New Mexico’s Cannabis Industry: Projections vs. Reality
In 2021, Ultra Health LLC, a key player in New Mexico’s cannabis industry, commissioned a detailed report from MPG Consulting to forecast the state’s needs as it transitioned to a fully legalized cannabis market. The report, titled “New Mexico Legalization & Cultivation Capacity Analysis,” provided comprehensive projections on market demand, cultivation requirements, and regulatory recommendations to guide the state through the early years of legalization.
A Blueprint for Growth
The report was designed to equip New Mexico with a strategic roadmap for its emerging cannabis market. It projected that by 2024, the state would require around 176,155 plant allocations to meet an estimated demand of 191,580 pounds of cannabis. This projection accounted for average yields of 1.1 pounds per plant, with a modest buffer to mitigate risks such as crop loss due to disease or pests.
MPG Consulting’s analysis also suggested that the regulated market would gradually absorb the existing illicit market, with a near-complete transition expected by 2026. The report’s recommendations were conservative yet strategic, aiming to ensure that supply would meet demand without overwhelming the market.
The Reality in 2024: A Dramatic Departure from Projections
Fast forward to September 2024, and the actual plant count in New Mexico has soared to 783,576—more than four times the number forecasted in the report. By October, this number adjusted to 708,703, and in November, it dropped further to 618,828 following a series of regulatory actions, including the revocation of all licenses held by Maggie’s Farm. Once one of the largest producers in the state, Maggie’s Farm’s collapse sent ripples through the industry, reflecting the volatility and unpredictability of this burgeoning market.
Implications and Conflicts
The discrepancy between the 2021 report’s projections and the current reality introduces several implications and potential conflicts within New Mexico’s cannabis market:
Oversupply Risk
The most immediate concern is the risk of oversupply. With the current plant count vastly exceeding projections, there is a significant risk that the market could become flooded with product, leading to plummeting prices. This could erode profit margins for growers and destabilize the market.
Market Saturation
The surge in plant counts suggests that more producers have entered the market than originally anticipated. While this could indicate a healthy and competitive industry, it also raises concerns about market saturation, where too many operators chase a limited consumer base.
Regulatory Challenges
The original regulatory framework, based on the 2021 projections, may no longer be adequate to manage the current market dynamics. The existing regulations might not be flexible enough to handle the rapid increase in cultivation, potentially leading to imbalances in supply and demand.
Conclusion
The contrast between the 2021 projections and the current plant count in New Mexico’s cannabis industry highlights the unpredictable nature of this emerging market. While the rapid growth presents opportunities, it also brings significant risks that must be carefully managed. With Maggie’s Farm out of the picture, two of the largest remaining producers in the state are Desert Peak Farms, located in southern New Mexico, and Southwest Greenhouse (Tegawa). Should either of these two producers falter—for example, due to a recall or significant regulatory penalties—the implications for the industry would be profound:
