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Marijuana

Legalizing pot: The billion dollar repercussions Add to ...

On Tuesday, California will vote on Proposition 19, an initiative to legalize, tax and regulate marijuana. If passed, it would allow people 21 years old or older to possess, cultivate or transport marijuana for personal recreational use.

Legalized marijuana in California would have a profound impact across North America, with prices plummeting and jobs lost. In British Columbia alone, experts say the move would wipe out about $2-billion in exports and 20,000 jobs.

But will Proposition 19 pass? Early polling found significant support for the initiative but, as election day draws nearer, the "no" side has been gaining traction. A USC/Los Angeles Times poll in the third week of October found 51 per cent of likely voters opposed to legalization and 39 per cent in support of the measure. Others polls have reported similar results.

If it does get support, get ready for massive changes in the drug industry.

PRICES: A REAL DOWNER

Some things, of course, remain uncertain if California does legalize marijuana. Marijuana will remain illegal under federal U.S. law and how the U.S. government will respond is unclear. There is also no indication of how the drug will be taxed and by how much.

But one thing on which all the experts agree is that prices will tumble. Right now, marijuana sells for about $300 to $450 per ounce in California. In larger quantities, it can sell for $4,000 a pound or more. Prices are set by demand, supply, the risk in providing an illegal product and the drug's strength - the amount of intoxicating THC (delta-9-tetrahydrocannabinol).

If the drug is legalized, risk will disappear, and both demand and supply will almost certainly increase. Production costs could drop to about one-tenth of current levels. Those working with marijuana would no longer collect a risk premium. Growers could open larger production facilities yielding economies of scale. The pre-tax retail price could drop as low as $38 per ounce, about one-tenth its current price.

AN AMERICA-WIDE BUZZ

Prices won't just tumble in California. With reduced production and processing costs, California growers would be more competitive with growers across the country. Marijuana produced legally would undercut prices throughout most of the U.S. The price of San Francisco marijuana after legalization could wholesale in Washington, D.C., at $2,575 per pound, compared to the current wholesale price in the Maryland/Virginia area of roughly $4,000 per pound.

Source: Altered State? Assessing How Marijuana Legalization in California Could Influence Marijuana Consumption and Public Budgets published by the RAND Corporation Drug Policy Research Center

MEXICO GETS TASTE OF COMPETITION

Mexican marijuana has carved out a niche in the drug trade as the supplier of a cheaper, commercial grade product. Its price advantage would disappear if California supports legalization. With reduced costs of production, California-grown marijuana could be priced about the same as the Mexican grass but would be considerably more potent - about 3.6 times more.

Mexicans would be left with exports to other U.S. states that could not obtain the California product. Mexico's drug-trafficking organizations earn up to $2-billion annually from exporting marijuana to the U.S., but could lose as much as $1.5-billion of that should California legalize marijuana.

Sources: Reducing Drug Trafficking Revenues and Violence in Mexico: Would Legalizing Marijuana in California Help? RAND Corporation International Programs and Drug Policy Research Center

IN B.C, AN INDUSTRY WILL GO UP IN SMOKE

The marijuana trade is one of the largest - if not the largest - industry in B.C., generating around $4-billion in revenue annually for at least the past seven years. Domestically, marijuana sells for about $2,000 a pound.

About 70 per cent of marijuana produced - about $3-billion worth - is exported to the U.S. The price of B.C. Bud increases as the distance from B.C. grows - it sells for $2,500 a pound just south of the Canada-U.S. border but can go for as much as $5,000 a pound in San Diego. And at least half of the exports to the U.S. go to California, sales that would be lost if legalization occurs there.

Closing one grow-op with 700 plants would eliminate an operation with annual revenue of about $344,000 and jobs for electricians, gardeners, those who tend and harvest the crops, security people and brokers who arrange the sale of the product. The province has around 60,000 marijuana growing operations varying in size, from a few dozen plants to several hundred. Legalization in California could take away work for 20,000 people in B.C. The impact on organized crime - which distributes and sells the drug - would be significant.

Source: Criminologist Darryl Plecas, of the University of the Fraser Valley in Abbotsford, B.C. and Mayor Brian Taylor of Grand Forks, B.C., the first leader of the B.C. Marijuana Party

 

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