February 21, 2020

U.S. Cannabis Spot Index — February 21, 2020

U.S. Cannabis Spot Index — Published February 21, 2020

U.S. Cannabis Spot Index down 2.6% to $1,421 per pound.

 

The simple average (non-volume weighted) price decreased $2 to $1,685 per pound, with 68% of transactions (one standard deviation) in the $929 to $2,442 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $3.13 and the simple average price was $3.72.

 

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

 

 

Greenhouse product’s share of the total reported weight moved nationally contracted by 4% this week. The relative volumes of warehouse and outdoor flower expanded by 3% and 1%, respectively.

The U.S. Spot Index declined by 2.6% this week to settle at $1,421 per pound. The trend lines of the Spot Indices of each of the country’s four largest markets are all on the downswing for the first time since early 2019. In the West Coast states, the overall declines in wholesale flower pricing are due primarily to falling rates for outdoor product. Such flower saw both its national relative volume and average deal size grow this week, indicating that additional amounts of last year’s autumn crop are coming to market.

 

We have pointed out in prior reports that historical sales data shows the first two months of any given year are generally a period of lower demand relative to March, when sales have been observed to spike in numerous adult-use markets, as well as medical ones in some cases. Retailers preparing for increased sales in the coming spring season may be bringing in lower-priced outdoor flower as inventory in order to help boost margins. Wholesale prices for such product indicate that supply is ample; this week’s volume-weighted rate for outdoor flower is off by 20.3% from the opening week of this year. 

 

 

In addition to falling prices in the four largest markets, the states with the newest adult-use systems – Massachusetts, Michigan, and Illinois – have also seen wholesale flower rates subside in recent weeks. Prior to that, climbing prices in those states provided some upward pressure on the U.S. Spot.

March Forward unchanged at $1,475 per pound.

 

The average reported forward deal size was 41 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 49%, 34%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 46 pounds, 34 pounds, and 39 pounds, respectively.

 

At $1,475 per pound, the March Forward represents a premium of 3.8% relative to the current U.S. Spot Price of $1,421 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

Revised Definition of “Wholesale Cost” Could Lower Tax Burdens of Retailers in Some Cases

Colorado

Flower Production Up, but Demand Down YoY in H1 2019; Consumers Turned Increasingly to Concentrates and Edibles in First Half of Last Year

 

Oregon

Retail Sales Down Slightly in January, but Largely Stable at About $67.5 Million, as Monthly Harvest Volume Up Around 20% YoY   

       

Michigan

Medical Cannabis Sales Rise 1.4% in January to $25.2 Million; Adult-Use Retail Revenue Up 41% MoM to $9.8 Million

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

21 February 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 21, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 21, 2020
image1

*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$6.28 per gram this week, down 0.5% from last week’s C$6.31 per gram. This week’s price equates to US$2,151 per pound at the current exchange rate.


Company Announcement:

We are pleased to share that Cannabis Benchmarks® has begun disseminating its Canada cannabis index data through Nasdaq’s GIDS service. These unbiased indexes provide a variety of benefits for this emerging commodity, including:

– making it easier to reference the market value of product in buy/sell negotiations,
– writing spot and forward contracts on a published index,
– third-party validation for asset valuation (e.g., biological assets), and
– paving the way for more sophisticated financial instruments for hedging, trading, and risk management (e.g., swaps, futures, and other derivative contracts).


Click to read the full press release: Cannabis Benchmarks® Distributes its Canada Cannabis Pricing Indexes on Nasdaq Global Index Data Service

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This week we look at how growth in the number of physical brick and mortar stores has been the key driver behind rising national cannabis sales. We now count 770 retail stores across Canada as of February, an increase of 47 stores from the previous month for a 6.5% growth rate.

Source: Cannabis Benchmarks, Statistics Canada

Alberta still has the highest store count with 420 stores, or 55% of the cannabis stores across Canada. As expected, Alberta, with the largest concentration of stores, has greater sales per capita than the other large provinces. While all other major provinces saw new store openings, this month was particularly important for Ontario. Stores from Ontario’s second lottery that was conducted in August 2019 opened this month. Six new stores of the 42 licenses issued opened in Canada’s largest province, which takes Ontario’s total to 31 retail outlets. 

 

As new stores have opened across the country, they have provided more convenient access to cannabis users who previously purchased from the illicit market or were pushed to the provincial online stores. This has been positive for the industry as the customer base continues to grow. We have heard from many cannabis users that the online experience is convenient, but they prefer walking into a store to see product variety, take in the aromas, and hear from experienced staff.

As seen in newly released data from Statistics Canada, the opening of new stores has coincided with a large drop in online sales as a proportion of overall revenue. At the onset of legalization, the lack of retail stores resulted in 44% of total sales coming from online provincial marketplaces. The latest data for September shows only 6% of sales coming from online stores.

Source: Cannabis Benchmarks, Statistics Canada

We project this downward trend in online buying to continue, and forecast monthly sales of $6.6M, or daily sales of $220,000, for all Canadian online stores for the month of November. We expect the growth in store counts, lower priced products, shrinking retail margins, and new cash and carry models will put immense pressure on provincial government run stores that continue to operate in the red. In our opinion, this could eventually lead to the privatization of online sales

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21 February 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

February 14, 2020

U.S. Cannabis Spot Index — February 14, 2020

U.S. Cannabis Spot Index — Published February 14, 2020

U.S. Cannabis Spot Index up 0.1% to $1,459 per pound.

 

The simple average (non-volume weighted) price increased $50 to $1,687 per pound, with 68% of transactions (one standard deviation) in the $929 to $2,445 per pound range. The average reported deal size increased to 2.0 pounds. In grams, the Spot price was $3.22 and the simple average price was $3.72.

 

The relative frequency of trades for greenhouse flower increased by 2% this week. The relative frequency of deals for outdoor product decreased by the same proportion, while that for transactions for indoor flower was unchanged. 

 

Warehouse product’s share of the total reported weight moved nationally contracted by 2% this week. The relative volume of greenhouse flower expanded by the same proportion, while that for outdoor product was unchanged.

The U.S. Spot Index rose by 0.1% this week to settle at $1,459 per pound. This week’s small increase in the national composite rate is due to an uptick in the U.S. price for indoor flower. Meanwhile, prices for outdoor flower have been trending downward to open this year. A similar trend was observed through the first quarter of 2019, after which rates for outdoor product began to rise in April, along with the U.S. Spot Index. This year, strong prices for warehouse flower have buoyed the national composite rate so far in Q1; if prices for outdoor product turn upward in the spring and summer, as they did last year, then the U.S. Spot appears poised to climb into territory not observed last year, as this week’s price is already just $5 off of 2019’s peak.

 

New data out of Colorado and Oregon shows that sales in December 2019 did not experience the uptick that has been observed in that month in previous years. However, year-over-year sales growth in both markets was strong in 2019. Colorado saw demand – measured in terms of total retail sales revenue – increase by about 13% from 2018 to 2019, after sales stagnated somewhat in the former year. Oregon’s market saw about a 22% year-over-year rise in sales in 2019, comparable to the rate of expansion documented in 2018. Those trends helped boost wholesale prices in both markets last year, with rates in both states holding relatively steady to begin 2020. Colorado and Oregon are the second and fourth largest legal cannabis markets in the country, respectively, in terms of retail revenue.

March Forward unchanged at $1,475 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%, 36%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 46 pounds, 32 pounds, and 46 pounds, respectively.

 

 

At $1,475 per pound, the March Forward represents a premium of 1.1% relative to the current U.S. Spot Price of $1,459 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:

Colorado

Total Retail Sales Reach Nearly $1.75 Billion in 2019, Up 13% YoY

Oregon

Retailers Tallied About $792 Million in Sales in 2019, Including Almost 220,000 Pounds of Flower Sold to Consumers and Patients

Washington

Bill Would Allow Producers & Processors to Provide Discounts to Retailers in Wholesale Transactions             

 

Nevada

November 2019 Retail Sales Approach $61 Million, Down Almost 3% From October

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14 February 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 14, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 14, 2020
image1

*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$6.31 per gram this week, down 1.3% from last week’s C$6.40 per gram. This week’s price equates to US$2,156 per pound at the current exchange rate.

 

The era of legal cannabis in Canada has been a bumpy ride for cannabis producers, consumers, and investors. The past year has been volatile and has seen collapsing valuations, high retail price points, dropping wholesale prices, lower-than-anticipated consumption, executive shake-ups, lay-offs, inventory write-downs, and corporate scandals. 

 

This week, the two largest Canadian licensed producers – Aurora and Canopy Growth – reported quarterly earnings for the period ending December 31, 2019. Rather than focusing on the financial results of the two mega-companies, we examine some of the fundamental metrics. In the latest reported quarter, both companies increased their production capacity and total sales. Aurora, which has been focusing on producing high-quality varieties and lowering total harvest costs, grew total quarterly output by 292% to 22,869 kg relative to the same quarter last year. 

 

Sales did not grow at the same pace, and in fact that has been one of the key contributors to the deteriorating financials and the decline in average net selling price. Sales from the same quarter last year have only grown by 36%, leading to excess supply going into inventory each month. Aurora’s cumulative inventory since legalization has ballooned by 68,657 kg. Based on their current sales rate, that is close to 22 months worth of supply.

 

Canopy Growth followed the same trend in at least the past five reported quarters. Canopy, the largest licensed producer in Canada, harvested 293% more than the same quarter last year, generating 29,900 kg. As with Aurora, sales grew at a significantly slower pace. Sales for the latest quarter reached 13,200 kg, or 31% higher than the same time last year. 

 

The gap between supply and sales has led to a massive inventory issue for Canopy, as well as lower selling prices. Supply in the latest quarter slowed to help ameliorate the inventory overhang, but Canopy’s cumulative product buildup since legalization commenced has grown by 79,600 kg. Based on their current sales rate, that is over 18 months worth of supply.

We recognize that 2020 sales will pick up with the opening of new stores, the launch of Cannabis 2.0 products, and increased consumer adoption, but will this be enough to balance the supply-demand fundamentals of this market? We expect to see similar results from many of the Canadian producers over the coming weeks, and potentially some inventory write-downs to help alleviate the rapid expansion in excess supply. As with other novel industries and commodities, cannabis in Canada is going through cycles of shortages and oversupply that should stabilize as the market matures.

Source: Cannabis Benchmarks, Aurora Cannabis and Canopy Growth quarterly earnings

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14 February 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

February 7, 2020

U.S. Cannabis Spot Index — February 7, 2020

U.S. Cannabis Spot Index — Published February 7, 2020

U.S. Cannabis Spot Index up 1.1% to $1,457 per pound.

 

The simple average (non-volume weighted) price increased $5 to $1,637 per pound, with 68% of transactions (one standard deviation) in the $905 to $2,370 per pound range. The average reported deal size decreased to 1.9 pounds. In grams, the Spot price was $3.21 and the simple average price was $3.61.

 

The relative frequency of trades for indoor flower increased by 8% this week. The relative frequency of deals for greenhouse and outdoor product both decreased, by 6% and 2%, respectively. 

 

Warehouse product’s share of the total reported weight moved nationally expanded by 6% this week. The relative volumes of greenhouse and outdoor flower each contracted by 3%.

The U.S. Spot Index rose by 1.1% this week to settle at $1,457 per pound. The national composite price has trended upward to start 2020, with this week’s rate representing an increase of 4.3% from the start of the year. This week’s U.S. Spot is also just $7 below 2019’s annual peak, which was documented in the week ending November 15. 

 

Overall wholesale flower prices in three of the country’s four largest markets – California, Colorado, and Oregon – have been fairly stable in recent weeks. Upward pressure on the national composite rate has come from Washington State and Nevada, as well as the newer adult-use systems in Massachusetts, Michigan, and Illinois. The opening of those states’ markets to general consumers has also pushed up prices for flower designated as medical, particularly in Illinois this week.

  

 

Looking ahead a few weeks, historical sales data out of established markets has shown that March is typically the month that sees the strongest demand in Q1, and sometimes for the first half of a year. Retailers in the major markets may look to bring in additional inventory in the coming weeks, which could result in upward pressure on wholesale prices in states where they have been fairly steady.

August Forward initially assessed at $1,455 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%, 36%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 48 pounds, 32 pounds, and 41 pounds, respectively.

 

At $1,475 per pound, the March Forward represents a premium of 1.2% relative to the current U.S. Spot Price of $1,457 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

Proportion of Total Product Batches Tested Constituted by Vapes & Extracts Reached Almost 39% in Q4 2019, Up from 31% in Q3 2018

Oregon

Official Data Shows About 30% of Flower and Trim is Going to Waste

Michigan

Adult-Use Sales Increased Significantly in January, Indicating Loosening Supply and More Retail Outlets Opening

 

Illinois

January Adult-Use Sales Top $39 Million as Wholesale Prices Climb; Rates for Medical Flower More Expensive than Adult-Use by About $340 Per Pound

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

7 February 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved