July 31, 2020

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

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

U.S. Cannabis Spot Index down 0.8% to $1,480 per pound.

 

The simple average (non-volume weighted) price decreased $12 to $1,726 per pound, with 68% of transactions (one standard deviation) in the $919 to $2,533 per pound range. The average reported deal size was nominally unchanged at 2.2 pounds. In grams, the Spot price was $3.26 and the simple average price was $3.81.

 

The relative frequency of trades for greenhouse flower increased by 7% this week. The relative frequencies of transactions for indoor and outdoor product decreased by 4% and 3%, respectively.  

 

The relative volume of greenhouse product expanded by 4%. The relative volumes of warehouse flower contracted by the same proportion, while that for outdoor product was unchanged.

Despite the turbulence caused this year by the COVID-19 pandemic, the U.S. Spot Index has been relatively stable, while also broadly echoing the course it followed in 2019. Similar to last year, monthly average national composite prices were steady from January to February 2020, then fell in both March and April. In 2019, May saw the commencement of an upward trend in the U.S. Spot that would persist through November. This year, positive movement did not begin until June. However, with July’s monthly average U.S. Spot price of $1,470 per pound, the last two months have seen the national composite price make gains as increased, in many cases record-breaking demand has spiked sales in numerous state-legal cannabis markets. July’s monthly mean U.S. Spot is up by 6.4% from the month prior.  

 

Elevated demand has contributed to pushing wholesale flower prices above where they were observed a year ago. July 2020’s mean Spot rate represents an 11.4% year-over-year increase, from $1,320 per pound in July 2019. Prices for all three grow types are currently up compared to the same month last year, reflecting the general expansion of demand that has lifted sales of all product types.   

 

As noted, the U.S. Spot climbed through late spring, summer, and fall of last year. In normal times, the onset of August would be welcomed by cannabis retailers, as it is typically the strongest sales month of any given year in many markets, particularly adult-use ones and larger medical programs. However, as we covered in last week’s report, the most recent available sales data shows sales growth slowing, or even reversing a bit in June, after several months of sharp spikes. Whether the steadily rising sales that usually characterize the summer months will manifest this year remains to be seen, as does whether consumers and patients will maintain the elevated levels of purchasing reported recently.

August Forward closes up $25 to $1,500 per pound.

 

The average reported forward deal size was 30 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 43%, 32%, and 25% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 31 pounds, 26 pounds, and 34 pounds, respectively.

 

At $1,500 per pound, the August Forward represents a premium of 1.3% relative to the current U.S. Spot Price of $1,480 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

Market Consolidation Will Not be as Rapid, Dramatic as Last Year’s M&A Announcements Suggested

Washington

Rulemaking for Required Pesticide and Heavy Metals Testing May be Delayed Further

 

Maine

Officials Reportedly Expect First Adult-Use Sales to Occur Late this Year

Rhode Island

FY2020 Medical Cannabis Sales Reach Almost $60 Million

 

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

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

CANADA CANNABIS SPOT INDEX — July 31, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published July 31, 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$6.28 per gram this week, down 0.4% from last week’s C$6.31 per gram. This week’s price equates to US$2,128 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.

This week we provide an update on store counts and sales. The Canadian cannabis industry is growing up with more than one thousand retail outlets now open across the country. This is an immense milestone, as there were only 361 stores open at the end of July 2019. With the increased physical retail presence, cannabis is becoming more visible and, presumably, more normalized in Canadian society.

 

To be exact, we count 1,012 licensed retailers, with an average monthly growth rate of 6% in 2020. This solid growth rate comes despite many store applications and openings being delayed due to COVID-19 shutdowns. The 50 store increase in July was distributed almost equally across Alberta, British Columbia, and Ontario. However, Alberta store counts seem to be hitting a saturation point, while Ontario store openings are taking off after a slow start.

Source: Cannabis Benchmarks

With the expanded store presence, we are also seeing retail sales ramp up. Statistics Canada reported May 2020 sales last week, showing a record C$185.9M in revenue. This new monthly record is up C$7.5M from the month prior, and C$100M from the same month last year. 

 

So all in all, the industry seems to be moving in the right direction. We recalculated our 2020 total sales target this week. The last time we did this was right as COVID closures were setting in and cannabis 2.0 products were starting to hit the shelves. 

 

With many of those events now behind us, we have a better understanding of how all the moving pieces have impacted sales. We project sales will continue to increase each month as new stores open, more cannabis 2.0 products become available, and life returns closer to normal. Our modelling shows monthly sales surpassing C$200M in August and hitting a peak of C$219M in December. 

Source: StatsCan, Cannabis Benchmarks

Cumulative Canadian sales for legal retail cannabis in 2020 are set to hit C$2.28B. This is almost double 2019’s sales tally of C$1.19B, according to Statistics Canada.

Source: StatsCan, Cannabis Benchmarks

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

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

July 24, 2020

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

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

U.S. Cannabis Spot Index down 0.5% to $1,492 per pound.

 

The simple average (non-volume weighted) price decreased $7 to $1,738 per pound, with 68% of transactions (one standard deviation) in the $938 to $2,538 per pound range. The average reported deal size was nominally unchanged at 2.2 pounds. In grams, the Spot price was $3.29 and the simple average price was $3.83.

 

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

 

The relative volume of greenhouse product expanded by 3%. The relative volumes of warehouse and outdoor flower contracted by 1% and 2%, respectively.

Sales data out of Oklahoma and Illinois showed that the dramatic growth experienced from March through May slowed in June. Increasing sales continued for the most part, albeit at a slower pace, with the exception being the medical sector of Illinois’ market, which saw a small decline in revenue last month. 

 

New data published since then shows similar trends in other states. As we detail below, sales continued to rise in Michigan, but revenue generated by the medical market largely plateaued and flower sales volume in that sector contracted slightly. In Oregon, which has seen perhaps the most stark increase in demand during the COVID-19 pandemic, sales dipped a bit in June after setting new records for three consecutive months. 

 

As reporting of sales data has a two-month lag in Colorado, it was recently revealed that May sales in the state boomed to unprecedented heights after March and April saw slowing growth. This could be related to the state beginning its “reopening” in late April, leading to more people venturing out of their homes. However, as alluded to above, stay-at-home orders did not dampen demand in other states.

 

National wholesale flower prices trended downward slightly from March through late May, despite the robust demand across nearly every sizable state market covered in our reporting. The U.S. Spot has been on the ascent since late May, which is not uncommon given that summer is typically a period of rising demand that usually peaks in August. Just as seasonal sales trends typically observed in Q2 of any given year have already been disrupted, though, the same could occur for the current quarter. 

 

While the early signs indicate that cannabis could be a recession-proof commodity, the current recession is unique and still in its early days. Many have pointed out in recent weeks that the CARES Act, passed into law in March, expires this week. The expiration of the legislation will bring to an end expanded unemployment benefits, as well as a moratorium on evictions for those with federally-backed mortgages or federally-subsidized rent, among other provisions that millions have depended on to weather the current crisis. 

 

This is taking place as the pandemic is undergoing a resurgence on the back of states loosening restrictions and reopening businesses, as well as other activities and services that were previously closed to stem the spread of the virus. Increased COVID case counts have prompted the rollback of some reopening measures and the imposition of new restrictions in some states, a trend that could expand if the virus continues to spread relatively unabated.

August Forward up $45 to $1,475 per pound.

 

The average reported forward deal size was 34 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 45%, 32%, and 23% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 39 pounds, 27 pounds, and 35 pounds, respectively.

 

At $1,475 per pound, the August Forward represents a discount of 1.2% relative to the current U.S. Spot Price of $1,492 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

May Sees Dramatic Spike in Sales After Slowing Growth in Previous Two Months

Oregon

June Sales Down 3% from May After Three Straight Months of Meteoric Growth  

 

Nevada

Trial Commenced Recently to Determine Fate of 61 New Retailer Licenses Held Up from Opening Since Late 2018

Michigan

Retailers Tally Over $90 Million in June as Adult-Use Sales Continue to Expand, Medical Market Demand Levels Off

 

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

Do you support wholesale market transparency?

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

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

CANADA CANNABIS SPOT INDEX — July 24, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published July 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$6.31 per gram this week, down 1.5% from last week’s C$6.40 per gram. This week’s price equates to US$2,121 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.

This week we provide an update on the ever-growing stockpiles of cannabis held in federal and provincial storage facilities. Earlier this month, Statistics Canada released data showing both unpackaged and packaged inventory ballooning to levels that point to potential inventory write-downs and financial distress for cultivators.

As of the end of April, total unpackaged inventory stood at 620,144 kg. This is product sitting with both cultivators and processors that is not yet ready for sale. Adding to that is 85,014 kilograms of ready-to-sell packaged inventory that is held by cultivators, provincial wholesalers, and retailers. These are outrageous numbers when we consider total Canadian consumption levels, which we detail just below. In no other major commodity market do we see such a large disconnect between supply and demand.

Source: Statistics Canada, Cannabis Benchmarks

So, let’s examine how we got here. The excess inventory is a result of massive mismatch between supply and demand. As Canada prepared to legalize recreational marijuana sales in Oct 2018, all the major Canadian cultivators planned to bring online an immense amount of growing capacity. This capacity slowly trickled into the market in 2019, which we can see in the unpackaged production figures reported by Statistics Canada. Monthly unpackaged production peaked in October 2019 at 144,955 kg, but has since stabilized to around 100,000 kg per month. Once the supply-demand imbalance became undeniable, cultivators began scaling back production and even went as far as closing growing facilities in some cases. 

 

Reality struck the market early with demand being only a fraction of the initial expectations. The illicit market continued to be robust and captured nearly 75% of total national cannabis consumption. That being said, with lower pricing and a growing retail footprint, we see demand expanding, but not at a pace sufficient to reach market equilibrium. Our estimates do show demand growing by 36% from September 2019 to April 2020, to 19,430 kg. At best this is about 20% of corresponding supply levels; hence the mismatch continues to grow each month.

Source: StatsCan, Cannabis Benchmarks

So the question remains: how will all this unsold cannabis be utilized? If all cannabis cultivation were to stop today, existing inventory could support 36 months of consumption, assuming demand holds at current rates. It is of course unlikely that cultivation will cease; the next major step is cannabis growers recognizing that most of this product will be unsaleable, which should lead to the destruction of product and write-downs.

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

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

July 17, 2020

CANADA CANNABIS SPOT INDEX — July 17, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published July 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$6.40 per gram this week, up 2.8% from last week’s C$6.23 per gram. This week’s price equates to US$2,137 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.

This week we provide an update on the growth in licensed cannabis stores across Canada. We also highlight a new pilot program that one licensed retailer hopes will expand into a widespread strategy to drive increased traffic and sales. 

 

Nationwide, the licensing of new stores has slowed due to COVID-19 and accompanying lockdowns. After slumping in April and May, we are seeing new stores begin to proliferate more quickly once again. At the end of June, there were 962 stores across Canada, with 59 stores added since May, and an increase of 672 stores from the same time last year. During the first half of 2020, the average number of new stores that opened monthly was 49. This took place under the specter of COVID-19. With COVID-related restrictions loosening, we expect the number of new stores to increase at an even faster pace in the second half of the year.

Source: Cannabis Benchmarks

We could also soon see an explosion of new cannabis retailers if a plan to pair them with convenience stores proceeds fruitfully. In August 2019, the publicly traded convenience store operator Alimentation Couche-Tard invested in the cannabis retail chain Fire & Flower. Couche-Tard acquired a 9.9% stake in the retailer in July 2019 with options to increase its stake to 50.1%. At the time, there was much speculation that cannabis could one day be sold through convenience stores. 

 

Last week, we moved one step closer to this happening. The two companies are running a pilot project in Alberta that will see Fire & Flower cannabis stores co-located with Circle K convenience stores. The cannabis and convenience stores will be on the same property, but separated in order to follow strict provincial regulations, with different entrances and points-of-sale for each. The stores are fully owned and operated by Fire & Flower and the company’s hope is that they will benefit from the foot traffic drawn by the convenience store side.

Source: Fire & Flower

If successful, the two companies have already identified more locations where they could expand the pilot project, as seen in the graphic below. There are 2,131 convenience stores across Canada operated by Couche-Tard, and the model could potentially be expanded to the U.S., and perhaps globally in the future. Strategies such as this could be what legal Canadian cannabis businesses need to stamp out the illicit market.

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

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