’re in the process of building a grow. Not sure [where] yet, but somewhere in Western Colorado.”

Megan Tackett is a reporter for the Aspen Daily News. She can be reached at megan@aspendailynews.com or on Twitter @MeganTackett10.