CANNABIS BENCHMARKS WEEKLY REPORT -- JUNE 15, 2018
U.S. Cannabis Spot Index down 2.3% to $1,209 per pound. The simple average (non-volume weighted) price decreased by just over $31 to $1,340 per pound, with 68% of transactions (one standard deviation) in the $573 to $2,107 per pound range. The average deal size decreased 2.2% to 5.1 pounds from 5.2 pounds. In grams, the Spot price was $2.66, and the simple average price was $2.95.
The relative frequency of transactions for indoor flower was stable week-over-week, while that for greenhouse product increased by 1%, at the expense of deals for outdoor flower. Warehouse-grown product’s share of the total reported weight moved grew by almost 3% compared to last week. The relative volumes of greenhouse and outdoor flower both decreased by similar magnitudes, of just over 1%. In the first week of January 2018, the relative volume of greenhouse product was nearly 40%, but fell to levels comparable to this week’s by month’s end.
The U.S. Spot Index sank to a new annual and all-time low, falling below the previous historic trough that it occupied for the prior two weeks. Average deal sizes continued to shrink for the most part, with only that for indoor product seeing an increase. Last year at this time, the average composite transaction volume, as well as those for warehouse, greenhouse, and outdoor flower, were 9.9, 9.1, 8.4, and 28.8 pounds, respectively.
The trend line of the U.S. Spot Index continued to demonstrate downward momentum this week, as it has consistently since just before the 4/20 holiday. It is being paced by Washington State’s Trailing 4-Week Average price, the decline of which accelerated this week, while that of Nevada is also applying downward pressure. The trend line of Colorado’s Spot Index remained steady, while California’s also flattened on recent upticks in its weekly composite price. The consistent decline of Oregon’s Trailing 4-Week Average this year has resulted in it slipping below that of Colorado for the first time since August 2016, prior to the opening of the licensed adult-use system in the Beaver State.
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July Forward assessed down $50 to $1,350 per pound. The average forward deal was unchanged at 67 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 53%, 35%, and 13% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 73 pounds, 67 pounds, and 43 pounds, respectively.
The entirety of the six-month Implied Forward Curve has been assessed lower this week; the former two months by $50 per pound, and the latter four months by $100 per pound. Although market participants are still facing significant uncertainty due to the end of California’s Transition Period on July 1st, a topic examined in depth below, the fact remains that the number of cultivation licenses issued in the Golden State vastly out numbers those of retailers. As such, it would seem that even if supply chain disruptions occur or product is disqualified from market due to failed testing, enough should be available to stock the fairly limited shelf space that exists currently in California’s licensed system.
Additionally, Massachusetts’ adult-use market is expected to be quite small at the outset, potentially consisting of less than 20 retailers in July - and perhaps as few as a dozen - and consequently will have little discernible impact in the U.S. Spot Index even if wholesale prices are high, as they are expected to be. Meanwhile, supply side rates in the Pacific Northwest states and Colorado continue to sink, with market participants reporting no signs of relief in sight, particularly in Oregon and Washington. Finally, the Spot Indices of Nevada and Arizona, two significantly-sized markets, have consistently trended downward recently. In both, production capacity appears more than capable of meeting demand, with no shortages or tight supply reported in either market in some time.
At $1,350 per pound, the July Forward represents a premium of 11.7% relative to the current U.S. Spot Price of $1,209 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.
Sample headlines from this week's Premium Report:
15 June 2018. Copyright © 2018 New Leaf Data Services, LLC. All rights reserved