Cannabis Eradication and the Price of Marijuana

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The DEA claims that the increase in the price of marijuana over the years is an indication of the success of their program to discourage marijuana cultivation and use. For example:

“The results of this program in 1992 have been impressive and are reflected dramatically by the soaring price of marijuana in the United States.”(37)

The preceding chart contains various reports of the price of marijuana between 1982 and 1992, and previews the discussion below. A report in the New York Times in 1981 lists the price for a pound of sinsemilla at $2000. The Wall Street Journal reported in 1992 that “growers get between $1500 and $3500 for a pound.” The DEA reported in 1992 that the “average wholesale price for a pound of sinsemilla is $3500.” Also in 1992 the Bureau of Justice Statistics reports that sinsemilla sold for between $500 and $4000 a pound.

Marijuana cost more in 1992 than it did in 1982, but so did most consumer goods. Using the New York Times report for 1981 as a baseline, and using the consumer price index to adjust for inflation each year, the sinsemilla that was $2000 a pound in 1981 would be $3300 a pound in 1992 dollars. Yet the DEA never considers inflation in their reports; they report inflationary increases in the price of marijuana as proof of their own effectiveness.

This claim was especially acute in 1986:

“Prices, with few exceptions, however, had doubled over those of 1985…”(38)

“Heretofore, the availability of domestic marijuana supplies may have offset the “dry spell” created by the seasonal fluctuation of imported marijuana. With the expansion of the U.S. eradication program, and its continued overall effectiveness nationwide, this “dry spell” may have been prolonged this year. . . Indications are the lessened availability of marijuana is of a temporary nature and will be alleviated as foreign crops are harvested and smuggled into this country.” (39)

“It should be noted that price increase may not be only due to lessened availability but also to the preference by growers to specialize in Sinsemilla.”(40)

In 1987, though, availability improved while prices remained steady.

“In contrast to the 14 Divisional Offices which noted diminished availability of marijuana in the 4th quarter of 1986, only one DEA Divisional office noted diminished supply of marijuana for the same time period in CY 1987.”(41)

Even so, the suppression program was still considered to be a major factor:

“Generally, in those states in which supplies were reported as diminished, the situation appeared to reflect a localized occurrence. That is to say, there appeared to be either (1) a lack of established foreign cannabis distribution networks within specific areas, (2) an effective domestic cannabis eradication and suppression program which impacted on availability within those states, and/or (3) geographic and climatic constraints within the state which inhibited production.”(42)

Marijuana has remained widely available throughout the period of this program, and domestic cultivation has continued to increase. There is a connection between THC content and market value, and the DEA activities have encouraged more growers to produce more potent marijuana. For example:

“Although marijuana appeared to be more readily available at a national level in CY 1987, prices remain high for domestic commercial marijuana.”(43)

Prices have remained high because the DEA has annually supported a high marijuana price by removing large amounts of the crop from the market.

The chart above compares various price indexes with the baseline established by the 1981 New York Times quote and inflation. It is hard to support claims that the price of marijuana has increased dramatically throughout the 1980’s. One index is derived from reports of marijuana consumers directly to High Times magazine. This data suggests that when adjusted for inflation, the price of marijuana stabilized and dropped in the late 1980’s, only to rise again recently.

The volatility of the price of any agricultural commodity is the basis for the complex trade in agricultural futures. This is a formidable testament to continuing fluctuations in commodity prices.