The Architecture of a Cannabis Price Floor: What’s Holding Prices Up?

Rolando García Bernado, PhD in Economics and IgniteIt’s Chief Economist, breaks down the costs, taxes and licensing restrictions shaping cannabis prices across U.S. markets—and explains why some states have much further to fall.

Falling prices have dominated the cannabis conversation for the better part of three years. Markets consolidated, and the green rush built on inflated expectations ran into slow-moving regulation and persistent oversupply. The industry entered a leaner stage of development, one in which cost discipline replaced expansion as the measure of a well-run operator. Through all of it, the debate has centred on how fast prices are falling.

So, what can be said about prices in cannabis that hasn’t been said before?

I’ve noticed that far less attention has gone to where the fall stops. Legal cannabis is a farm commodity sold through a licensing system, so its floor can be calculated: the cost of growing a gram efficiently, plus taxes, plus the cost of putting that gram on a shelf. Some states already sell at that level. Others still charge two or three times as much, and the gap owes far more to licensing than to costs. 

Wholesale, shelf and register

Wholesale prices followed the harvest calendar this year. The U.S. Cannabis Spot Index touched $990 per pound in mid-June according to Cannabis Benchmarks, when the previous outdoor crop had sold through, and the new one was still in the field. Supply thinned, and the index climbed to $1,123 by late September. The first October assessment came in 1% lower, at $1,112, with April 2027 forwards priced at $1,065. Traders expect the autumn harvest to push prices back down.

Cannabis Benchmarks weekly U.S. Spot Index reports, April to October 2026 (selected weeks); forward from the October 2 report

Against late August 2025, the national index stands about 4% higher. But the composite hides an evident split between new/capped and old/uncapped markets. The ever-declining price of wholesale median for a bud in Colorado, according to the official source, fell from $649 per pound in late 2025 to $574 in the third quarter of 2026. Another example comes from Grown Rogue, a publicly traded cultivator founded in Oregon that also grows in Michigan, which reports its Michigan bulk price to the SEC at $615 per pound in the second quarter, 16% below a year earlier. Wholesale kept falling in the oldest open markets. 

States with capped licences and tighter supply pulled the national average the other way.

Retail prices fell more broadly. Across 33 states in Trans High Market Quotes (High Times), the menu-based data that Hoodie Analytics compiles for packs up to a half-ounce, the realized price per gram of flower fell 4.8% between August 2025 and August 2026. With each state’s mix of pack sizes held constant, the decline shrinks to 2.7%, which makes us think that shoppers supplied the difference by buying bigger. Half-ounces, which sell at about 58% of the per-gram price of an eighth, rose from 33.6% to 37.4% of grams sold. Headset’s register data adds a third channel of decline, with discounts growing from 22.8% to 26.0% of shelf value over the year.

Seven states moved the other way, in two distinct groups.

North Dakota (+5.4%), Utah (+4.5%) and Louisiana (+4.2%) run medical-only programmes in which statute limits the number of dispensaries, and closed entry lets their prices climb. Alaska (+2.4%), Michigan (+2.2%), Washington (+1.2%) and Arizona (+0.9%) belong to the opposite type: open-licence markets where years of decline have run out of room (cheapest legal cannabis in the world is sold now in Arizona). 

Michigan’s increase in packaged sizes reflects the 24% wholesale excise that took effect in January. Across all formats, including the ounces HTMQ does not cover, the state’s average ounce slipped from $61.79 to $60.33. The other three markets faced no new tax, and their prices levelled off near a floor.

The Michigan receipt

If this is a race to the bottom, how far away is the finish line?

We took Michigan as an example because each component of a gram sold there can be traced to a public source.

The Michigan gram	Per gram	Source
Growing it	$0.61	Grown Rogue cost, $277/lb
Grower’s margin to bulk	$0.75	Bulk price, $615/lb
Wholesale excise (24%)	$0.33	State statute
Processing, distribution, retail	$0.45	Residual
Realized retail price, Aug 2026	$2.13	CRA

The receipt combines reported and derived figures. The per-gram conversions are arithmetic, and the retail line is a residual: the spread between landed cost and the realized price. Michigan qualifies as a reference point for the floor because its market clears under persistent excess supply. At the end of August, licensees held a massive 896,589 pounds of flower against 108,719 pounds sold that month, an inventory-to-sales ratio of roughly eight months. With that much stock overhanging the market, price reflects the marginal seller’s need to liquidate and gravitates toward short-run cost. The receipt still holds some slack. The grower’s $0.75 margin over cash cost is the one line that can absorb further declines before producers begin to exit, and its size measures how much room the Michigan floor has left.

Differences in cost explain little of the distance between other states and this receipt. Wages for crop workers range only from about $16 to $21 an hour across legal states per BLS. Industrial electricity prices vary far more per EIA, and power is the main input that separates one indoor grower’s cost from another’s. Rebuilt with each state’s power price and wages, at about 900 kWh per pound, Grown Rogue’s cost rises by roughly 7% in Illinois, 30% in Connecticut, and 40% in Massachusetts (these are my own estimates).

Carried through the receipt, Illinois’ higher costs lift the Michigan gram to about $2.20. Illinois’ realized price is $5.61. The remaining $3.40 per gram corresponds to no input. It measures the value of a licence in a market where entry is capped, which is rent in the strict sense. Connecticut (DCP), New Jersey (CRC) and Ohio (DCC) share the same structure. Massachusetts confirms it from the opposite side: the state pays some of the highest power prices in the country, yet its flower sells for $3.89 a gram (CCC), because regulators licensed generously.

Realized prices: Michigan CRA, Massachusetts CCC, Illinois, New Jersey CRC, Connecticut DCP, Ohio DCC. Receipts: author’s estimates from Grown Rogue’s 8-K, EIA and BLS data

The receipts carry Michigan’s tax structure and assume efficient indoor production. Greenhouse or outdoor growing would lower them further, and no plausible adjustment closes a gap of three or four dollars a gram.

Where the floor holds

As mentioned, Arizona shows the floor at work, so it’s no wonder that Vext Science had to close its indoor cultivation in the state this year after wholesale flower began selling below its cost of production, and its Phoenix dispensaries now buy from third parties. Exits of this kind set the floor. Price settles at the cash cost of the most efficient growers still operating (even below, for a certain amount of time if financing is available).

That cost sits well below the industry average. Back in 2023, in a Whitney Economics survey of more than 400 cultivators, most reported selling at $750 per pound or less, under an average breakeven of about $800. Some things have changed since then, and now companies like Glass House are producing greenhouse biomass in California for $122 per pound in the second quarter. The distance between those figures explains why oversupplied markets can shed growers for years without lifting prices.

The chart above sorts the states by how much rent their prices still carry. Michigan, Washington, Arizona and Alaska show the flat prices of markets near the floor. Illinois, New Jersey and Connecticut fell 22% to 37% this year and still carry most of their rent, so the bulk of their adjustment lies ahead. Ohio fell from $9.40 at its August 2024 launch to about $6.65 and then stopped. Its licence cap remains intact, and so does its rent.

Canada indicates how the final stretch tends to unfold. Its cannabis price index fell 8% to 9% a year early on and only 1.7% in the year to December 2025, per Statistics Canada. Near the floor, each further step down removes producers rather than surplus margin, which slows the decline.

For operators in capped markets, the gap between the local price and the receipt is licence rent, and it erodes as regulators add licences, neighbouring states undercut, and inventory accumulates. A retail plan in New Jersey or Illinois built on today’s spread depends on a rent that Michigan, Washington and Arizona have already competed away. The defensible planning price is the receipt plus the local tax wedge. In mature markets, the open question concerns which growers sit below that line with no short-term perspective of getting price relief.

As cannabis prices approach their economic floor, operators and investors must distinguish between margins supported by efficiency and those protected by licensing restrictions. These pressures will also shape conversations at the IgniteIt Capital & Policy Summit in Washington, D.C., on November 18, where industry executives, investors, and policymakers will examine the regulatory and financial decisions shaping the future of the U.S. cannabis industry.