April 24, 2020

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

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

U.S. Cannabis Spot Index up 1.2% to $1,368 per pound.

 

The simple average (non-volume weighted) price increased $48 to $1,588 per pound, with 68% of transactions (one standard deviation) in the $861 to $2,315 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $3.02 and the simple average price was $3.50.

 

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

 

Outdoor flower’s share of the total reported weight moved expanded by over 2% this week. The relative volumes of warehouse and greenhouse product each contracted by about 1%.

In recent weeks, large month-over-month increases in March sales figures in Oregon and Arizona have been framed by some reports as a direct result of the COVID-19 pandemic and accompanying panic-buying. Cannabis consumers and patients in several markets have indeed been stocking up ahead of stay-at-home orders going into effect, or based on general apprehensions of the possibility of the closure of cannabis retail, as demonstrated by the long lines at licensed shops documented in numerous states prior to restrictions on movement being put in place. 

 

However, a more detailed and contextualized look at official sales figures suggests that established seasonal sales patterns and previously-existing growth trends may be primarily responsible for impressive March sales figures, with coronavirus-related purchasing contributing to boost sales higher than they might have been otherwise. In what follows, we focus on Oregon and Arizona, two of the markets for which official March sales data is available, along with several years of historical data.

 

First, seasonal sales patterns must be acknowledged. In recent years, March has established itself in many legal cannabis markets as the strongest sales month of the first quarter, and sometimes of the first half, of any given year. Additionally, March sales in numerous markets in past years have frequently represented new record retail revenue figures, which are typically then surpassed in the summer months. 

 

In Oregon, March sales represented record highs for the state’s market at the time in each year from 2017 through 2019, making 2020 the continuation of a trend that has been documented from the outset of the state’s licensed system. In Arizona, total sales volume of all products and flower sales volume specifically also set new records for the state’s market in March in each year from 2017 through 2019, just as another new record was established this year. 

 

Second, while month-over-month sales increases reported for March 2020 out of Oregon and Arizona are impressive, they are not substantially out of line with those documented in prior years. In Oregon, March 2020’s retail revenues rose by about 24% from February. In 2017, sales rose by about 21% from February to March; 2018 saw around an 18% increase in the same period; while 2019 saw a roughly 19% climb. Overall for 2019, annual sales in Oregon were up by about 22% from the year before. March 2020’s month-over-month increase did outpace those of prior years, but growth rates for the February-March period in Oregon have typically been about 20% since the state’s licensed market opened. 

 

March sales in Arizona’s medical cannabis market have also consistently seen robust growth in the years leading up to and including this one. Total sales volume of all products rose by 14.8% month-over-month in March 2020. In March 2017, the rate of increase in this metric was 15.5%; it was 16.3% in 2018, and 11.7% in 2019. Flower sales volume rose by 15.1% in March 2020, a larger magnitude than the 10.9% increase recorded in March 2019, but in line with the 15.9% and 15.5% increases in this metric documented in March 2018 and 2017, respectively.

May Forward closes unchanged at $1,400 per pound.

 

The average reported forward deal size was nearly 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 36 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 2.4% relative to the current U.S. Spot Price of $1,368 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:

National

Are Robust March Sales the Result of COVID-Related Bulk Buying or Existing Seasonal Trends and Market Growth?

Oregon

Rule to Allow Random Testing of Products for Adulterants and Contaminants Now in Effect

 

Michigan

Adult-Use and Medical Sales Rise Sharply in March as Supply Appears to Begin to Loosen

       

Arizona

Total Sales Volume Tops 17,000 Pounds in March, Establishing New Record for State’s Medical Market

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

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

CANADA CANNABIS SPOT INDEX — April 24, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 24, 2020
1

*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$6.18 per gram this week, down 3.1% from last week’s C$6.38 per gram. This week’s price equates to US$1,987 per pound at the current exchange rate.

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This week we review new data from Statistics Canada on retail sales. The latest data for February shows sales sliding to C$150M. With two fewer days than January, however, this lower overall number still represents growth. Average daily sales show an increase of 4% in February versus the previous month, to C$5.2M/day.

Source: Cannabis Benchmarks

All of the large Canadian provinces saw substantial daily sales gains except for Quebec. Ontario’s daily sales grew by 10%, to C$1.3M/day. This increase in sales comes with only five new stores opening in Ontario in February. March sales are expected to rise by an even larger magnitude, with seven additional stores opening, as well as a sales spike associated with the COVID-19 pandemic. Quebec had four more retail stores open in February, yet total daily sales decreased by 3% to just over C$1M/day.

 

In terms of volume, Cannabis Benchmarks estimates a total of 14,792 kg of recreational cannabis flower was purchased across Canada in February. Ontario, with 39% of the Canadian population, leads in sales, but only makes up 25% of the total volume sold. This implies that there should be significant sales growth in the province in coming months, as Ontario makes legal cannabis more accessible with a larger retail store footprint. 

 

Alberta, on the other hand, generated 22% of total sales despite only 12% of the country’s population living in the province. As we have discussed previously, this is due largely to the fact that Alberta is home to a disproportionately large proportion of the licensed retailers in Canada, making the legal market more convenient and accessible to consumers in the province.

Source: Cannabis Benchmarks

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

April 17, 2020

U.S. Cannabis Spot Index — April 17, 2020

U.S. Cannabis Spot Index — Published April 17, 2020

U.S. Cannabis Spot Index down 0.5% to $1,352 per pound.

 

The simple average (non-volume weighted) price decreased $16 to $1,540 per pound, with 68% of transactions (one standard deviation) in the $832 to $2,249 per pound range. The average reported deal size was nominally unchanged at 2.1 pounds. In grams, the Spot price was $2.98 and the simple average price was $3.40.

 

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

 

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

The U.S. Spot Index declined by 0.5% this week to settle at $1,352 per pound. It may be tempting to interpret the recent downward trend in the national composite price in light of reports of reduced sales due to the COVID-19 pandemic and accompanying stay-at-home orders in all of the country’s five largest legal cannabis markets, and others. This is especially true at this time of year, with 4/20 approaching, which usually results in a spike in retail sales. 

 

However, the U.S. Spot’s decline in recent weeks is not uncharacteristic for the period ahead of 4/20, although this year’s is of a slightly larger magnitude than last year’s. For 2020, the national composite price’s current peak is $1,459 per pound, which occurred on February 14. Since then, the U.S. Spot has declined by 7.3%. In 2019, the national average rate was largely steady from the outset of the year until February 15, after which it declined by 6.3% from that point to the week ending April 19, 2019, movement very similar to this year. In 2018, the U.S. Spot rose in March, but then fell by 4.4% from the final week of that month to the week ending on April 20, 2018. 

 

While the movement of the U.S. Spot leading up to 4/20 this year has not departed significantly from prior trends, the reasons behind the movement may have changed. Declining prices in the weeks ahead of 4/20 in prior years have been attributed to better supply-chain management (retailers not waiting until the week or two just before the holiday to stock up), generally looser supply (compared to 2015 or 2016, for example), and retailers increasingly choosing lower-priced outdoor product to sell in larger-volume increments at discounted prices. 

 

Although the national average deal size for outdoor flower grew this week, the relative volume of such product contracted in California and Oregon, but expanded in Colorado and Washington, significantly in the latter. Overall wholesale prices have not seen dramatic swings in recent weeks in any of the four largest legal cannabis markets mentioned above, even as significant alterations to sales have occurred due to COVID-19. Meanwhile, the downward trend in Michigan’s Spot is likely attributable to both loosening supply as licensed growers continue to ramp up, along with lower sales while the state is under a stay-at-home order. 

 

 

As we have pointed out in the past, Nevada’s market is likely to be the one of the hardest hit by COVID-19, as Las Vegas tourism has virtually disappeared. Sales in the Las Vegas metropolitan area make up a vast majority of those that take place statewide, but the region’s resident population of about 2.2 million is usually supplemented with between roughly 3.2 and 3.7 million tourists monthly. Overall, the downturn in Nevada’s Spot is almost certainly attributable largely to the dramatic reduction in demand taking place in the Las Vegas area.

May Forward unchanged at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 36 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 3.6% relative to the current U.S. Spot Price of $1,352 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

February Adult-Use and Medical Cannabis Sales Total Almost $140 Million, Essentially Flat from January and Up 17% YoY

Massachusetts

Judge Upholds Governor’s Closure of Adult-Use Cannabis Retailers in Response to COVID-19

 

Illinois

March Medical Cannabis Sales Set New Record for State’s Program at Nearly $30 Million; Average Retail Price for Flower in Medical Market Declined for the First Time in Six Months

       

New Mexico

Supply Outpaced Growing Demand in State’s Medical Market in Q4 2019, Leading to Expanding Unsold Inventory and Falling Wholesale Flower Prices

 

Maine

Beginning of Adult-Use Sales Delayed Indefinitely Due to COVID-19

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

CANADA CANNABIS SPOT INDEX — April 17, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 17, 2020
1

*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 1.3% from last week’s C$6.46 per gram. This week’s price equates to US$2,067 per pound at the current exchange rate.

Include your weekly wholesale transactions in our price assessment by joining our Price Contributor Network If you have not already done so, we invite you to join our Price Contributor Network, where market participants anonymously submit wholesale transactions to be included in our weekly price assessments. It takes two minutes to join and two minutes to submit each week, and comes with loads of extra data and market intelligence.

Online Sales on a New Course

 

With the enactment of the Cannabis Act, provinces and territories were given the responsibility for determining how recreational cannabis would be distributed and sold in their jurisdictions. Each instituted a variety of regulatory frameworks, resulting in an industry structure composed of public, private, and hybrid systems for brick-and-mortar and online stores.

 

 

Below is a summary of the structure set out in each province.

 

Source: Cannabis Benchmarks

All provinces, other than Manitoba and Saskatchewan, have some government intervention in the sales of cannabis products. In most cases, the provincial government controls the online sales channel of cannabis. Surprisingly, Canadian cannabis consumers have preferred purchasing their cannabis in stores rather than online from the comfort of their home. This has been evident in the correlation between the rapid increase in monthly sales and the establishment of new stores. 

 

Cannabis Benchmark estimates the total number of cannabis retail stores in Canada at 806 as of March 2020, an increase of 615 from the previous year. Alberta has held the top spot in terms of the number of cannabis stores, as well as the lowest average distance between consumers and the nearest cannabis store. The Alberta regulatory framework for issuing new retail licenses is the quickest and most relaxed, unlike Ontario, which was slow to issue licenses. 

 

As more physical retail locations get built out, the average distance between Canadians and the nearest licensed cannabis store is decreasing. This is leading to higher monthly sales in the legal market and, presumably, lower sales through illegal channels. Additionally, as more consumers head to brick and mortar stores, online stores sales have been falling dramatically – until the COVID-19 pandemic and the accompanying mitigation measures taken by the federal and provincial governments. 

 

As reported in a BloombergBNN article, the Ontario Cannabis Store reported an explosion in online sales as consumers stuck at home stocked up on cannabis. In the second half of March, daily online orders nearly tripled to 5,000 orders; April sales are even higher at 9,000 orders per day month-to-date. Of all the orders, more than 33% are being placed by customers new to the OCS, indicating that the illicit market is losing market share during this crisis.
In past reports, we estimated total March retail cannabis sales across Canada spiked to C$216M. This is a massive jump from C$154M reported for January 2020 by Health Canada, and more than three-and-a-half times greater than March 2019’s sales of C$59M. 

 

Today we add to that analysis by breaking out the portion of sales we expect to come from online sales. While online sales had been on a decline, the global COVID-19 pandemic seems to be setting them on a different course. Our estimates show Canadian online sales reaching a total of C$14M throughout March, or C$450k daily. In April, the trend will continue higher as more consumers rely on home delivery of cannabis.

Source: Cannabis Benchmarks

This prompts the debate of whether cannabis producers should be able to bypass the provincial governments and retail networks to sell directly to consumers. This would allow licensed producers to better compete against their number one competitor – the illicit market. By selling direct to consumers, LPs could keep prices lower by cutting out unnecessary transport to provincial facilities, storage at public distribution points, and provincial sales margins. After all, LPs already sell medical cannabis directly to patients. Email us with your thoughts at [email protected].

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10 April 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

April 10, 2020

U.S. Cannabis Spot Index — April 10, 2020

U.S. Cannabis Spot Index — Published April 10, 2020

U.S. Cannabis Spot Index down 2.1% to $1,359 per pound.

 

The simple average (non-volume weighted) price decreased $32 to $1,556 per pound, with 68% of transactions (one standard deviation) in the $820 to $2,293 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.00 and the simple average price was $3.43.

 

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

 

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

The U.S. Spot Index declined by 2.1% this week to settle at $1,359 per pound. In the weeks since the COVID-19 pandemic has gripped the U.S. in earnest, the national composite price for cannabis flower in legal markets has been relatively stable. From the week ending March 20 through this week, the U.S. Spot has ranged between a low of $1,357 and a high of $1,388 per pound, while averaging $1,370 per pound during the four-week period. 

 

That price is down compared to the average national composite price of $1,415 per pound observed from the opening of this year through the week ending March 13. However, the U.S. Spot was already trending downward prior to the drastic measures taken by federal, state, and local officials in response to COVID-19, after peaking at $1,459 per pound in the week ending February 14. Based on input from market participants and our own analysis, we expect the negative trend to be exacerbated by the pandemic and have in prior weeks adjusted Forward prices downward. 

 

On the state level, the chart above shows that only Washington has seen wholesale flower prices climb since late March. The other three of the Big Four markets – California, Colorado, and Oregon – have seen rates slide downward gradually, continuing previously existing trends. While reports indicate that sales are suffering in numerous markets, it is likely that Nevada will be disproportionately affected, as a significant portion of the state’s sales are to tourists visiting Las Vegas, a consumer base that is now completely absent.

May Forward unchanged at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 37 pounds, respectively.

 

 

At $1,400 per pound, the May Forward represents a premium of 3% relative to the current U.S. Spot Price of $1,359 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:

Oklahoma

Cannabis Benchmarks Debuts State Spot Index, which Settled at $2,084 Per Pound this Week

Oregon

March Sales Set New Record at Almost $85 Million as COVID-19 Pandemic Gripped State

 

Michigan

State Officials Abruptly Disallow Caregiver Product to Enter Adult-Use Market

       

Massachusetts

Adult-Use Sales in March Reached Over $50 Million Despite Ceasing for Final Week of the Month as Part of Governor’s COVID-19 Stay-at-Home Order

 

Illinois

March Adult-Use Sales Up from February, But Average Daily Sales Figures Show Month-Over-Month Declines

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

10 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved