August 30, 2019

CANADA CANNABIS SPOT INDEX — August 30, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 30, 2019

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.72 per gram this week, down 3.9% from last week’s C$7.00 per gram. This week’s price equates to US$2,293 per pound at current exchange rates.

 

This week we examine the results of the lottery for retail store licenses held by the Alcohol and Gaming Commission of Ontario (AGCO). On August 21, AGCO unveiled the 42 winners that can potentially open a physical outlet. The license winners are allocated across five structured regions of the province. 

 

This was the second lottery held in Ontario after the first, held in January, was deemed unfair. This time around AGCO initiated a more strict and controlled process.





Here is our review of the lottery results in a nutshell:

A total of 5,094 parties expressed interest, of which 4.5% were disqualified, withdrawn, or deemed incomplete. The remaining 4,864 applications entered the lottery across the five regions, with 42.2% of the applications submitted to open storefronts in Toronto or the Greater Toronto Area (GTA). From these applications only 0.9% were given the special email or call to congratulate them for being winners. 

 

Ontario has been one of the slowest provinces to open licensed cannabis stores, which has both hurt sales and contributed to the prevalence of the illicit market. That looks to change soon with the opening of new legal outlets and the introduction of new products nationwide in Canada’s licensed market. Today we are revisiting our forecast for sales in Ontario through the end of the year, adjusted to include June data released recently by Health Canada. The June sales data showed a significant increase from May; therefore we have updated our projection higher for the rest of the year.

Source: Cannabis Benchmarks

Health Canada’s Cannabis Retail Trade Sales by Province and Territory showed Ontario sales increasing in June to C$25.9M, up by 13.2% compared to the month prior. We anticipate July and August sales to be slightly higher with 31 days in each month. After that, we expect sales to pick up significantly. 

 

First, we assume that baseline online sales will grow by 20% each month starting in October as new products such as edibles, vapes, and beverages become available. Second, we assume the same for daily sales at existing shops, as well as newly licensed storefronts from the second lottery. Overall, our calculations show that Ontario cannabis sales could grow by as much as 300% from June’s monthly revenues, to as high as C$79M in December of this year.

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

30 August 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

U.S. Cannabis Spot Index — August 30, 2019

U.S. Cannabis Spot Index — Published August 30, 2019

U.S. Cannabis Spot Index up 4.0% to $1,404 per pound.

 

The simple average (non-volume weighted) price increased $48 to $1,605 per pound, with 68% of transactions (one standard deviation) in the $858 to $2,353 per pound range. The average reported deal size was 2.2 pounds. In grams, the Spot price was $3.10 and the simple average price was $3.54.

 

The relative frequency of trades for indoor flower increased by over 1% this week. The relative frequency of transactions involving greenhouse product decreased by the same proportion, while that for outdoor flower was stable. Outdoor product’s share of the total documented weight moved nationally contracted by 3% this week. The relative volumes of warehouse and greenhouse flower expanded by 1% and 2%, respectively.

 

 

The U.S. Spot Index rose by 4% this week to settle at $1,404 per pound. This week’s national composite price represents a new annual peak and is the highest observed since the opening week of 2018.  

 

As shown in the chart above, the generally upward trend in wholesale prices documented in the country’s four major legal cannabis markets is persisting as summer draws toward a close. New tax data out of California, discussed below, shows that the amount of demand being captured by the Golden State’s licensed system increased significantly in Q2. 

 

Downward trends in wholesale rates in the secondary markets of Nevada and Michigan have not been enough to stem the positive momentum of the U.S. Spot. Nevada’s market is close to the size of Oregon’s in terms of retail revenues generated in recent months. However, we estimate that significantly more flower is traded wholesale in Oregon compared to Nevada.

The national volume-weighted price for flower to be sold to general consumers rose this week on increases in all four major markets, as well as Alaska, which outweighed a decline in Nevada. 

 

Prices for medical flower jumped this week to their highest point in the quarter. Rates for product designated for registered patients were on the rise in California, Massachusetts, Illinois, and New Mexico, as well as some smaller markets.

 

September Forward closes up $35 to $1,325 per pound.

 

The average reported forward deal size was 46 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 59%, 25%, and 16% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 40 pounds, and 63 pounds, respectively.

 

At $1,325 per pound, the September Forward represents a discount of 5.6% relative to the current U.S. Spot Price of $1,404 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines From This Week’s Premium Report:

  • California

  • Q2 Cannabis Tax Data Shows Retail Sales Up Roughly 18% from Q1, Volume of Flower and Trim Transferred Wholesale Both Up by About 38% Each
  •  
  • Colorado

    Denver Health Official Provides More Details on Contaminant Assessment of Products on Retail Shelves

  • Oregon

  • QTD Spot Index Up About 50% Compared to Q2’s Average Composite Price
  •  
  • Michigan

  • Sales in Medical Cannabis Market Expanding Steadily, But Suspension of Testing Lab Raises Questions About Possible Supply Bottleneck
  •  
  • New Mexico

  • New Plant Count Limit Went Into Effect This Week, Producers Now Limited to 1,750 Mature Plants, Down from 2,500

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

30 August 2019.  Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

August 23, 2019

U.S. Cannabis Spot Index — August 23, 2019

U.S. Cannabis Spot Index — Published August 23, 2019

U.S. Cannabis Spot Index up 1.7% to $1,350 per pound.

 

The simple average (non-volume weighted) price increased $65 to $1,557 per pound, with 68% of transactions (one standard deviation) in the $822 to $2,292 per pound range. The average reported deal size increased to 2.5 pounds from 2.3 pounds last week. In grams, the Spot price was $2.98 and the simple average price was $3.43.

 

The relative frequency of trades for outdoor flower decreased by over 3% week-over-week. The relative frequency of transactions involving indoor and greenhouse product increased by about 2% and 1%, respectively. Warehouse flower’s share of the total documented weight moved nationally contracted by almost 2% this week. The relative volume of outdoor product expanded by the same magnitude, while that for greenhouse flower was stable.

 

The U.S. Spot Index rose by 1.7% this week to settle at $1,350 per pound. Although rates for all three grow types were on the upswing, the potential for a larger increase in the national composite price was tempered by another expansion in the relative volume of outdoor-grown flower. 

 

As we noted last week, California’s market has seen a surge of sun-grown supply recently as light-deprivation harvests are dried, trimmed, and brought to market. While that trend persisted this week, increases in the relative volume and average deal size for outdoor product in the Golden State were smaller than those documented in prior weeks. 

In contrast, Oregon and Washington State reported transaction stats indicate that wholesale buyers continue to favor indoor flower this summer, with increasing relative volumes of such product helping to push up Spot prices in those markets.

The national volume-weighted price for flower to be sold to general consumers rose slightly this on increases in that sector of the market in Colorado, as well as in Oregon and Alaska. 

 

Prices for medical flower recovered a bit after last week’s significant decline. Rates for product designated for registered patients were on the rise in California, Arizona, Michigan, Maine, and New Mexico, as well as some smaller markets.

 

September Forward assessed up $50 to $1,290 per pound.

 

The average reported forward deal size was 47 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 55%, 29%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 41 pounds, 50 pounds, and 62 pounds, respectively.

 

At $1,290 per pound, the September Forward represents a discount of 4.5% relative to the current U.S. Spot Price of $1,350 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines From This Week’s Premium Report:

  • California

  • Price for Adult-Use Flower Down by Over 6% from Close of July
  •  
  • Colorado

    State Spot Index Climbs to Another Year-to-Date High as Historical Data Indicates Demand is Reaching its Highest Point of the Year

  • Oregon

  • Composite Price Rose Almost 18% in First Half of Q3 Despite Significantly Expanded Harvest Volume in July
  •  
  • Washington

  • Relative Volume of Indoor Flower Has Reached its Highest Levels of the Year this Month as That for Outdoor Product Shrinks
  •  
  • Nevada

  • Retail Sales Down in June After Reaching Record Heights in May, Still Up by 20% Year-Over-Year
  •  
  • Arizona

  • Flower Sales Volume to Patients Reaches 12,560 Pounds in July, a New Record for One of the Country’s Largest Medical Markets

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

23 August 2019.  Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — August 23, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 23, 2019

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$7.00 per gram this week, up 2.0% from last week’s C$6.86 per gram. This week’s price equates to US$2,390 per pound at current exchange rates.

 

This week we examine the growing number of cultivators in Canada’s market. As the country prepared to legalize the cannabis industry, Health Canada observed massive interest in obtaining a cultivation license. 

Last year at this time, it is estimated that there were over 500 applications for such permits waiting to be reviewed. Since then, Health Canada has been working through the pile and has licensed a total of 184 producers. That is a growth of 70 licenses over the last year, an increase of over 60%.

Source: Cannabis Benchmarks, Health Canada

At the moment, not all licensees are operational. However, if each license holder builds their cultivation facility and begins producing, then we can expect that Canada’s production capacity will surpass domestic demand by a large margin. Furthermore, if options to export significant amounts of product remain limited, as they are currently, a surplus of inventory could overwhelm the Canadian market. 

 

The chart below shows the growth in number of licensed cultivators under the Cannabis Regulations. The increase in licenses accelerated quickly ahead of the legalization of cannabis on October 17, 2018. Ontario and British Columbia have seen the largest expansions in the number of licensed cultivators, with continued growth occurring this summer.

Source: Cannabis Benchmarks, Health Canada

The potentially lucrative nature of Canada’s newly-legal cannabis industry generated significant interest, but only the strong survived in fully completing their applications, which proved to be an immense undertaking in both length and detail. 


Health Canada took a very cautious approach to eliminate applicants who could not fulfill the strong standards mandated of industry participants. The completed form required municipal permits, property details and layouts, executive team security clearances, approvals from local fire and police associations, and much more before submission. The average time to receive a license took anywhere from three to nine months depending on the completeness of the application. Our estimates indicate there are still 400 applications in Health Canada’s queue, but it is likely that some have been withdrawn.

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

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Do you support wholesale market transparency?

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

23 August 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

August 16, 2019

CANADA CANNABIS SPOT INDEX — August 16, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 16, 2019

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.86 per gram this week, down 1.7% from last week’s C$6.98 per gram. This week’s price equates to US$2,345 per pound at current exchange rates.

 

This week we turn our attention to the growing interest in cannabidiol (CBD) in Canada. Taking into account the popularity of CBD products in the U.S. and the fact that American lawmakers were working toward legalizing industrial hemp, from which CBD can be derived, the Canadian government included the regulation of CBD as part of the Cannabis Act, the country’s legalization measure that went into effect in October 2018. Under Canadian law, unlike in the U.S., both CBD derived from industrial hemp and CBD derived from cannabis plants with greater than 0.3% tetrahydrocannabinol (THC) are treated identically.

 

 

Let’s start with some background. Cannabis and hemp plants contain hundreds of chemical substances, some of which are known as cannabinoids. CBD, like all cannabinoids, interacts with the human Endocannabinoid System. Endocannabinoids are molecules produced by the human body that are chemically similar to those found in cannabis plants. Unlike THC, however, CBD is non-psychoactive.

CBD Molecular Structure

Source: Wikipedia

CBD and other cannabinoids are found in the trichomes of cannabis and hemp plants. Trichomes are tiny, glandular outgrowths that emerge on the flowers and leaves of cannabis and hemp plants as they mature. The greatest concentrations of trichomes are typically found on the flowers. CBD extracted from cannabis or hemp plants can take the form of an oil or a crystalline powder, which can be consumed directly in capsule or tincture form; oils can also be vaporized for inhalation. The recent popularity of CBD among consumers has led to such raw forms of the extracted molecule being incorporated into products such as topical creams, cosmetics, beverages, and foods.

 

CBD is still classified as a controlled substance under United Nations drug control conventions; hence CBD is regulated in Canada and must abide by the rules and requirements that apply to cannabis under the Cannabis Act. 

 

Regulation of the CBD Supply Chain in Canada 

 

Cultivation: A federal license under the Cannabis Act is required. This license could be a cannabis cultivation license under the country’s cannabis regulations or an industrial hemp license under the industrial hemp regulations.

 

Processing: A processing license is required to manufacture products containing CBD for sale.

 

Distribution: CBD and associated products can be sold by provincially authorized cannabis retailers (provincial online marketplaces or private storefronts) for recreational use and, for medical purposes, by federally-licensed sellers of cannabis.

Import and Export: As with cannabis, the international transportation of CBD is illegal under three United Nations drug conventions. CBD products may therefore only be transported across international lines if the importing/exporting party is a holder of a license issued under the Cannabis Regulations; as with the domestic production, distribution, and sale of CBD, a permit from Health Canada is required in order to engage in international trading. See our report from August 2, 2019 for additional details on import and export.

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

Are you a licensed market participant in the U.S. or Canada? 

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

16 August 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved