Commercial Cannabis Production Costs: What’s Included in the Cost to Produce a Pound of Flower?

Updated January 2025

How much does it cost to produce a pound of cannabis flower? That question is top of mind for many cultivators in both emerging and established markets—and everyone’s in a race to the bottom. The U.S. cannabis industry may be valued in the ballpark of $45 billion in 2025, but margins are still extremely tight for plant-touching businesses. The surest path for cannabis business owners is reducing the costs of what’s in your control.

So what’s included in the cost to produce a pound of flower? Here’s the breakdown. 

Fixed vs. Variable Commercial Cannabis Production Costs

Cannabis production costs can be categorized into two main types: fixed costs and variable costs. Understanding the distinction between these is crucial for evaluating both business performance and the efficiency of individual cultivators.

Fixed Cannabis Cultivation Costs

Fixed costs are largely dictated by the business owner’s choices, such as the location of the grow and facility design choices, including:

• Taxes and regulatory fees based on jurisdiction
• Rent or mortgage expenses and property taxes
• Base utility costs that are tied to the selected facility
• Employee labor costs, such as state minimum wage and benefits

While these costs cannot be easily adjusted once the location and operations are established, strategic site selection and energy-efficient infrastructure can help mitigate their impact.

Variable Cannabis Cultivation Costs

Variable costs, by contrast, are directly influenced by cultivation managers. These can include:

• Utility prices (gas, electricity, water)
• Fertilizer type and quantity
• Substrates and growing media
• Pest control inputs

Efficient management of these resources can significantly reduce these costs. For example, growers can:

• Optimize nutrient feeding schedules based on plant growth stages

• Utilize energy-efficient lighting and climate control systems
• Deploy automation tools

For more on calculating variable costs, check out our blog on How to Measure Cultivation Yield Metrics to Assess Per-Pound Overhead Costs, including how to calculate yield per square foot, grams per watt of energy usage and yield per kilowatt.

How Automation Reduces Costs in Modern Cultivation Facilities

Part of cost reduction comes down to cultivation facility square footage, and the other part is boosting efficiency with automation. Automation is revolutionizing the cannabis industry. Rapidly evolving AI technologies are enabling cultivators to monitor and optimize operations in real time. Key benefits include:

• Improved utility management: Automated irrigation and climate control systems reduce water and energy waste.
• Labor efficiency: Robotics and scheduling software ensure employees are utilized effectively, minimizing downtime.
• Precision agriculture: AI-driven sensors provide data on plant health, allowing cultivators to adjust inputs precisely and reduce waste.

Facilities in the 5,000-10,000 square foot canopy range typically hit an inflection point as they scale where automation becomes cost effective, reducing labor and utility expenses significantly. Calculate your cultivation facility efficiency to make a data-based decision on when the time might be right as your grow moves from a microbusiness to mid-size, large or MSO-scale (depending on state license categories, of course).

What Fix and Variable Costs Reveal About a Plant-Touching Business

The difference between fixed and variable production costs matters when you’re evaluating a business versus an individual cultivator. 

To evaluate the financial health of a business, you must consider the entire picture—from the startup costs and the facility construction to cannabis licensing fees, along with the unique costs associated with cannabis compliance in different regulatory markets (RFID tags, anyone?).

To evaluate an individual cultivator, focus on the variable costs. Those will give you a broad sense of the cannabis facility workflow and how efficiently variable resources are being utilized within that facility. That efficiency is what will ultimately drive profits.

Success Rides on Cultivation Efficiency

An efficient business can produce a pound of cannabis for about $150—or even less—depending on the state regs and regional climate. On the opposite end of the spectrum, it could cost as much as $1,000 to grow a pound of flower. That difference is tied to location and regulatory constraints, to be sure, but also cultivation efficiency. 

Knowing how to parse fixed costs from variable ones allows you to see just how valuable a cultivator’s methodology can be. More importantly, you can determine who the great cultivators are, because every successful cannabis business has a knowledgeable cultivator who is responsibly managing variable costs.

Want to talk more about optimizing yield and quality of harvest, the best cannabis facility design for your goals, equipment and materials selections and cannabis genetics? Contact Next Big Crop today.