Illegal Commodity Pricing

Here's an article which will be followed by questions:

SPOKANE -- Law enforcement officers harvested a dubious record last year: enough marijuana plants to rank the illegal weed as Washington state's No. 8 agricultural commodity, edging sweet cherries in value.

The 135,323 marijuana plants seized in 2005 were estimated to be worth $270 million -- a record amount that places the crop among the state's top 10 agricultural commodities, based on the most recent statistics available.

And like any agricultural product, marijuana is very much a commodity, Lt. Rich Wiley, who heads the Washington State Patrol narcotics program, said Wednesday.

"We're struck by the amount of work they put into it," Wiley said. "It's very labor-intensive. They often run individual drip lines to each plant and are out there fertilizing them. It takes a tremendous amount of work."

But the results are worth the effort, said Wiley, who coordinates pot busts with the U.S. Drug Enforcement Agency and local law enforcement agencies. A single plant can produce as much as a pound of processed marijuana, worth about $2,000, he said.

The article states that volume-wise, it was also a record, but I wonder if it was a record on per/plant basis, and if so, do illegal commodities, like marijuana, fluctuate along with legal commodities, like corn?  There's reason to think they would.  High costs, for say water/fertilizer/energy/land would affect both commodities equally.  Then there's the argument that cheap Federal Reserve money spurred the increase in commodity prices, because at a time when money is yielding little, people are inclined to put their money into hard assets.  Then again, marijuana is (I think) a perishable item, so perhaps there's no reason to store money there during times when CD yields aren't too hot.  There's also the broader macroeconomics.  Do people smoke more pot in good times, or in bad times when they're unemployed.  If it weren't illegal, it might be a good economic hedge against recession, or as some might say 'defensive investment'.

Comments

[anon]

Price varies with supply as you would expect. However, supply is not a function of weather (much is grown indoors anyway). It mostly reflects the degree and success of law enforcement and eradication efforts. At least thats how it was when I was in college.

Further, consider that bad economic times would likely lead to as much of a supply increase as a demand increase. Unemployed people are more likely to consider less than legal business ventures (or at least growing their own smoke that they can no longer afford to purchase).

[wcw]

As noted, weather is just not an issue -- they call it weed for a reason, and even commodity marijuana is expensive enough to run drip lines. No, the marijuana market is almost exactly like the Champagne market. There's cheap crap that gives you a headache, drinkable stuff, and then as-much-as-you-can-spend stuff of dubious worth (which I say as a horrible sucker for really good Champagne).

It's never been my thing, but my impression from the wake-and-bake stoner acquaintances of my youth is that the price of the good stuff just doesn't go down much.

[The Other Stalwart]

I think to call marijuana a commodity would be a disgrace to "Purple Haze" and "Northern Lights" producers everywhere...

I agree with one of the above comments that price is very much driven by the intensity of police efforts to crack down on it. Avoiding the authorities I would guess comprises the majority of the cost. Actual water and fertilizer is probably a very small proportion. Also yes, in periods of unemployment I would imagine that more people decide to take the risk of growing it.

[SourAaron]

Maybe in Amsterdam, where it is legal, such an expiriment could be done. The results would be truly fascinating!

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[Steve Nash]

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