Supply and demand is a fundamental concept of capitalism. Ask any Econ 101 student to explain these ideas to you, and they could probably go on about it for some time. What is interesting about supply and demand is how they can be seen interacting with one another in our everyday world. The cannabis manufacturing industry has seen this play out in real-time as it has combated with turbulent world events (such as COVID-19) and the changing legal status of cannabis around the world. We wanted to take a brief look at how this real-world drama is unfolding today.
No Shortage Of Demand
Cannabis has remained in high demand throughout the entire duration of the pandemic. This is because this good is similar to alcohol and tobacco products in that it is extremely recession-resistant. Even in March 2020 as the pandemic began to grip the United States, customers were lining up to purchase their favorite cannabis products where it is legal to do so.
Sixteen states and the District of Columbia have legalized the use of marijuana for recreational purposes while a total of thirty-six states have allowed for at least medical use of the substance according to Business Insider. This means that a significant majority of the country now has access to marijuana in some form. All of this easing of legal restrictions has certainly been good for business, but some wonder if there are gray clouds on the horizon in the form of supply issues as the COVID-19 pandemic refuses to release its grip on the planet.
Supply Chain Concerns
The United States cannabis industry has long faced issues of supply chain concerns. The legality of cannabis being in question in so many areas for such a long time led to some artificial shortage issues in the past, but now those issues are even more pronounced as suppliers of cannabis manufacturing materials are under pressure from the strain that COVID-19 has had on their economy. Forbes.com summarized some thinking of leading cannabis manufacturers here:
The cannabis industry has experienced cycles of supply shortages over the last two years, but this pandemic is a different beast. With challenges coming from both overseas as well as North America, it’s a double-edged sword, In the early months of 2020, ports and factories in China were impacted when the coronavirus made its debut in Wuhan. These disruptions led to an anticipated 2- to 3-month delay for cultivation materials such as grow lights, pots, and other agricultural commodities, according to Justin Pierce, a principal with Hydroponics, Inc., the leading provider of agricultural supplies, logistics, and procurement for the cannabis and hemp industries.
This is keeping some in the industry up at night as they worry that the still-new industry in the United States could face enormous pressure from the competition beyond our borders and from other industries that compete with cannabis (i.e. alcohol and tobacco).
The industry did receive a lifeline from the governors of many states who deemed the industry essential during the pandemic. It is important to remember that plenty of people rely on cannabis treatments to treat some of their diseases and illnesses. As such, the essential tag for cannabis manufacturers makes sense and is a blessing for those who rely on their products.
Popularity Brings Shortages As Well
Interestingly enough, the popularity of cannabis products has also given some manufacturers reasons to be concerned about supply issues in the future. The overwhelming demand has meant that supply chains have not had a lot of time to adapt and develop new ways to get the products to consumers in the appropriate quantities right where they need and want them. The legal status of cannabis is up for question in many states has increased the difficulty of getting supply totals just right. Thus, there are certainly a lot of reasons to believe that cannabis manufacturing could continue to face logistical challenges in the future. That being said, high demand is certainly a problem that most industries are satisfied with having.
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