When Krispy Kreme arrived in Santa Fe in 2015, about 150 people camped outside the store the night before it opened to make sure they got their freshly made donuts.
We should expect the same with cannabis once recreational product sales begin in April, state officials say.
Yes, there could be bottlenecks at first, they warn. But it will level out at some point and there will be plenty of cannabis for everyone, they say.
“We believe it is possible for some stores to sell high volumes in the first week of cannabis sales,” said Linda Trujillo, director of the government’s regulatory and licensing department, which has set up a cannabis control department to oversee the new industry.
“But just like at Krispy Kreme, where they make more donuts the next day or an hour later [the initial surge]”We think there will be enough cannabis in the pipeline to meet demand,” she said last month when her agency released rules for cannabis producers.
Days after the Cannabis Control Division received initial applications from producers, it may seem premature or even absurd to worry about whether there will be enough cannabis in circulation in April, when retailers are due to start selling their products.
But some key players in the state’s medical cannabis program have raised concerns. If there isn’t enough cannabis available when sales begin, it could be difficult for everyone, including the state’s roughly 121,000 medical cannabis patients, to get the product they need, they say. And if the state should fall behind with its production capacities, it could take a long time before it catches up.
“The adult [recreational] Program introduce new requirements and immediately push us into a significant product deficit from day one, “said Duke Rodriguez, president and CEO of New Mexico’s Top Organics-Ultra Health, the state’s leading medical cannabis company.
This deficit, he added, “will only worsen.”
Jason Greathouse, co-founder of Pecos Valley Production in Roswell, a medicinal cannabis farm, said he “absolutely” agrees with Rodriguez’s view.
“We have a great facility ready to go [for recreational cannabis]”he said,” and even with our existing facilities, we won’t even have enough time to produce enough. ”
“The timing is terrible,” he said of the timetable between the state approving the rules last month and the acceptance of applications and the expected turnaround of the plentiful product by April 1.
In other parts of the country where recreational cannabis use has been legalized, long lines have formed outside cannabis stores on the first few days of business. Nevada reported $ 3 million in sales in the first four days of legal cannabis sales in 2017, and Illinois reported $ 3.2 million in sales on the first day of sales in January 2020.
In Illinois, where lawmakers allowed only 30 producers to grow cannabis, stores sold a staggering $ 39.2 million in products nationwide in January. The following month it was around $ 35 million.
Bottlenecks quickly became a reality in both countries.
In Illinois, demand still exceeds supply, said Geoffrey Lawrence, senior policy fellow with the Reason Foundation, a Los Angeles-based think tank researching the cannabis industry.
Cannabis scarcity states often owe their problems to “legislators trying to get the market started,” he said. “If you pass an invoice and want the validity date to be six or eight months from then on, it takes a lot of leg work because it takes time for the licenses to be built up.”
In New Mexico, Governor Michelle Lujan Grisham signed the Cannabis Regulation Act in April. She called for a special session in March to legalize cannabis after previous efforts failed.
By law, growers can grow up to 8,000 plants per year and request an increase to a total of 10,000 plants over the next two years.
The initiative’s supporters welcomed the fast-paced schedule while the Cannabis Control Division was created to oversee the program and establish rules for producers, manufacturers, retailers and other companies involved in the operation.
Rodriguez and others concerned about a shortage say that part of the challenge with the fast approaching deadline is the time it takes to produce a full crop of cannabis ready for sale. Rodriguez said even if the Cannabis Control Division approves the first wave of applications within 30 days, there is still much work for newcomers to the business.
New applicants will need to invest in necessary property and water rights and security measures to get started by that date, he said. Even when they’re ready to go, it will be almost half a year before they produce their first full crop of ready-to-sell cannabis, provided they’re grown indoors.
A 2020 report by the Colorado Department of Revenue on cannabis growth said the average life cycle of the cannabis harvest is 125 days.
This doesn’t include the extra time it takes to cure, dry, test, and package, Rodriguez said. He and Lawrence said it wasn’t unrealistic to assume it would take about five months to get a full harvest together.
The crop is produced in waves as the crops ripen to ensure steady supplies for the state, Trujillo said.
She said her agency will prioritize approving applications that came in earlier.
Ben Lewinger, Executive Director of the New Mexico Cannabis Chamber of Commerce, welcomed the government request that recreational cannabis producers make up to 25 percent of their product available to medical patients.
“We definitely do not have a scenario with delivery bottlenecks,” said Lewinger. “This is something every state has faced with legalization. That’s why this part of the law, which allows for up to 25 percent of the product to be reserved for cannabis patients, is so important.”
Rodriguez said it wasn’t the percentage that counts, but the actual amount of cannabis produced in April. “In these first few months, medical device sales will already make up the majority of total sales,” he wrote in an email. “The additional adult sales will only get us into scarcity sooner, deeper, and longer.”
Others said a deficiency was inevitable and probably wouldn’t cause any real problems. John Kagia, chief knowledge officer for Washington, DC-based cannabis analysis and research firm New Frontier Data, has studied the impact of legalized cannabis programs around the world.
According to his group’s analysis, legal cannabis users make up around 12 percent of a state’s population. In most states, no more than 2 percent of their population use medicinal cannabis.
In New Mexico, the medical cannabis rate is closer to 6 percent, which means a jump to double that amount shouldn’t be that difficult to achieve, he said. And recreational users who rely on the black market are unlikely to move to the legal market immediately, he said.
In Colorado, where sales became legal in 2014, it took about four to five years for the legal cannabis market to overtake the illegal market, Kagia said. And his group estimates that legal trade in Colorado serves 80 percent of all users, which means about a fifth still rely on the illegal market, especially when the product is cheaper.
A potentially interesting run on New Mexico products could come from Texas residents willing to cross the state line to purchase cannabis – much like what some New Mexicans are doing now in Colorado. The cannabis tourism trade could affect initial sales.
Greathouse estimates 50 percent of its new customers will be from Texas once sales begin in the spring.
To make up for a possible shortage, Rodriguez said the state could put in place emergency precautions that would allow producers to exceed the 8,000-10,000 limit.
Lewinger said one option could be for lawmakers to postpone the retail date when they meet in January to give manufacturers more time.
“That could be part of the discussion,” he said.
But he also believes that deficiency won’t be a big deal in the long run.
“Five years from now, when we have a full cannabis market, we’ll realize that a few months of short supply wasn’t the worst that could happen,” he said.