A Critical Examination of Oklahoma's Medical Marijuana Supply & Demand Report (2023) By: Alex Popoff | With input from: Jeff Ledbetter, Earthwise Organics LLC & Caleb Neal, Native Veteran | June 25, 2023

Addressing Challenges & Fostering a Sustainable Cannabis Market in Oklahoma

An Empirical Assessment of Oklahoma’s Medical Marijuana Market (Mudd et al., 2023) provides a detailed assessment of Oklahoma's medical marijuana market. It offers detailed data on supply estimates and supply-to-demand ratios for the first quarter of 2023. The analysis utilized data from METRC (the track-and-trace system implemented across the state) and self-reported survey data. The findings illuminate details on the volume of cannabis grown, harvested, and packaged, as well as demographic, consumption, homegrow, and other data. This paper was written to push back on some of the claims using additional empirical and qualitative data.

Summary of Data (Mudd et al., 2023)

Oklahoma Medical Cannabis Supply Estimates 2023:

• Approximately 4.9 billion grams of wet-weight cannabis is estimated to be grown and harvested.
• 1.07 billion grams of plant waste will be removed.
• This leaves about 3.8 billion grams of buds before drying.
• 884 million grams of cannabis will be packaged.

Supply-to-Demand Ratios:

• Average Supply to Demand Ratio for Regulated Medical Cannabis: 64 grams of supply for every gram of demand.
• Average Supply to Demand Ratio for All Cannabis: 9 grams of supply for every gram of demand.
• Compared to a healthy supply-to-demand ratio of 2:1 in other markets, the medical cannabis market in Oklahoma appears to be oversupplied by about 32 times and could serve all cannabis consumers approximately 4.5 times over.

Concentration of Cultivation:

• Cultivation is highly concentrated in the central region of the state, with the largest amount of cannabis supply being generated there.
• The central region produces over six times the amount of cannabis compared to other regions, on average.

Oklahoma Medical Cannabis Patient Demand Estimates 2023:

• Consumer demand is relatively consistent across the state, with the highest demand observed in the southeast region and the lowest demand in the northwest region.
• Demand trends indicate a relatively consistent level of demand across Oklahoma.

Data Visualizaiton, Supply & Demand

• Figure 1 illustrates the disparity between supply and demand in Oklahoma's medical marijuana market. The gold range represents the upper limit of supply at a ratio of 2:1 and the lower limit at 1.5:1.
• The empirical study stated a supply and demand ratio of 1.3:1 could be ideal. However, this falls significantly below the desired level for both patients and industry stakeholders. Factors such as weather and other issues can have a substantial impact on the availability of supply and the corresponding demand.
• As the ratio approaches 1:1, the risk of shortages in specific strains and preparations of medical cannabis increases. While a high supply may attract criminal diversion, it is crucial to distinguish it from the broader issue of prohibition. Pressuring lawful operators out of business due to non-compliant individuals undermines the effectiveness of the industry.

A Growing Perspective

The insights of Jeff Ledbetter Cultivation Director at Earthwise Organics, and other growers can provide a more well rounded picture of the industry. Jeff is a craft grower in Oklahoma. According to Jeff, "either I am stupid or this whole breakdown is off the mark." He questioned the methodology used in the study, particularly the decision to begin with "silly dry weight based survey demand numbers" and then revert to wet weights, which he finds confusing for readers.

Jeff has amassed significant experience in the cannabis industry over the years. He has spent 2 years as the Owner/operator and Cultivation Director of Earthwise Organics, where he focuses on implementing sustainable and living soil cultivation practices. Prior to his current role, Jeff worked as a Senior Consultant at GrowBetterCo for over 5 years, providing his expertise to assist growers in improving their operations.

Jeff’s Take on the Empirical Assessment of Oklahoma’s Medical Marijuana Market (Mudd et al., 2023)

The accuracy of the estimate of 340 million grams of cannabis per year sounds somewhat accurate to Jeff. He believes it is likely a low estimate. He also raises a valid point by questioning why the study acknowledges that licensed growers with illicit activities were given licenses by the state, but then places blame on legal license growers. “Is there a chance we didn’t properly sample patients in OK?” Additionally, OMMA should release data on out of state patient cards.

Jeff suggested market overproduction is likely at a ratio of 2.25:1, indicating a significant but not unmanageable oversupply compared to demand. His perspective emphasizes the need to consider practical industry knowledge and challenges the assumptions made in the empirical study. (Jeff's LinkedIn & Earthwise Organics)

If supply and demand data are so important, why not survey more people and get a more accurate picture?

Input from Caleb Neal of Native Veteran

Caleb is a US Army veteran and another living soil craft grower in Oklahoma. Caleb said the sample size was extremely small and doesn’t accurately represent the community. “Any other industry would laugh this study out of the room.” The study could be improved by asking patients to volunteer their survey responses in exchange for 10% off renewing their medical marijuana cards. Getting a larger sample size would provide a more accurate response. (You can learn more about Caleb and Native Veteran HERE.)

Why listen to growers?

We gain a more comprehensive understanding of the medical marijuana market in Oklahoma when we consider the input of those actually growing the cannabis. Encompassing both the empirical data presented in the study, and the insights of licensed operators is key. This holistic approach allows us to address the nuances of the market, contributing to a more informed analysis. Jeff and Caleb's input provides a more well rounded understanding of the market.

Demographic Discrepancies & Data Collection Challenges

This section addresses demographic discrepancies and data collection challenges identified in the study.

Demographic Discrepancies:

• The study's sample population exhibited a notable over-representation of females, with 64.6% of participants being female (Mudd et al., 2023). However, Oklahoma's actual population has a more balanced gender distribution, closer to 50/50 between males and females (U.S. Census Bureau , 2022).
• The study claims there is a slight difference between the 2021 Census data and their survey sample. The difference in the female to male ratio in the studies’ surveyed population versus 2022 Census data is almost 30% higher (28.94%).
• This means the study had roughly 30% more females than males and there is no explanation other than “slightly different.”
• The disproportionate representation of females in the study raises questions about the generalizability of the findings and their applicability to the broader population.
• The study claims it collected survey data from March and April 2023 yet it compared demographic data with a 2021 Census (U.S. Census Bureau, 2022).

There are additional but more minor differences between the more recent census data and the survey sample.

Data Collection Challenges:

• The study relied on surveys to estimate demand, which introduces potential issues associated with self-reporting biases and inconsistent responses. This is also true even for self-reported METRC data also referenced.
• To obtain more reliable data, a recommended approach would involve collecting data from a sampling of point-of-sale (POS) systems within dispensaries and comparing it with the METRC data from the same sampled area. Comparing law enforcement seizures by region and types of seizure would also be helpful.
• Surveying individuals on their actual cannabis purchases, including requesting receipts, would provide a more accurate understanding of consumption patterns, purposes, and quantities. Anonymity and well-designed survey questions can help mitigate biases associated with legal responses.
• Notably, the study did not consider estimates of illegal, unlicensed cannabis production and consumption, which can significantly impact the overall market dynamics and supply-demand balance.
• The study instead relied heavily on vague Oklahoma Law Enforcement estimates.

Limitations and Recommendations:

• The reliance on survey data and the absence of actual sales data limits the accuracy and reliability of the study.To address these limitations, future studies should incorporate a combination of survey data and actual sales data from POS systems.
• It is recommended to ensure a more diverse and representative sample that aligns with the demographic composition of Oklahoma's population, enabling a more accurate assessment of the medical marijuana market.
• Researchers should request demographic data from the OMMA (if possible) to compare the average card-holder demographics with the surveyed population.

The identified demographic discrepancies and data collection challenges in the study highlight the importance of obtaining more precise and representative data.

“Free” Market

The cannabis market in Oklahoma has experienced significant challenges due to its regulatory environment and lack of consistency. This section explores how Oklahoma's cannabis market is not a free market, characterized by consistent rule changes, leadership transitions, extrajudicial shutdowns of businesses, and the influence of surrounding states' laws on cannabis regulation. Additionally, the study mentioned in the previous section suggests the presence of regulatory capture, which exacerbates the issues faced by the market. However, upon closer examination, it becomes evident that the problems go beyond mere hearsay and are deeply rooted in a lack of enforcement on illegal activities and impatience among regulators.

This section further explores these issues, highlighting the impact on market dynamics and the perpetuation of a vicious cycle of under or over regulation that disproportionately favors the wealthy, as seen in other regulatory capture environments such as Florida.

Inconsistency & Rule Changes:

One of the primary challenges faced by the cannabis market in Oklahoma is the lack of consistency and frequent rule changes. The regulatory landscape has been characterized by a series of modifications, making it difficult for businesses to navigate and plan for the long term. Leadership changes within regulatory bodies, such as OMMA, have further contributed to the uncertainty surrounding the market. These fluctuations in leadership and regulatory policies undermine the stability necessary for businesses to operate effectively and deter potential investors seeking a predictable and conducive business environment.

Extrajudicial Business Shutdowns:

Another issue plaguing the cannabis market in Oklahoma is the extrajudicial shutdown of businesses. While regulation and enforcement are crucial for maintaining market integrity, the arbitrary closure of businesses without proper legal procedures can create an environment of fear and instability. Such actions not only disrupt the operations of compliant businesses but also erode trust within the industry and hinder its overall growth. The lack of a transparent and fair process for addressing compliance issues further exacerbates the challenges faced by market participants.

Impact of Surrounding State Laws:

Oklahoma's cannabis market is also influenced by the laws and regulations of surrounding states. Some neighboring states have either heavily regulated and taxed cannabis markets or completely prohibited its use. These variations in regional regulations create imbalances in supply and demand dynamics, leading to challenges in achieving market equilibrium. The disparities in cannabis policies between states can result in cross-border issues, including illicit trade and market distortions. To address these challenges effectively, a coordinated approach among states is required to establish harmonized regulations that facilitate fair competition and prevent market imbalances.

Impatient Regulators and Lack of Enforcement:

Markets naturally require time to find a balance between supply and demand. However, the impatience of regulators and politicians to witness immediate results often leads to rushed decision-making and the implementation of inadequate regulations. This impatience can result in growers being incentivized to increase supply. Without knowing about future cost increases or policy variations, growers are not simply competing against other growers. Rather, growers are racing regulators as well. This creates a race to the bottom on pricing, as businesses strive to gain a competitive advantage in a challenging and uncertain environment. Insufficient enforcement mechanisms further exacerbate the problem, allowing illegal activities to persist, disrupting market fairness, and impeding the development of a regulated and sustainable industry. All roads lead to harming the patients and lawful operators, not the cartels or other organized crime groups.

The Baggage Claim Dilemma and Regulatory Capture:

While the study introduced the concept of the baggage claim dilemma, this author feels it falls short in fully understanding the underlying issue. While growers are surely playing a role in their own demise, impatience and regulatory cycles play a role, too. The baggage claim dilemma is described as when people increasingly approach the luggage carousel to stay ahead of others doing the same thing. However, each decrease in distance to the carousel often results in an equal and opposite reaction. Meaning, more people approach the carousel, making it harder for everyone. This Baggage Dilemma was used to describe cultivators increasing production while competitors follow suit, hiking supply and plunging prices. Meanwhile, demand is stagnant or marginally growing (if accounting of illicit demand).

This all sounds great, but the heart of the problem lies in the impatience of regulators and politicians themselves. This perpetual cycle of under or over regulation not only hampers market growth but also creates an environment susceptible to regulatory capture.

This form of capture often favors wealthy entities and can lead to further distortions and inequalities within the cannabis market. However, the study alleged, without evidence, that Oklahoma’s illicit market could be due to regulatory capture. This author questions the Oklahoma Supply and Demand study’s usage of the term. It was also interesting to see regulatory capture defined at all. Readers should understand, and if they do, they will see it does not apply in Oklahoma (at least not in the way the authors described.)

Conclusion

The challenges faced by Oklahoma's cannabis market are multifaceted and interconnected. The lack of consistency in regulatory policies, extrajudicial shutdowns, the influence of neighboring state laws, impatient regulators, and insufficient enforcement mechanisms all contribute to the difficulties here. Understanding and addressing these challenges are crucial for fostering a thriving and equitable cannabis market in Oklahoma.

Efforts should be made to establish consistent and transparent regulations, ensure fair enforcement, and encourage collaboration among states to promote a harmonized regional approach to cannabis regulation. By learning from the experiences of other regulatory capture environments, such as Florida and California, Oklahoma can work towards a more balanced and sustainable cannabis market that benefits all stakeholders and upholds public safety and welfare.

Final Recommendations:

• Give lawful license holders time and help, don’t harm them (i.e shutdowns without a true risk to public safety)o Market Trends show a decline in nearly all license categories including cultivation, dispensary, processor, and even patient count. Give it more time.
• Target organized crime, not honest mistakes, or disorganized operations
• Collaborate with surrounding states, not solely on enforcement but on legalization initiatives
• The true criminal elements would likely fly under the radar and not gain a license. As prior law enforcement, this author agrees criminals would forgo a license (not “hide in plain sight.”). Jeff also brought this up as a grower and from discussions with other growers.
• Consider the Supply and Demand studies’ assumptions could be wrong. Targeting license holders may be easier but it is not necessarily beneficial.

Additional Data Visuals (created by Alex Popoff using OMMA (2023) Data):

References

OMMA. (2023). Licensing and tax data. Oklahoma Medical Marijuana Authority. https://oklahoma.gov/omma/about/licensing-and-tax-data.html

Mudd, L., Sofis, M., & Slade, M. (2023, June). An empirical assessment of Oklahoma’s medical marijuana market. oklahoma.gov. https://oklahoma.gov/content/dam/ok/en/omma/content/supply-and-demand-study/EmpiricalAssessmentofOklahomasMedicalMarijuanaMarket.pdf

U.S. Census Bureau . (2022, July). U.S. Census Bureau quickfacts: Oklahoma. U.S. Census Bureau . https://www.census.gov/quickfacts/OK