CANNABIS BENCHMARKS WEEKLY REPORT -- JUNE 29, 2018
U.S. Cannabis Spot Index down 1.8% to $1,160 per pound.
The simple average (non-volume weighted) price increased by $5 to $1,325 per pound, with 68% of transactions (one standard deviation) in the $568 to $2,081 per pound range. The average deal size increased 8.5% to 5.8 pounds from 5.3 pounds. In grams, the Spot price was $2.56, and the simple average price was $2.92.
The relative frequency of transactions for indoor flower again decreased slightly week-over-week, by 1%, while that for greenhouse product was up by the same proportion. While the relative frequency of deals for outdoor flower was flat compared to last week, such product’s share of the total observed weight moved nationwide contracted modestly, by almost 2%. The relative volume of warehouse flower also experienced a small week-over-week decrease, of about 1%, resulting in an over 2% increase in greenhouse product’s relative volume.
The U.S. Spot Index slipped by 1.8% this week to settle at $1,160 per pound, establishing yet another historic low national composite price. Wholesale price deterioration in Colorado, Oregon, Washington, and Nevada have worked to overwhelm recent modest upticks in California, a phenomenon not always assured, as the whims of the Golden State’s market have on past occasions been observed to drive the direction of the national going rate. Yet, whether or not the former four adult-use states listed above can continue to dictate the direction of the U.S. Spot Index in the coming weeks is uncertain. Increasing supply from summer light-deprivation harvests (particularly in the West Coast markets), as well as generally expanding production in Nevada and Colorado, will run up against potential supply chain hurdles resulting from the end of the Transition Period in California, discussed at length in this week's Premium Report.
The histogram below show price dispersion by grow type for the first half of 2018. There has been significant price erosion in the major markets in 2018. Last year, excluding statistical outliers, no transactions were observed below $600 per pound, and only outdoor-grown flower was observed below $800. This year all grow types had some transactions at or below $600, with 65% of outdoor flower transacting at or below $800. Last year, nearly half of greenhouse flower was sold between $1,200 and $1,400 per pound, whereas this year, so far, has seen 56% of greenhouse flower sold between $800 and $1,000 per pound.
July Forward assessed down 11% to close at $1,200 per pound.
The average forward deal declined 1 pound to 65 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 42%, 41%, and 17% of forward arrangements, respectively, with the number of reported forwards for greenhouse grown flower on the rise. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 75 pounds, 63 pounds, and 46.5 pounds, respectively.
The double digit decline in the July Forward reflects extensive reporting from the field in California. Market participants have stated that while some businesses in the state may face difficulties adjusting to new requirements after June 30th, when the state’s Transition Period concludes, many others have been preparing for months. Additionally, the reality on the ground is that stringent enforcement of the new mandates will be difficult for regulators to execute with limited resources and statewide plant and inventory tracking still absent, potentially allowing the state’s plentiful production to flow through the supply chain more smoothly than the letter of the new rules might permit. Finally, delays in the opening of regulated adult-use and medical cannabis commerce in Massachusetts and Michigan, respectively, mean that those markets are no longer expected to influence the national Forward Curve as much as some anticipated earlier this year.
Meanwhile, a couple new developments this week have the potential to affect supply and demand in multiple states in the months ahead, although it must be acknowledged that such impacts could ultimately be negligible in regard to assessed wholesale pricing. First, we noted in the Spot Index commentary for California that the first major wildfire of the year was sparked late last week in Lake County, an area of northern California just southeast of Mendocino County. We discuss potential ramifications for California’s market in the Forward Curve commentary for that state. Additionally, the possibility of a severe fire season in the Pacific Northwest states is examined in the Forward Curve commentaries for Oregon and Washington State. Full coverage is available in the Premium Report.
At $1,200 per pound, the July Forward represents a premium of 3.4% relative to the current U.S. Spot Price of $1,160 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:
29 June 2018. Copyright © 2018 New Leaf Data Services, LLC. All rights reserved