November 13, 2020

CANADA CANNABIS SPOT INDEX — November 13, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 13, 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$5.93 per gram this week, up 0.3% from last week’s C$5.91 per gram. This week’s price equates to US$2,059 per pound at the current exchange rate.

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Earlier this year, tough financial realities forced numerous Licensed Producers (LPs) to scrap costly greenhouse expansions. Now, an increasing number of Canadian cannabis cultivators are shifting production capacity to outdoor cultivation. Outdoor cultivation has significantly lower operating costs relative to growing indoors or in a greenhouse, including lower infrastructure and labor costs, and no energy costs for lighting, heating, and ventilation.

 

The latest data from Statistics Canada shows outdoor cannabis cultivation capacity expanding at a rapid rate. As of August 2020, there were 544 hectares licensed to grow cannabis outdoors. This is a massive jump relative to the first data point from October 2019. Over the 11 month period, outdoor cannabis cultivation capacity grew by 312 hectares, or 134%. 

Source: Cannabis Benchmarks

The next chart takes the same data and standardizes the units to square feet. While this chart does not reflect the amount of actual cannabis production, since an indoor-grow will have multiple harvests annually, compared to one per year outdoors, it does show the dramatic shift towards outdoor production.

Source: Cannabis Benchmarks

While outdoor cultivation is ramping higher, indoor production capacity has plateaued. This makes sense when one considers that legal markets continue to compete with illicit producers for market share. Outdoor cultivation’s lower production cost makes it more competitive with illicit supply, but the resulting cannabis is usually of lower quality. As a result, significant portions of outdoor-grown product might not be as marketable for smoking in its raw form as that grown indoors. However, it is very suitable as low-cost raw material for manufacturing cannabis 2.0 products such as edibles, beverages, and vapes. 

 

Outdoor cultivation does have risks. In Canada, there is only one growing season for outdoor cannabis. Hail, wind, and early freezes can destroy an entire harvest, leaving farmers with lost revenue. On the other hand, the 544 licensed hectares could conceivably produce a tsunami of additional flower and other plant material that may overwhelm already-inflated supply levels in Canada. 

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

13 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

November 6, 2020

U.S. Cannabis Spot Index — November 6, 2020

U.S. Cannabis Spot Index — Published November 6, 2020

U.S. Cannabis Spot Index down 0.7% to $1,647 per pound.

 

The simple average (non-volume weighted) price decreased $11 to $1,859 per pound, with 68% of transactions (one standard deviation) in the $1,115 to $2,603 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $3.63 and the simple average price was $4.10.

 

The relative frequencies of trades for each grow type were essentially unchanged from last week.

 

The relative volume of outdoor flower expanded by almost 3% this week. The relative volumes of indoor and greenhouse product contracted by about 1% and 2%, respectively.

With the close of October, much of the country’s legal outdoor crop has been harvested, but early reports out of Oregon state that it has not yet hit the market for the most part. It will likely be several weeks before significant portions of this year’s crop are dried, trimmed, tested, packaged, and sent to retailers. While the overall state of the harvest in West Coast states and Colorado is still unclear, some initial reports from market participants in Oregon indicate that some outdoor crops that were exposed to smoke and ash from the wildfires earlier this year are finishing favorably. Some are worried more about disruptions to power and water caused by the wildfires, and how that impacted the ability to care for growing plants, more so than smoke damage. 

 

In the meantime, the upward momentum of the U.S. Spot Index accelerated in October relative to September. While the national composite price last year rose to its annual peak in mid-November 2019, this year the last two weeks have seen consecutive downturns in the U.S. Spot.

 

 

Strong sales are continuing, however, with the holidays approaching as well. Adult-use markets in Massachusetts and Illinois both saw new monthly sales records set in October. It remains to be seen how – or if – the worsening COVID-19 pandemic will impact demand during the upcoming holiday season. Prior to this year, Thanksgiving and the end-of-year holidays had become a period when retailers run promotions and specials to drive sales, including dubbing the day after Thanksgiving “Green Friday,” to accompany “Black Friday” deals run by traditional retailers.

May 2021 Forward initially assessed at $1,565 per pound.

 

The average reported forward deal size was nominally unchanged at 23 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 40%, 36%, and 25% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 29 pounds, 17 pounds, and 23 pounds, respectively.

 

At $1,590 per pound, the December Forward represents a discount of 3.5% relative to the current U.S. Spot Price of $1,647 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:

Legalization Updates

Five States Legalized Cannabis in Some Form in Tuesday’s Elections: Arizona (Rec), Mississippi (Med), Montana (Rec), New Jersey (Rec), and South Dakota (Rec & Med)

Arizona’s Large Medical Program Well-Positioned to Expand to Serve Adult-Use Consumers

New Jersey’s Nascent Adult-Use Industry, Building on Small Medical Program, Will Need Time to Grow to Meet Massive In and Out-of-State Demand

Massachusetts

Adult-Use Retailers Set New Sales Record in October, Exceeding $83M; 2020’s YTD Tally Climbs to Over $542M

Illinois

Recreational Sales Top $75M in October, Another New Record, With Average Daily Sales Increasing Almost 8% from Prior Month

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

6 November 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — November 6, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 6, 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$5.91 per gram this week, down 0.7% from last week’s C$5.96 per gram. This week’s price equates to US$2,036 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 nationwide. The Canadian cannabis industry has continued to open new retail outlets across the country at a steady clip. At the end of July, we crossed the milestone of 1,000 stores and expansion has not slowed since then. As of the end of October, we counted 1,226 licensed retailers, with an average monthly growth rate of 6.3% in 2020. This growth rate has been very consistent throughout the year, which gives us confidence that the cannabis industry will continue to grow at a stable rate in 2021.

Source: Cannabis Benchmarks

The 67-store increase in October was once again dominated by Ontario. Ontario did not hit its targeted 40 new stores during the month; rather, 32 new stores were opened in the province. Ontario now has 210 stores, which is contributing to a massive uptick in total cannabis sales. 

 

August’s reported sales were C$245M at the national level, and we should note that since then 142 new stores have opened, an increase of 13%. 

Source: Cannabis Benchmarks

As can be seen in the above chart, we have two linear fits. The last two reported months (July and August) have moved a step higher in the store to sales relationship. We believe that the end of COVID lockdowns, along with the increased availability of cannabis 2.0 products, propelled sales per store to a new level. Combined with the addition of new stores, we estimate total Canadian sales increased to between C$8.2 and $8.7M per day in October, resulting in total sales of more than C$300M last month.

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

06 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.