December 18, 2020

CANADA CANNABIS SPOT INDEX — December 18, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 18, 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$6.20 per gram this week, up 1.7% from last week’s C$6.09 per gram. This week’s price equates to US$2,207 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 growing gap between supply and demand in Canada’s legal cannabis market. By combining our estimate on monthly demand with Statistics Canada’s production estimates, we can get a clearer understanding of the dynamics of the country’s regulated cannabis market.

 

Cannabis Benchmarks estimates that the total implied demand for legal cannabis in August 2020 was 25,978 kg, an 81% increase over the same month in 2019, as shown in the following table. 

Source: Cannabis Benchmarks, Statistics Canada

Even though demand has continued to grow at a rapid rate, August’s demand is still less than 25% of the 112,025 kg of unpackaged production reported by Statistics Canada for the month. The mismatch is creating a huge oversupply of both packaged (finished) and unpackaged (unfinished) products across the country. Not surprisingly, Statistics Canada’s most recent data for August 2020 shows unpackaged and packaged inventory ballooning to 882,938 kg. This represents 34 months worth of supply at current demand levels, and inventory is continuing to increase. Additionally, this imbalance has persisted even after many Licensed Producers took large write-offs for excess inventory over the past year. 

Source: Cannabis Benchmarks, Statistics Canada

The hope is that this inventory will ultimately be sold either as dried flower or after being converted into a cannabis derivative product, but there is a chance that the quality of the product degrades to a point where it is not sellable. As noted above, we estimate that the August inventory level represents 34 months of demand based on the August sales volume. 

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

18 December 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

December 11, 2020

U.S. Cannabis Spot Index — December 11, 2020

U.S. Cannabis Spot Index — Published December 11, 2020

U.S. Cannabis Spot Index down 0.6% to $1,524 per pound.

 

The simple average (non-volume weighted) price decreased $21 to $1,813 per pound, with 68% of transactions (one standard deviation) in the $1,091 to $2,536 per pound range. The average reported deal size decreased from 2.5 pounds to 2.4 pounds. In grams, the Spot price was $3.36 and the simple average price was $4.00.

 

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

 

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

New sales data out of several states confirms our previous analysis that demand has subsided since late summer. In Colorado, total sales declined for the third straight month in October, but were still up by over 30% compared to 2019. September saw retail revenues in Nevada decrease, even despite a rise in the number of tourists visiting Las Vegas. 

 

Additionally, in states with newer adult-use markets – namely Massachusetts and Illinois – November sales saw a downturn after steady growth in both states earlier this year. However, the declines were relatively small. In the case of Illinois’ adult-use sector, average daily sales in November were up compared to October, but growth has slowed. 

 

 

While it appears that the COVID-related wave of increasing cannabis demand crested around July or August in most states, monthly retail revenue figures remain elevated. In other words, recent decreases in demand do not mean that sales have fallen to pre-coronavirus levels. Wholesale flower prices reflect continued strong demand. National prices for product of each grow type have remained relatively stable during the autumn, although a slight downward trend has developed for outdoor flower in particular. The recent downturn of the U.S. Spot, meanwhile, is due to expanded volumes of lower-priced outdoor product being traded in the West Coast states and Colorado.

January 2021 Implied Forward unchanged at $1,565 per pound.

 

The average reported forward deal size was 35 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 45%, 34%, and 22% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 50 pounds, 21 pounds, and 28 pounds, respectively.

 

At $1,565 per pound, the January Implied Forward represents a premium of 2.7% relative to the current U.S. Spot Price of $1,524 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 Sales Decline for Third Straight Month in October to Just Under $200M, Still Up 33% YoY

Nevada

September Retail Revenue Down 3.5% MoM to $76.7M, Despite Increase in Tourism that Month

Massachusetts

November Adult-Use Sales Slip 8.5% from Prior Month to $76.2M, First Significant Decrease After Steady Growth in 2020

Illinois

Adult-Use Demand Growth Slowed, Medical Sales Down in November; Total Sales Reached $106M, Off 2% from October

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

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

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

11 December 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — December 11, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 11, 2020
ccsi image 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$6.09 per gram this week, up 0.9% from last week’s C$6.04 per gram. This week’s price equates to US$2,155 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 revisit our outlook for the growth of cannabis store counts and sales in Ontario. The province’s Alcohol and Gaming Commission (AGCO) issued a statement on December 8 regarding Cannabis Retail Store Authorizations, which necessitates updates to our projections. 

 

Last December, after pressure from the cannabis industry, the Ontario government altered its retail store licensing process from a lottery system to a more open format. The goal was to issue up to 20 retail store licenses each month starting in April. Then, in a statement in September, AGCO stated they would “double the pace of store authorizations this fall.” This suggested an average of 40 new stores each month through the end of the year. Despite the province missing its targeted increase in October and November, this week’s statement ups their growth estimate once again.

 

Starting this month, Ontario’s cannabis store regulator is now set to double the number of Retail Store Authorizations (RSA) it is issuing each month to 80. This is a massive increase, and a necessary shock to boost legal cannabis sales in Canada’s most populous province. 

 

 

With the new RSA target, we anticipate 80 stores to open on average each month throughout 2021. At this rate, the current 240 stores would increase to roughly 1,260 stores by the end of next year.

Source: Cannabis Benchmarks

As we stated last week, based on the current store count of 240, each store serves roughly 60,000 Ontarians. (This number is not adjusted for underage people or those that choose not to consume cannabis products.) If the forecast of 1,260 stores is achieved, there will be one retailer per 11,500 Ontario residents. This number is closer to Alberta’s per capita store count, as well as those of some mature state markets in the U.S.

 

Over the past two years, we have reported on the very strong relationship between the number of open stores and monthly retail sales in each province. Each new store provides better accessibility to the legal cannabis system and helps pull consumers away from the still-robust illicit market. The latest sales data for September 2020 issued by Statistics Canada shows Ontario cannabis retail sales totaled C$77.9M that month with 178 stores open. Based on the new RSA target of 80 new stores per month, our updated forecast shows sales growing dramatically over the course of 2021. We now project Ontario’s total sales to exceed C$1.6B by the end of next year.

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

11 December 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

December 4, 2020

U.S. Cannabis Spot Index — December 4, 2020

U.S. Cannabis Spot Index — Published December 4, 2020

U.S. Cannabis Spot Index down 3.8% to $1,534 per pound.

 

The simple average (non-volume weighted) price decreased $12 to $1,834 per pound, with 68% of transactions (one standard deviation) in the $1,106 to $2,562 per pound range. The average reported deal size increased from 2.3 pounds to 2.5 pounds. In grams, the Spot price was $3.38 and the simple average price was $4.04.

 

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

  

 

The relative volume of outdoor flower expanded by 6% this week. The relative volumes of warehouse and greenhouse product contracted by 3% each.

With the end of 2020 approaching, a look back on our year-to-date wholesale price assessments reveals some interesting and surprising trends. The chart below shows the course of the U.S. Spot Index since Cannabis Benchmarks first began assessing this data point in April 2015.

Perhaps most notably, the behavior of the U.S. Spot in 2020 displays strong similarities to the course charted in 2019, despite the disruption caused by the COVID-19 pandemic this year. In both 2019 and 2020, the national composite price opened the year on a downward trend due to increased supplies of outdoor flower from the prior year’s fall harvest. The U.S. Spot began to climb in the spring in both years; in 2019 this ascent started in late March, in 2020 it would not commence until late May. 

 

Additionally, a downturn in wholesale flower prices began in November with the autumn harvest both last year and this year, but 2020’s started earlier and has so far been more dramatic. This is somewhat surprising given significantly elevated demand and sales revenues in 2020, as well as questions surrounding the fall crop due to the severe wildfires that ravaged the West Coast. 

 

Another surprise in this year’s data is that the ascent of the U.S. Spot in 2020 has so far not matched the magnitude of the wholesale price recovery observed in 2019. Regardless, the 10% year-to-date increase from the assessed price at the start of the year represents a notable rise, especially following the U.S. Spot’s climb in 2019. Barring a large downturn in the coming weeks, it appears likely that 2020 will be the second straight time that the U.S. Spot will close the year higher than at its outset. In the first three full years that Cannabis Benchmarks assessed wholesale flower prices, the national average ended each year off from where it started, often by a large margin.

June 2021 Implied Forward initially assessed at $1,600 per pound.

 

The average reported forward deal size was 32 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 43%, 34%, and 23% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 45 pounds, 19 pounds, and 28 pounds, respectively.

 

At $1,565 per pound, the January Implied Forward represents a premium of 2.0% relative to the current U.S. Spot Price of $1,534 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

Newly-Released Q3 Cannabis Tax Revenues Show Continued Growth in Retail and Wholesale Sectors of Legal Market

Los Angeles Identifies 200 Retail License Applicants Eligible for Further Processing, Temporary Approval to Operate

Oregon

Retail Revenues Through November Top $1B, but Monthly Sales in Autumn Down from Summer

Massachusetts

New Adult-Use Delivery License Types and Other Rules Approved by Regulators; Industry Group Threatens Litigation

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

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

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

4 December 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — December 4, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 4, 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$6.04 per gram this week, up 1.7% from last week’s C$5.94 per gram. This week’s price equates to US$2,114 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 pace. As of the end of November, we counted 1,276 licensed retailers, with an average monthly growth rate of 6.1% 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

At the national level, the increase in store counts look to be growing linearly, but drilling down into each province shows a very different picture. 

Source: Cannabis Benchmarks

All provinces are seeing store counts grow, but at different rates. British Columbia’s store count is growing at a steady-state, while Ontario’s has been growing exponentially. Ontario, however, is playing a bit of catch up to the rest of the provinces on this front. While Ontario has not achieved its goal of opening 40 stores per month set in September, they have not far behind; since September, an average of 34 new stores per month have opened in the province.

The more interesting story is Alberta, where the number of new store openings has decreased significantly. The province appears to have reached a plateau on how many stores it needs to support its relatively small population of 4.3M people. Alberta’s current store count equates to one per 8,018 residents. 

 

For context, Alberta’s per capita store count lies between those of two of the most mature legal cannabis markets in the U.S.: Colorado and Oregon. In Colorado, there is one recreational retailer per roughly 9,600 residents. In Oregon, there is one legal store for about every 6,150 people. 

If we assume Alberta’s to be the optimal number of stores – an assumption buttressed by its position between two relatively stable, mature U.S. state markets – it provides some insight into how many retailers each province ultimately needs to open to reach the same ratio. Below is the result of this simple model: calculating the number of stores each province needs to meet the same ratio of one store per 8,018 people.

*note adjusting for the % of the population that does not use cannabis products

Based on this analysis, Canada as a whole would require a total of 4,638 stores, or 3.6 times the current number of retailers. While it is unlikely that Canada will reach that amount anytime soon, continued growth in store counts will ultimately lead to higher sales across the country. If we project using the average of 55 stores opened each month across Canada – the 2020 average so far – then we reach 4,638 stores at the end of 2023. This level of accessibility would almost certainly minimize illicit market activity and shift most of the overall cannabis sales volume to legal channels – something the regulated industry is very much looking forward to.

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

04 December 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.