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This story was republished with permission from Crain’s Detroit.

Michigan’s cannabis industry faces a reckoning in 2025.

Oversupply and low, low prices are coming to a head in the industry, leaving a trail of shuttered cultivators and processors.

The average price for an ounce of cannabis flower in Michigan’s adult-use market fell nearly 23% to $71.80 — a record low — between the start of the year and the end of November, cutting into margins for the industry.

Two major cultivators have recently announced closures.

Chicago-based PharmaCann told employees it would shutter its 207,000-square-foot LivWell Michigan cultivation site in Warren, laying off 222, in January.

Fluresh LLC, doing business as Tend.Harvest.Cultivate, announced it was closing down its $46 million, 105,000-square-foot grow facility in Adrian at the end of November.

And with the inventory of the annual outdoor “Croptober” harvest flooding the market, there’s no indication prices will stabilize.

The inventory of fresh frozen cannabis — which is cannabis from outdoor grow operations frozen for use in resins and rosins throughout the year — was already nearly 2.8 million pounds in October; up more than 228% from the 876,600 pounds in November 2023, according to state data analyzed by William Fetterman, owner of Hanover-based Central Coast Horticultural LLC.

That oversupply of cannabis is a prime driver of low prices. Last year, fresh frozen cannabis sold for $0.12 to $0.15 per gram. This year, that price is going to be as low as $0.08 per gram, or about $36 per pound, Fetterman told Crain’s.

But there are several factors at play that could sustain those in the Michigan market that are able to withstand the current pricing conditions.

The benefit to cultivators going out of business is that it removes product supply from the market.

Fluresh produced about 4% of the state’s total marijuana output with its Adrian operation contributing about 20,000 pounds of product and output from its Grand Rapids operation contributing 30,000 pounds annually, Kanitz told Crain’s.

Removing the Adrian site’s supply could inch marijuana prices up in the coming months.

Kanitz hopes others in the industry follow suit and throw in the towel by removing unprofitable operations to become smaller companies.

“I think the overhang in inventory will persist into 2025, but supply will continue to come offline and we’ll be in a healthier market going into 2026,” Kanitz said.

And there’s the hope of federal rescheduling of marijuana to change it from a Schedule I narcotic to a Schedule III drug, placing it alongside ketamine and some anabolic steroids. The U.S. Drug Enforcement Agency removing marijuana as having “no currently accepted medical use and high potential for abuse” under the Controlled Substance Act of 1970 would also free cannabis businesses from a costly tax code law.

Rescheduling marijuana eliminates the IRS Tax Code 280E, which prevents individuals from writing off business expenses involved in the trafficking of narcotics translating to a 70% or sometimes higher effective tax rate for marijuana dispensaries instead of the regular 21% corporate rate.

While this largely only impacts marijuana dispensaries, a massive boost in cash by reduced taxes could allow those retailers to buy wholesale marijuana at a higher price, thus buoying the struggling cultivators and processors.

But the ultimate crutch to the industry is the strength of the Michigan marijuana consumer.

Despite those low margins, operators sold nearly 35,000 more pounds in marijuana flower and 103,000 ounces more infused liquid in October than in September.

The low prices have created a buyers’ market in the state that recorded a total of $276.4 million in sales in November — or nearly $39 in per capita spending for adults 21 years and older in the state.

Legal marijuana sales in Michigan are averaging nearly $275 million monthly and are on pace to reach $3.3 billion for 2024, up from $3.06 billion in 2023.

“Overall, the Michigan cannabis market in 2025 is poised for continued growth and development,” Myles Baker, a partner and cannabis attorney at Detroit-based law firm Dickinson Wright, told Crain’s in a statement. “Federal guidance on rescheduling may shake things up nationwide. Competition may intensify leading to a survival of the fittest environment, but with continued growth in sales. We can expect more of the same with some wild card items that can change the landscape of Michigan cannabis going forward.”