August 28, 2020

U.S. Cannabis Spot Index — August 28, 2020

U.S. Cannabis Spot Index — Published August 28, 2020

U.S. Cannabis Spot Index up 1.3% to $1,547 per pound.

 

The simple average (non-volume weighted) price decreased $14 to $1,762 per pound, with 68% of transactions (one standard deviation) in the $958 to $2,566 per pound range. The average reported deal size was nominally unchanged at 2.1 pounds. In grams, the Spot price was $3.41 and the simple average price was $3.88.

 

The relative frequency of trades for greenhouse flower decreased by over 4% this week. The relative frequencies of transactions for indoor and outdoor product increased by about 2% each.  

 

The relative volume of warehouse product expanded by over 4%. The relative volumes of greenhouse and outdoor flower contracted by about 3% and 1%, respectively.

Already elevated relative to pre-COVID observations, the U.S. Spot Index climbed each week this month. This even as wholesale flower prices on the West Coast stabilized somewhat. New tax figures from California’s legal cannabis market indicate that overall demand is up significantly compared to 2019, with adult-use purchasing increasing from Q1 to Q2. 

 

Meanwhile, wholesale prices have continued to trend upward in Colorado, Illinois, and Michigan. The latter two markets are quickly expanding their influence on the U.S. composite price, as their growing sales account for greater proportions of the national total each month. For example, whereas Nevada was earlier this year one of the top markets by revenue, with sales reaching over $60 million monthly, both Michigan and Illinois saw total cannabis revenues top $100 million last month, in line with sales in Oregon. Those figures should also continue to grow as production and the retail footprints of their adult-use sectors develop and expand further.

 

 

Looking ahead, higher wholesale flower prices in Michigan and Illinois, where production has largely remained indoors to this point, could help buoy the U.S. Spot in the coming months as the autumn harvest comes in, at least more so than in prior years. Early reports have indicated favorable growing conditions on the West Coast, but severe wildfires in California could complicate harvests, with the potential that product could be made unmarketable by smoke and other contaminants from the blazes.

September Forward closes up $35 to $1,485 per pound.

 

The average reported forward deal size was 29 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 40%, 33%, and 27% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 30 pounds, 25 pounds, and 31 pounds, respectively.

 

At $1,485 per pound, the September Forward represents a discount of 4.0% relative to the current U.S. Spot Price of $1,547 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

August 2020’s Monthly Average U.S. Spot Index Highest Since September 2017 on Unprecedented Sales in Many States

California

New Tax Figures Show Sales Elevated from 2019, Increase in Adult-Use Purchasing in Q2 2020

Proposed Bill Would Prevent Increases to Cannabis Tax Rates for One Year

Colorado

Local Cannabis Measures That Could Result in More Growth Being Considered

 

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

28 August 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — August 28, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 28, 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 2.8% from last week’s C$6.47 per gram. This week’s price equates to US$2,166 per pound at the current exchange rate.

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This week we look at the state of the Canadian medical cannabis market since recreational legalization. The medical cannabis sector faces stiff competition from both the legal recreational market and the still-robust illicit market. That being said, medical cannabis is still a significant area of focus for many of the large cultivators, which can be seen in their financials. For example, Canopy showed its medical cannabis business outperforming in its recent quarterly earnings release for the three-month period ending June 30. They showed growth of 3% in its medical business, while recreational sales to consumers declined by 29% due to COVID and competition.

 

Despite remaining a focus for many licensed producers, trends in the Canadian medical cannabis sector show it contracting for the most part, with no bottom reached just yet. The first dataset we look at is the number of active medical clients registered by licensed producers. The number of medical clients increased during the first year of legalization, but starting in September 2019 we have seen huge declines in registered patients. We attribute this drop to the increase in recreational retail outlets, increased product variety (including Cannabis 2.0 items), and falling prices. 

Even as store counts increased significantly, particularly in Ontario, Cannabis Benchmarks projections did not anticipate the sales growth that occurred from May to June. Momentum in the industry was underestimated due to most Canadians being under some degree of lockdown order at the time. 

 

June’s numbers tell us that more Canadians are using cannabis products whilst under lockdown and they are choosing to buy through legal channels. Such trends have been observed in legal U.S. cannabis markets as well. These conclusions are supported by Ontario’s sales patterns. Ontario saw sales jump by 19% month-on-month in June, while the province’s store count only increased by 6.5%. This indicates that each store is serving a wider base of customers, assuming clients are purchasing similar quantities. Given that legal cannabis stores have been permitted to remain open during the pandemic it is unlikely that consumers are making outsized purchases to stock up or hoard product. This reasoning suggests the assumption that individual buying patterns have remained stable is a sound one.

 

Looking beyond June, we now see sales continuously expanding and believe that many consumers have been converted from the illicit market to legal channels as a result of the COVID-19 pandemic. We project sales will continue to increase each month as new stores open and more Cannabis 2.0 products become available. 

 

Cannabis 2.0 products seem to be key to higher sales for many of the top licensed producers (LPs). As dried flower prices sag to compete with both the illicit market and other legal businesses, LPs see Cannabis 2.0 products as a major growth sector where they can extract a premium for their production. 

 

For example, in Canopy’s latest earnings call, management noted cannabis beverages as a key offering to grow its market presence, especially amongst consumers who have no interest in smoking as a consumption method. With the expertise of its investor and partner Constellation Brands, the company announced in a May 2020 investor presentation that it has shipped 530,000 drinks since the launch of Cannabis 2.0 products in Q4 2019. 

 

Beverages, along with other key products such as vapes, accounted for 12% of Canopy’s total sales in the latest earning quarter. The company expects cannabis beverages to soon make up 5% of the total Canadian beverage market. It is still unclear if these sales are one-time novelty purchases or if consumers will make a habit of buying cannabis beverages, but Canopy claims the demand is there and will be consistent. As a result, they have doubled their weekly production runs to eliminate SKU stockouts by mid-2021.

 

Below are some slides from the May Virtual Investor Meeting.

Source: Canopy Growth Investor Presentation – May 2020

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

28 August 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

August 21, 2020

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

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

U.S. Cannabis Spot Index up 0.7% to $1,527 per pound.

 

The simple average (non-volume weighted) price increased $8 to $1,776 per pound, with 68% of transactions (one standard deviation) in the $963 to $2,589 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.37 and the simple average price was $3.92.

 

The relative frequency of trades for greenhouse flower increased by about 3% this week. The relative frequency of transactions for indoor product decreased by the same proportion, while that for deals involving outdoor flower was unchanged.  

 

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

As we have chronicled recently, wholesale cannabis prices have been trending upward since late May on record-setting demand in numerous state markets, including some of the largest and most mature. In recent weeks, the U.S. Spot has risen to its highest point since the first week of 2018, which was the last time prior to mid-July when it was observed to exceed $1,500 per pound. New data out of Michigan this week showed a surge of demand in that market as well, with combined adult-use and medical cannabis sales topping $100 million for the first time. The persistent, outsized demand that has marked legal cannabis systems since the outset of the COVID-19 pandemic in the U.S. is at this point resulting in rumblings about possible shortages in states such as Oregon and Colorado. 

 

We have also pointed out previously that production in such mature markets has leveled off somewhat in recent years. However, earlier this month a grower in southwestern Oregon reported to Cannabis Benchmarks that outdoor cultivation conditions had been excellent so far this year and that he expected a bumper crop. He speculated that growers up and down the West Coast were having similar experiences. Recent harvest figures out of Oregon suggest expanded mid-summer crops this year, substantiating the grower’s account.

 

 

A surge of high-quality supply this fall and winter could blunt the upward trend of the U.S. Spot, especially if a new coronavirus stimulus measure is insufficient or does not come to fruition.

September Forward up $50 to $1,450 per pound.

 

The average reported forward deal size was 29 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 41%, 33%, and 27% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 30 pounds, 25 pounds, and 32 pounds, respectively.

 

At $1,450 per pound, the September Forward represents a discount of 5.1% relative to the current U.S. Spot Price of $1,527 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

Sustained, Record Setting Demand Pushes U.S. Spot to Highest Point in Over 2.5 Years, But Reports Say West Coast on Track for Large Fall Harvest

Oregon

Flower Sales Revenue Rises in July, but Sales Volume Fairly Flat, Indicating Retail Prices are Following Wholesale Rates Upward

Michigan

Combined Adult-Use and Medical Cannabis Sales Rise to New Record in July after Slowing in June, Topping $100 Million for First Time

Annual Fees for Licensed Medical Cannabis Facilities Drop Significantly From FY20 – FY21

 

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

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

CANADA CANNABIS SPOT INDEX — August 21, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 21, 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$6.47 per gram this week, up 3.8% from last week’s C$6.23 per gram. This week’s price equates to US$2,220 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 look at the state of the Canadian medical cannabis market since recreational legalization. The medical cannabis sector faces stiff competition from both the legal recreational market and the still-robust illicit market. That being said, medical cannabis is still a significant area of focus for many of the large cultivators, which can be seen in their financials. For example, Canopy showed its medical cannabis business outperforming in its recent quarterly earnings release for the three-month period ending June 30. They showed growth of 3% in its medical business, while recreational sales to consumers declined by 29% due to COVID and competition.

 

Despite remaining a focus for many licensed producers, trends in the Canadian medical cannabis sector show it contracting for the most part, with no bottom reached just yet. The first dataset we look at is the number of active medical clients registered by licensed producers. The number of medical clients increased during the first year of legalization, but starting in September 2019 we have seen huge declines in registered patients. We attribute this drop to the increase in recreational retail outlets, increased product variety (including Cannabis 2.0 items), and falling prices. 

Source: StatCan, Cannabis Benchmarks

In October 2018, when recreational cannabis was federally legalized, two provinces – Alberta and Ontario – were home to 78% of the country’s active registered medical cannabis clients. The two provinces can be seen as case studies in how the development of the recreational market can impact demand in the medical sector. 

 

Alberta on one hand made it quick and simple to open a new recreational retail location, while Ontario’s licensing process was much slower. This shows in the number of retail stores open in both provinces. Ontario, with 14.4 million citizens, had 116 stores open by the end of July; Alberta, with 3.4 million citizens, had 500 stores open. 

 

With more convenient access in Alberta, a significant portion of medical cannabis clients let their registrations lapse and shifted to purchasing in the recreational sector. Contrastingly, with few stores open, Ontario saw an increase in medical cannabis clients up until September 2019. With more Ontario stores opening, the previous increase in registered medical cannabis clients is being reversed, as they can obtain product via recreational retailers without going to the trouble of registering with the medical program. 


Alberta currently has 73,000 medical cannabis clients, down 19% from October 2018. Ontario currently has 171,000 medical cannabis clients, 1% lower than the number registered in October 2018.

Source: StatCan, Cannabis Benchmarks

Another dataset that illustrates the downward trend in Canada’s medical market is the number of monthly medical cannabis cannabis shipments from licensed producers to patients.

Source: StatCan, Cannabis Benchmarks

As seen above, there is a clear downward trend from October 2018 to February 2020. However, that trend was disrupted notably in March 2020. The reason behind the spike in shipments in March is that registered medical clients placed an outsized amount of online orders, as Canadians became subject to COVID-related lockdowns.

Province by province we see a similar trend, as shown in the chart below, with the exceptions of British Columbia (BC) and Quebec. Although BC has built out a robust retail footprint, residents still rely heavily on the illicit market, which is traditionally strong in Western Canada. While Quebec has some of the most inexpensive recreational cannabis prices in the country due to a low provincial mark-up, it does not have a well-built recreational retail network. This has led to medical cannabis shipments holding steady, and even increasing.

Source: 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

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

August 14, 2020

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

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

U.S. Cannabis Spot Index up 0.1% to $1,518 per pound.

 

The simple average (non-volume weighted) price increased $6 to $1,768 per pound, with 68% of transactions (one standard deviation) in the $972 to $2,565 per pound range. The average reported deal size was nominally unchanged at 2.2 pounds. In grams, the Spot price was $3.35 and the simple average price was $3.90.

 

The relative frequency of trades for greenhouse flower increased by 4% this week. The relative frequency of transactions for outdoor product decreased by the same proportion, while that for deals involving indoor flower was unchanged.  

 

The relative volume of warehouse product expanded by over 3%. The relative volume of outdoor flower contracted by the same proportion, while that for greenhouse product was unchanged.

After sales growth in legal cannabis markets across the U.S. largely slowed in June, new data this week out of Oregon, Arizona, and Illinois shows demand bouncing back and expanding in July. The U.S. Spot Index has been responding to the strong demand experienced thus far this spring and summer. In July, the national composite price averaged $1,470 per pound, up 6.4% from $1,382 per pound in June. 

 

The one caveat so far to rising July sales is Oklahoma’s medical cannabis program, which saw a downturn last month. Medical sales in Oklahoma had outpaced combined adult-use and medical revenue in Illinois in recent months, but that changed in July. Illinois’ sales leapfrogging those of Oklahoma was due to a sharp uptick in the former state’s developing recreational sector, showcasing the larger growth potential of such markets relative to medical-only ones.

 

 

As we have pointed out in prior reports, however, August appears as if it could be the turning point in determining whether cannabis is truly a recession-proof commodity. Enhanced federal protections and benefits provided by the CARES Act expired at the end of July. This has left millions at risk of eviction, in addition to dramatically reducing unemployment payments. With Congress on vacation – again – from yesterday until after Labor Day, no new stimulus measure appears to be forthcoming until autumn, if at all. If strong demand persists this month and beyond, even in the face of such headwinds, then cannabis businesses will likely feel secure despite the economic carnage occurring in other industries due to the coronavirus.

September Forward unchanged at $1,400 per pound.

 

The average reported forward deal size was 30 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 41%, 33%, and 27% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 31 pounds, 25 pounds, and 33 pounds, respectively.

 

At $1,400 per pound, the September Forward represents a discount of 7.7% relative to the current U.S. Spot Price of $1,518 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

June Sales Reach Historic High for Second Straight Month, but Growth Slowed After May’s Spike

Oregon

Record Demand Resumed in July After Sales Slumped Momentarily in June

Arizona

Total Sales Volume to Patients Back on the Rise in July, Subsequent to Flattening in Prior Month

Illinois

Medical Cannabis Sales Rise to Record $33 Million in July; Total Monthly Revenue Exceeds $94 Million When Combined with Adult-Use Sales

Oklahoma

July Sales Dip to About $75 Million After Peaking in June

 

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

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