The price of legal cannabis in Canada has fallen for the first time since legalization, according to Statistics Canada.
The average legal price dropped to $10.23 per gram in the third quarter from $10.65 per gram in the second quarter, the federal agency said on Wednesday, marking the first recorded drop.
Illegal pot remains significantly cheaper, falling to an average price of $5.59 per gram in the third quarter from $5.94 in the second quarter. The pair of declines pushed the overall average price down to $7.37 in the third quarter, from $7.87 in the prior quarter.
A number of observers have recently predicted lower prices from legal sources, citing a glut of pot in provincial warehouses, and oversupply in stores as they seek to make room for new edible, beverage and vape products set to be released in mid-December.
“When you’re in an oversupply situation, prices come down. Plain and simple,” Craig Wiggins of the cannabis industry research group TheCannalysts told Yahoo Finance Canada last week.
He notes producers are currently harvesting enough cannabis to satisfy 81 per cent of the total demand projected by Health Canada, while legal sales in June amounted to just 14 per cent of demand by volume.
Analysts at BMO Capital Markets recently called for “price cuts on middle-tier flower” to kick in near the end of the year.
“Given the elevated inventory level currently held by provinces, which we have anecdotally heard is largely the ‘mid-range’ flower category, we believe provinces and retailers will likely implement price markdowns to accelerate product sell-through,” Tamy Chen and Peter Sklar wrote in a research note on Monday.
Statistics Canada cautions its average prices are based on crowdsourced data, which is subject to bias because the sample is self-selected and the number of responses is limited. This release was based on quotes gathered between July 1 and Sept. 30, 125 of which were deemed plausible.