January 22, 2021

CANADA CANNABIS SPOT INDEX — January 22, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending January 22, 2021
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$5.95 per gram this week, up 1.5% from last week’s C$5.87 per gram. This week’s price equates to US$2,128 per pound at the current exchange rate.

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This week we once again touch on the changing cultivation landscape in Canada. Overbuilt cultivation capacity has forced numerous Licensed Producers (LPs) to close indoor cultivation facilities and scrap plans for future developments. As the cannabis market matures, cultivators realize that price wars are inevitable, just as in any other commodity. With that realization, an increasing number of Canadian cannabis cultivators are shifting production capacity outdoors. 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 October 2020, there were 576 hectares licensed to grow cannabis outdoors. This is a massive jump relative to the first data point from October 2019. Over the 12 month period, outdoor cannabis cultivation capacity grew by 344 hectares, or 148%. This increase comes as three of the largest indoor and greenhouse producers, Aurora, Canopy Growth, and Tilray, announced closures of large facilities last year along with major inventory write-downs.

 

Source: Cannabis Benchmarks

The next chart takes the same data and standardizes the units to square feet. It is important to note that this chart does not represent a direct comparison of actual cannabis production by each cultivation type, since indoor operations are able to harvest multiple times annually. Additionally, while the dramatic increase in outdoor cultivation capacity – along with plateauing indoor production – points to significant volumes of new supply in the coming years, a greater proportion of indoor production ends up being sold as smokable flower, while significant amounts of outdoor-grown cannabis are devoted to extraction and product manufacturing. The controlled environments of indoor growers enable the production of flower that has greater consistency and aesthetic appeal to consumers looking for smokable product by virtue of sheltering the cultivation process from weather and pest pressures. 

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

22 January 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

January 21, 2021

U.S. Cannabis Spot Index — January 22, 2021

U.S. Cannabis Spot Index — Published January 22, 2021

U.S. Cannabis Spot Index up 0.6% to $1,486 per pound.

 

The simple average (non-volume weighted) price decreased $29 to $1,749 per pound, with 68% of transactions (one standard deviation) in the $1,013 to $2,484 per pound range. The average reported deal size decreased to 2.4 pounds. In grams, the Spot price was $3.28 and the simple average price was $3.86.

 

The relative frequency of trades for greenhouse flower decreased by 1%. The relative frequency of deals for outdoor product increased by the same proportion, while that for indoor flower was unchanged.

  

 

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

The city of Detroit began accepting applications for adult-use retailers this week, on Tuesday, January 19. Applications will initially only be accepted from “legacy residents” who meet certain criteria under a social equity program, according to the Detroit News. To this point, Detroit has not permitted any adult-use cannabis businesses to open in the city. We noted previously that licenses could be issued as soon as June 2021. 

 

The Detroit News report notes, “only a handful of the city’s 46 medical marijuana dispensaries … are owned by [Detroit] residents.” This suggests that, for the most part, sales to adult-use consumers will not begin through existing stores as soon as licenses are issued and most new licensees will have to get up and running from scratch.

February Implied Forward declined $25 to $1,500 per pound.

 

The average reported forward deal size was 39.6 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 52%, 35%, and 13% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 55 pounds, 21 pounds, and 26 pounds, respectively.

 

At $1,500 per pound, the February Implied Forward represents a premium of 1.0% relative to the current U.S. Spot Price of $1,486 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:

Michigan

Combined Adult-Use and Medical Cannabis Sales Reach Almost $985 Million in 2020

Arizona

New Adult-Use Market May Open in Coming Days, About Two Months Ahead of Expectations

New Mexico

Medical Cannabis Sales Expanded Significantly in Q3 2020, Even as Growth in Patient Count Slowed

Massachusetts

Adult-Use Delivery Businesses Expected to Come Online this Year, but May Be Delayed by Litigation

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

22 January 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

January 15, 2021

U.S. Cannabis Spot Index — January 15, 2021

U.S. Cannabis Spot Index — Published January 15, 2021

U.S. Cannabis Spot Index down 0.9% to $1,477 per pound.

 

The simple average (non-volume weighted) price was unchanged at $1,777 per pound, with 68% of transactions (one standard deviation) in the $1,032 to $2,523 per pound range. The average reported deal size decreased to 2.5 pounds. In grams, the Spot price was $3.26 and the simple average price was $3.92.

 

The relative frequency of trades for indoor flower decreased by 1%. The relative frequency of deals for outdoor product increased by the same proportion, while that for greenhouse flower was unchanged.  

 

The relative volume of outdoor flower contracted by 1% this week.

 

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

The early weeks of 2021 have seen the U.S. Spot Index’s downward trend, which commenced in November with the fall harvest, continue. The current price erosion is being driven almost exclusively by falling rates in California, Colorado, and Oregon. Additionally, states in which prices had previously been climbing – namely Massachusetts, Michigan, and Illinois – have seen that upward momentum level off in recent weeks.

 

We have pointed out previously that the winter months typically see lower demand relative to the spring and summer, with the exception of a sales boost in December in many cases. One of the most notable findings in this week’s Premium Report is that total sales in Colorado in November dropped sharply, by over 12% compared to the prior month. A downturn in retail revenue from October to November is customary; however, this year’s decrease was more than twice the magnitude of that observed last year, indicating a significant pullback in purchasing that month.

 

 

On the other hand, Arizona’s Spot Index is trending upward as the beginning of adult-use sales draws closer. The state’s medical market saw almost 190,000 pounds of flower retailed to patients in 2020 – the fifth-largest flower sales volume in the country last year by our estimates – up by about 25% from the year prior. Notably, however, wholesale prices in the state trended downward for much of the year even in the face of strong demand, and only began to rise in the closing months of 2020 with the imposition of required product testing and the approval of adult-use legalization by voters, which both occurred in November.

February Implied Forward unchanged at $1,525 per pound.

 

The average reported forward deal size increased from 38.9 pounds to 40.1 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 52%, 34%, and 14% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 56 pounds, 21 pounds, and 26 pounds, respectively.

 

At $1,525 per pound, the February Implied Forward represents a premium of 3.3% relative to the current U.S. Spot Price of $1,477 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

YTD 2020 Sales Exceed $2 Billion as of November, Even as Monthly Tallies Have Declined Since August

Arizona

Medical Dispensaries Sold Almost 190,000 Pounds of Flower to Patients in 2020, the Fifth-Largest Sales Volume Total of Any State Market

Maine

December Adult-Use Sales Top $1.9 Million, Up 50% from November

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

15 January 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — January 15, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending January 15, 2021
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$5.87 per gram this week, down 1.6% from last week’s C$5.96 per gram. This week’s price equates to US$2,095 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 employ our updated expectations for nationwide retail expansion, detailed in last week’s report, to recalculate sales revenue projections for 2020 and 2021. We projected that by the end of 2021 Canada will be home to 2,540 physical cannabis storesThis figure would represent an increase of 1,171 licensed shops compared to the end of 2020, but still falls short of our optimal projected level of 4,638 storesThat being said, the large number of additional new retailers, mainly in Ontario, will add tremendously to Canada’s overall cannabis sales figures.

 

 

The latest data from Statistics Canada shows October 2020 sales at C$270M. This new monthly record is up C$13.0M from the month prior and C$140M from the same month last year. This level of sales was achieved with 1,225 stores. If the number of retailers continues to expand at the rate we anticipate, monthly sales will easily cross C$300M early this year.

 

Below is our monthly Canada-wide cannabis sales projection through the end of 2021. We expect to conclude 2021 with a record monthly sales level of C$345M in December.

Source: Cannabis Benchmarks

All in all, the legal industry is steadily growing and becoming more established. With our new store count projection, we recalculated our complete 2020 and 2021 sales projections. We now expect cumulative 2020 sales totaling C$2.6B and cumulative 2021 sales totaling C$3.8B. The 2021 sales represent a 46% increase from 2020.

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

15 January 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

January 8, 2021

CANADA CANNABIS SPOT INDEX — January 8, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending January 8, 2021
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$5.96 per gram this week, down 1.9% from last week’s C$6.08 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 store counts nationwide. This is a very important metric to track, as each new store contributes to higher sales. The better accessibility of recreational cannabis will help reduce consumer spending in illicit supply chains and further establish cannabis as a customary part of Canadian society.

 

The Canadian cannabis industry has continued to open new retail outlets across the country at a strong pace. As of the end of December, we counted 1,369 licensed retailers, with an average monthly growth rate of 6.0% in 2020. December saw one of the largest individual monthly growth rates last year with 93 new stores, or 7.3% more than the month before. This growth rate continues to be very consistent, which gives us confidence that the cannabis industry will continue to expand at a stable rate in 2021.

 

In the chart below we show our expectations for store count growth throughout 2021. We forecast that Canada will end 2021 with 2,540 stores across the country. At the national level, the increase in store counts looks to be growing linearly, but drilling down into each province shows a very different picture.

Source: Statistics Canada, Cannabis Benchmarks

We expect Alberta store counts to plateau in late summer and even start to decrease in the latter part of the year as the province begins to exceed its saturation point. Store counts in BC and Quebec are expected to increase at a modest rate, while Ontario’s are projected to expand at a higher rate based in part on recent announcements by regulators that we have covered previously.

Source: Statistics Canada, Cannabis Benchmarks

Our final projected 2021 store count of 2,540 is still quite far from the optimal level we calculated in previous reports. We have previously estimated that Canada will require 4,638 stores to reach a per capita store count that lies between two of the more 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. 4,638 stores will get Canada to one legal store per 8,000 people.

 

We do not expect store counts to reach that level until 2024.

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

08 January 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.