January 31, 2020

U.S. Cannabis Spot Index — January 31, 2020

U.S. Cannabis Spot Index — Published January 31, 2020

U.S. Cannabis Spot Index down 0.1% to $1,441 per pound.

 

The simple average (non-volume weighted) price increased $9 to $1,632 per pound, with 68% of transactions (one standard deviation) in the $895 to $2,370 per pound range. The average reported deal size increased to 2.0 pounds. In grams, the Spot price was $3.18 and the simple average price was $3.60.

 

The relative frequency of trades for indoor flower decreased by 1% this week. The relative frequency of deals for outdoor product increased by the same proportion, while that for transactions involving greenhouse flower was stable. 

 

Warehouse product’s share of the total reported weight moved nationally expanded by almost 2% this week. The relative volumes of greenhouse and outdoor flower each contracted by about 1%.

The U.S. Spot Index declined by 0.1% this week to settle at $1,442 per pound. For January as a whole, the national composite price averaged $1,415 per pound, down by 1.3% from December 2019’s mean going rate of $1,434 per pound. The transition to a new year has seen varied price movement from 2017-2018 to the current moment. From December 2017 to January 2018, the monthly average U.S. Spot price fell by 5.2%, from $1,417 to $1,343 per pound. From December 2018 to January 2019, it rose by 1.8%, from $1,136 to $1,157 per pound.

 

This year, the overall downturn in the national composite price has been driven by declining rates in California and Colorado. While both markets saw significant demand growth in 2019, January and February of any given year are typically periods of relatively depressed sales compared to December and March. 

 

Meanwhile, high prices continue to be observed in the new recreational markets of Michigan and Illinois. The number of pounds of flower traded wholesale in each of those markets in 2019 amounted to about 8% and 5%, respectively, of our preliminary estimates of the amounts of product moved in either California or Colorado. Consequently, the elevated prices being reported currently out of new recreational markets are not exercising significant influence on the U.S. Spot at this time, due to the relatively small amount of trading taking place.

February Forward closes unchanged at $1,450 per pound.

 

The average reported forward deal size was 43 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 38%, and 16% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 50 pounds, 32 pounds, and 44 pounds, respectively.

 

At $1,450 per pound, the February Forward represents a premium of 0.6% relative to the current U.S. Spot Price of $1,441 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

Initial Estimate of Size of California’s Wholesale Flower Market for 2019 Indicates 25% Growth in Volume of Product Traded, Almost 30% Increase in Value

Washington

Regulators Publish Proposed Rules to Require Testing for Pesticides and Heavy Metals, Plus Estimates of Costs to Businesses

Michigan

Cannabis Benchmarks Estimates that Michigan’s Legal Cannabis Market Declined in Size and Value for Second Straight Year in 2019

 

Illinois

Size of Wholesale Flower Market Doubled  in 2019 Compared to Previous Year, But Production Must Expand Dramatically to Meet Adult-Use Demand

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

31 January 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — January 31, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 31, 2020
CCSI 31Jan2020

*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$6.38 per gram this week, down 3.5% from last week’s C$6.61 per gram. This week’s price equates to US$2,209 per pound at the current exchange rate.

 

This week we examine new retail cannabis sales data reported by Statistics Canada. Last week, November 2019 sales were published. Canadian legal cannabis sales amounted to C$135M in November, up by 5.2% from October’s sales total. Despite showing some overall expansion from the prior month, digging into the numbers it is clear that all the sales growth came from one province – British Columbia (BC).

BC looks to be playing a bit of catch up, and the sales increase blew past our modelled expectations. This is a positive sign for the legal industry, because BC is regarded as one of the provinces with the strongest illicit market presence. The sales growth can be attributed to an exponential expansion in physical stores across the province. BC sales in November 2018 were only C$1.1M; November 2019’s sales of C$19M shows 1,666% growth over the year.

Source: Cannabis Benchmarks

Alberta retail cannabis sales have climbed steadily since legalization. As we reported last week, Alberta has been seen as the most liberal and forward-looking province for making legal cannabis available to users. The Alberta government’s framework to license and regulate cannabis retailers has been simple and quick; hence has been more successful that other provinces in stamping out the illicit market. Alberta sales in November 2018 were C$11.2M, November 2019’s sales of C$29.8 represent a rise of 166% year-over-year.
Quebec has been another province that has successfully grown sales over the first year of legalization. Quebec’s goal since initiation was to keep taxes and prices low to beat out the black market. Quebec sales in November 2018 were C$11.9M in total; November 2019’s C$29.8 in sales constitutes an increase of 151% over the year.
Lastly, we turn to Ontario. Ontario, Canada’s most populous province, receives a lot of attention from cannabis investors. In fact, most LPs blamed the sluggish roll out of retail stores in Ontario as the major reason for their lagging financial performance. Ontario’s slow roll out of retail shops (there are only 25 in the province currently) has hurt overall cannabis sales and kept customers going back to the illegal sources. As seen in the chart below, sales were very low until April 2019, with cannabis only offered through the online Ontario Cannabis Store prior to that month. After April 2019, sales climbed steadily as the current stores opened, but growth stalled in late summer. With the Ontario government facing immense pressure they have abandoned the lottery system for awarding new retail licenses, but the impact of more easily obtained stores licenses and sales is not expected until early Q2. Ontario sales in November 2018 were C$8.9M; November 2019 sales of C$31.6 show a rise of 254% from a year ago.

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

31 January 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

January 24, 2020

CANADA CANNABIS SPOT INDEX — January 24, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 24, 2020

*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$6.61 per gram this week, up 2.3% from last week’s C$6.46 per gram. This week’s price equates to US$2,292 per pound at the current exchange rate.

This week we examine the potential cannabis market landscape in Alberta through the end of 2020. A Statistics Canada survey estimates 662,000 cannabis users in Alberta, or roughly 18.8% of the province’s adult population. In many ways, Alberta has been seen as the most liberal and forward-looking province for making legal cannabis available to users. The Alberta government’s framework to license and regulate cannabis retailers has been simple and quick, similar to the way it operates liquor stores.

Our latest cannabis store count puts Alberta well ahead of the rest of the country with 55% of Canada’s cannabis retailers located in the province. Accessibility has been one of the biggest impediments to the growth of legal cannabis sales in Canada, but Alberta’s unique approach has been effective in driving sales into the legal market. We have reported in the past that roughly 80% of cannabis across Canada is still being purchased in the illicit market, but Alberta looks to be doing better than the other provinces on that front. Kelley Holmes, the manager of cannabis account services for the Alberta Gaming, Liquor, and Cannabis Commission (AGLC), recently stated that “Colorado, during its first year of legalization … had around 15% of the market move to the legal market;” but, in Alberta, Holmes estimates the proportion is between 25% and 30%.

Source: Cannabis Benchmarks

As we have established in past reports, there is a very strong relationship between retail sales levels and the number of cannabis stores in a province. Accordingly, Alberta has one of the highest per capita sales levels. We project the number of stores will continue to grow and estimate that by December 2020 there will be 668 stores open across Alberta, with 292 more stores opening over the course of the year, for a growth rate of 78%.

 

Increased sales will come with growth in the number of stores. Cannabis Benchmarks projections for retail cannabis sales in Alberta and the number of licensed storefronts projected to open each month through the end of 2020 are illustrated in the charts below.

Source: Cannabis Benchmarks

As of the last retail report from the Government of Canada, Alberta’s monthly sales for September and October averaged C$27M. We are now forecasting legal retail cannabis sales in Alberta to average C$37M per month in 2020, with the addition of the new retail locations and Cannabis 2.0 products, generating C$40.5M in sales by December 2020. 

In total, we forecast C$441M of sales in Alberta in 2020, with Cannabis 2.0 products expected to be C$61M, or 14%.  

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24 January 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

January 17, 2020

U.S. Cannabis Spot Index — January 24, 2020

U.S. Cannabis Spot Index — Published January 24, 2020

U.S. Cannabis Spot Index up 3.0% to $1,443 per pound.

 

The simple average (non-volume weighted) price increased $44 to $1,623 per pound, with 68% of transactions (one standard deviation) in the $898 to $2,348 per pound range. The average reported deal size declined to 1.9 pounds. In grams, the Spot price was $3.18 and the simple average price was $3.58.

 

The relative frequency of trades for indoor flower decreased by almost 3% this week. The relative frequencies of deals for greenhouse and outdoor product increased by about 2% and 1%, respectively.

 

Outdoor flower’s share of the total reported weight moved nationally contracted by 3% this week. The relative volumes of warehouse and greenhouse product expanded by 1% and 2%, respectively.

The U.S. Spot Index rose by 3% this week to settle at $1,443 per pound. Yet the current overall trend of the national composite price remains a fairly modest downward slide, driven primarily by such price movement in California and Colorado, the country’s two largest markets. Additionally, while still holding stable overall, the trend line of Oregon’s Spot exhibited a slight decline this week.

 

On the West Coast, indoor growers are currently enjoying elevated rates for their produce. Prices for warehouse-grown flower in California, Oregon, and Washington State all rose this week and settled above their 2019 peaks. In the Pacific Northwest states, rates for outdoor product documented so far this month are elevated compared to those observed in December, while prices for such flower in California have declined in the opening weeks of 2020.

 

 

The new adult-use markets of Illinois and Michigan continue to experience tight supply and high wholesale flower prices. However, Massachusetts’ Spot Index this week vaulted above its 2019 peak and is the highest in the country by a significant measure. This week’s Massachusetts Spot is up 19% year-over-year. Last year at this time, the state’s adult-use market was just two months old and consisted of only a handful of retailers. Now, with over 30 shops authorized to sell to general consumers, it seems demand has grown and is putting pressure on cultivators to keep up. Similar scenarios could play out in Illinois and Michigan; wholesale price peaks may be some months down the road if retail access and demand growth continues to outpace supply.

Prices for both adult-use and medical flower climbed in all three of the states with the newest recreational markets.

 

  • Illinois 

    • Adult-use: $3,041 per pound, up 0.4% from last week.

    • Medical: $3,096 per pound, up 7.2% from last week.  

  • Massachusetts

    • Adult-use: $3,538 per pound, up 5.2% from last week.

    • Medical: $3,418, up 0.9% from last week.  

  • Michigan 

    • Adult-use: $3,490 per pound, up 0.4% from last week. 

    • Medical: $2,553, up 1.9% from last week. 

     

February Forward unchanged at $1,450 per pound.

 

The average reported forward deal size was 42 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 47%, 39%, and 14% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 49 pounds, 32 pounds, and 41 pounds, respectively.

 

At $1,450 per pound, the February Forward represents a premium of 0.5% relative to the current U.S. Spot Price of $1,443 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

Wholesale Flower Designated as Adult-Use Commanded Premium of Almost 25% Over Medical Product in 2019

 

Oregon

Retail Sales Grew 23% YoY in 2019; Market Trends Suggest Even Larger Revenue Expansion Possible in 2020

 

Washington

Monthly Sales Stabilized in Second Half of 2019 at Just Under $100 Million, as YTD Total through November Tops $1 Billion

 

Massachusetts

State Spot Index Surpasses $3,475 Per Pound, Higher Than Newer Recreational Markets in Illinois and Michigan

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

24 January 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — January 17, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 17, 2020

*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$6.46 per gram this week, down 0.7% from last week’s C$6.51 per gram. This week’s price equates to US$2,246 per pound at the current exchange rate.

This week we continue our discussion of both the current availability and prospects related to the Cannabis 2.0 market. As a quick reminder, Cannabis 2.0 refers to the legalization of edibles, extracts, and topicals. Unlike last year at the onset of legalization – when there appeared to be a massive shortage of flower and supply dynamics were opaque – the provincial governments, licensed producers, and retailers have this time been vocal in setting expectations. They have been open about both the timeline to release products and their limited initial availability. That said, demand for the new products has been roaring. Most shops sell out their stocks immediately.

As part of the roll out of Cannabis 2.0, Health Canada has put strict regulations on the level of THC contained in each product, as well as on packaging and labeling. 

  1. These products cannot contain nicotine, caffeine, or alcohol; hence no infused coffee or alcoholic beverages will be available. 
  2. Edibles (food, candy, or beverages) cannot contain more than 10 milligrams of THC per container. For example, a package of the Grape Oasis Gummies shown below comes with five pieces that contain two milligrams of THC each. 
  3. Cannabis oil extracts are limited to 1,000 milligrams of THC per container.
  4. Topicals, such as lotions, cannot contain more than 1,000 milligrams of THC in a container.

Ontario was one of the few provinces that gave private brick and mortar stores a head start on receiving and selling Cannabis 2.0 products. Starting January 6, the 25 Ontario retailers were able to procure a limited range of products to sell ahead of the government-run Ontario Cannabis Store (OCS). Yesterday, was the first day that the OCS online store sold Cannabis 2.0 products and they were sold out of edibles within hours of their initial availability. In fact, there was a digital queue of thousands of orders showing the strong demand. Currently there is only one cannabis edible product listed on the OCS, but even that is out of stock.

The coming months will be interesting in this industry as the Canadian population becomes accustomed to the new product types. We will be tracking the sales growth associated with these new products, as well as how dry flower sales might be impacted.

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

17 January 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved