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Analysis: Estimating the Size of D.C. Marijuana Market

How easy would it be for an urban location like D.C. to grow its own marijuana?

With people of D.C. set to vote to legalize the possession and home cultivation of marijuana on Tuesday, and the Council already working on a tax and regulate bill, an important question is just how big will this market be. What is the local demand for marijuana among adults? It is an issue that came up several times during the Council’s public hearing on the tax and regulate bill yesterday.

To get a rough answer to this question I did a very basic analysis. These figures are meant only to provide a starting point for future discussions and to highlight why it is uniquely difficult to answer this question for D.C. The figures could be significantly off-base with numerous unknowns at the moment.

It should also be noted that the legal market will probably take a few years to grow to its full size. As we have seen, people will only slowly switch away from their illegal dealers, and it is very likely that limited supply during the first several months will keep prices high undermining some people from using any new retail stores.

The Marijuana Market Among D.C. Residents Only

7.6-17.1 metric tons – A way to get a very rough estimate of the local demand for marijuana among adults is D.C. is to take existing estimates from Colorado and Washington and simply adjust for adult population. The Marijuana Policy Group prepared for the Colorado Department of Revenue a report that provided a useful breakdown of the major market estimates in Colorado and Washington. The highest projection per capita was based on the Rand Corporation’s estimate for the potential market in Washington, and the lowest is the Colorado Center on Law and Policy’s estimates for the residential adult market in Colorado. The Marijuana Policy Group’s own projections for Colorado were just slightly lower per capita than the Rand study.

38,000 to 80,000 square feet of grow space – The next obvious question is how easy would it be for an urban location like D.C. to produce this agricultural product internally since shipments across state lines is prohibited? A report for the Washington Liquor Control Board estimated that an average of 40 grams can be produced per harvest per square foot of grow area. Indoor producers can get between 4-6 harvests a year, which is likely how most legal marijuana facilities would grow it in the District. For the sake of argument, it takes about one square foot of grow area to produce 200 grams a year. So potentially it could take only about 38,000 to 80,000 square feet of grow area to serve the entire residential market. That is less than one city block of space or less than 0.01 percent of the total area the District.

Resident, Tourist and Adults Living in Nearby Communities:

11.8 to 26.5 metric tons which would require about 59,000 to 133,000 square feet of licensed grow space.

If non-residents are allowed to buy marijuana the calculations for the legal market become much more difficult. There are numerous factors which would affect purchasing by non-residents including: What is the price going to be? How small will the purchase limit be? Are there going to be marijuana smoking lounges where they can consume marijuana in D.C? How many stores will be licensed and where will they be located? How many other states will marijuana be legal in?

To think about the question it is probably best to split non-residents into two groups, tourists and people living in nearby commuter neighborhoods.

Tourist – Calculating the possible demand of tourists (if they are allowed to purchase marijuana) is difficult, but it is important because the district had roughly 19 million visitors a year. One way to look at it is to assume every visitor stays for one night so over the course of the year tourists artificially increase the overall population of D.C. by roughly 52,000 people or 40,000 adults. That is a 7 percent increase in population. So a 7 percent increase in demand would be 0.6-1.3 metric tons.

Residents of neighboring communities – A much bigger and unique unknown is the huge number people who live very close to D.C. There are a total of about 1.7 million people inside the beltway, but only about 650,000 live in D.C. proper itself. While it is clear some of these people would come to enjoy legal marijuana in D.C., how much depends on the factors listed previously.

Purely for the sake of argument let’s assume 30 percent of the marijuana consumed by adults from these outlying communities eventually will come from D.C. This could be in the form of people from Arlington coming into D.C. to enjoy a joint at their friend’s house or an individual in Bethesda buying a few grams in D.C. and bringing them home. I suspect the D.C. Council will take steps to try to discourage this latter’s behaviors with rules like a very small purchase limit for non-residents. This increases the estimate by an addition 3.6 to 8.1 metric tons.

This 30 percent assumption could easily be off. If the legal price is slightly above the black market, commuter use could be lower; but if price at D.C. stores is significantly lower than the black market, commuter consumption will probably be much higher. This could easily be the biggest variable that makes accurate projections difficult.

For comparison, the D.C. Director of Fiscal and Legislative Analysis, Office of Revenue Analysis estimated the potential market could be around 10.4 metric tons. This estimate is based on the lower end for two main reasons. They assume a relatively low average annual consumption among users of only three ounces and a relatively low rate of D.C. marijuana consumption from adults in neighboring communities.

Jon Walker is the author of After Legalization: Understanding the future of marijuana policy

Photo by Rusty Blazenhoff under Creative Commons license

CommunityJust Say Now

Analysis: Estimating the Size of D.C. Marijuana Market

How easy would it be for an urban location like D.C. to grow its own marijuana?

With people of D.C. set to vote to legalize the possession and home cultivation of marijuana on Tuesday, and the Council already working on a tax and regulate bill, an important question is just how big will this market be. What is the local demand for marijuana among adults? It is an issue that came up several times during the Council’s public hearing on the tax and regulate bill yesterday.

To get a rough answer to this question I did a very basic analysis. These figures are meant only to provide a starting point for future discussions and to highlight why it is uniquely difficult to answer this question for D.C. The figures could be significantly off-base with numerous unknowns at the moment.

It should also be noted that the legal market will probably take a few years to grow to its full size. As we have seen, people will only slowly switch away from their illegal dealers, and it is very likely that limited supply during the first several months will keep prices high undermining some people from using any new retail stores.

The Marijuana Market Among D.C. Residents Only

7.6-17.1 metric tons – A way to get a very rough estimate of the local demand for marijuana among adults is D.C. is to take existing estimates from Colorado and Washington and simply adjust for adult population. The Marijuana Policy Group prepared for the Colorado Department of Revenue a report that provided a useful breakdown of the major market estimates in Colorado and Washington. The highest projection per capita was based on the Rand Corporation’s estimate for the potential market in Washington, and the lowest is the Colorado Center on Law and Policy’s estimates for the residential adult market in Colorado. The Marijuana Policy Group’s own projections for Colorado were just slightly lower per capita than the Rand study.

38,000 to 80,000 square feet of grow space – The next obvious question is how easy would it be for an urban location like D.C. to produce this agricultural product internally since shipments across state lines is prohibited? A report for the Washington Liquor Control Board estimated that an average of 40 grams can be produced per harvest per square foot of grow area. Indoor producers can get between 4-6 harvests a year, which is likely how most legal marijuana facilities would grow it in the District. For the sake of argument, it takes about one square foot of grow area to produce 200 grams a year. So potentially it could take only about 38,000 to 80,000 square feet of grow area to serve the entire residential market. That is less than one city block of space or less than 0.01 percent of the total area the District.

Resident, Tourist and Adults Living in Nearby Communities

11.8 to 26.5 metric tons which would require about 59,000 to 133,000 square feet of licensed grow space.

If non-residents are allowed to buy marijuana the calculations for the legal market become much more difficult. There are numerous factors which would affect purchasing by non-residents including: What is the price going to be? How small will the purchase limit be? Are there going to be marijuana smoking lounges where they can consume marijuana in D.C? How many stores will be licensed and where will they be located? How many other states will marijuana be legal in?

To think about the question it is probably best to split non-residents into two groups, tourists and people living in nearby commuter neighborhoods.

Tourist – Calculating the possible demand of tourists (if they are allowed to purchase marijuana) is difficult, but it is important because the district had roughly 19 million visitors a year. One way to look at it is to assume every visitor stays for one night so over the course of the year tourists artificially increase the overall population of D.C. by roughly 52,000 people or 40,000 adults. That is a 7 percent increase in population. So a 7 percent increase in demand would be 0.6-1.3 metric tons.

Residents of neighboring communities – A much bigger and unique unknown is the huge number people who live very close to D.C. There are a total of about 1.7 million people inside the beltway, but only about 650,000 live in D.C. proper itself. While it is clear some of these people would come to enjoy legal marijuana in D.C., how much depends on the factors listed previously.

Purely for the sake of argument let’s assume 30 percent of the marijuana consumed by adults from these outlying communities eventually will come from D.C. This could be in the form of people from Arlington coming into D.C. to enjoy a joint at their friend’s house or an individual in Bethesda buying a few grams in D.C. and bringing them home. I suspect the D.C. Council will take steps to try to discourage this latter’s behaviors with rules like a very small purchase limit for non-residents. This increases the estimate by an addition 3.6 to 8.1 metric tons.

This 30 percent assumption could easily be off. If the legal price is slightly above the black market, commuter use could be lower; but if price at D.C. stores is significantly lower than the black market, commuter consumption will probably be much higher. This could easily be the biggest variable that makes accurate projections difficult.

For comparison, the D.C. Director of Fiscal and Legislative Analysis, Office of Revenue Analysis estimated the potential market could be around 10.4 metric tons. This estimate is based on the lower end for two main reasons. They assume a relatively low average annual consumption among users of only three ounces and a relatively low rate of D.C. marijuana consumption from adults in neighboring communities.

Jon Walker is the author of After Legalization: Understanding the future of marijuana policy (more…)

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at http://pendinghorizon.com