February 12, 2021

CANADA CANNABIS SPOT INDEX — February 12, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 12, 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$5.80 per gram this week, down 1.2% from last week’s C$5.88 per gram. This week’s price equates to US$2,067 per pound at the current exchange rate.

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This week we examine household expenditure data issued by Statistics Canada on a quarterly basis. The data show some very interesting and positive trends for the legal cannabis sector. To start, we look at the rise of the legal recreational cannabis market across Canada. As seen in the chart below, Q3 2020 was the first quarter in which the estimated household expenditure for recreational cannabis exceeded that spent in the illicit market.

 

With increased access through retail stores and online channels during the pandemic, more Canadians chose to purchase cannabis through regulated, legal channels. Also fueling that trend was the drop in prices as new supply from indoor and outdoor cultivation operations became available.

In Q3 2020, recreational cannabis expenditures grew 102% to C$824M and illicit cannabis expenditures dropped by 19% to C$754M as compared to the same time frame in 2019. We also note that expenditure for medical-use cannabis dropped 6% to C$146M. Medical cannabis now makes up only 8.5% of the total cannabis bought in Canada. Total expenditure on cannabis was C$1.7B for the quarter, or C$18.7M per day.

Source: Cannabis Benchmarks, Health Canada

Next we look at cannabis purchasing in comparison to that for alcohol and tobacco. Major alcohol and tobacco companies have made significant investments in cannabis operations over the last few years, in part as a hedge to ensure they do not lose out to the latent demand for cannabis that is being captured gradually by legal businesses. The data released by Statistics Canada to date shows that alcohol and tobacco sales remain much stronger than cannabis sales, and that increased cannabis sales have not impacted those categories negatively. As seen in the chart below, both alcohol and tobacco sales remained consistent between Q3 2019 and Q3 2020, with 51% and 37-38% respectively.

Source: Cannabis Benchmarks, Health Canada

We should note that sales were up across the board for all three categories – most likely due to COVID-19 lockdowns. Alcohol sales were up 10% year-on-year, tobacco sales were up 4%, and total cannabis sales (legal and illicit) were up 17%.

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

12 February 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

February 5, 2021

U.S. Cannabis Spot Index — February 5, 2021

U.S. Cannabis Spot Index — Published February 5, 2021

U.S. Cannabis Spot Index up 1.5% to $1,512 per pound.

 

The simple average (non-volume weighted) price decreased $12 to $1,750 per pound, with 68% of transactions (one standard deviation) in the $992 to $2,508 per pound range. The average reported deal size was 2.3 pounds. In grams, the Spot price was $3.33 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 outdoor flower contracted by over 3% this week. The relative volumes of warehouse and greenhouse product expanded by about 2% and 1%, respectively.

After a tumultuous 2020, how legal cannabis markets will fare in 2021 is an open question. In this week’s Premium report, we note two studies out of major markets. In Oregon, state regulators raise the possibility of flattening demand post-COVID, combined with a potential increase in production. A study from researchers at Washington State University also predicts slowing demand growth compared to 2020’s over 20% year-over-year increase in retail sales. 

 

Official sales data for January has yet to be released by many states, but historical trends tell us that the first two months of any given year are typically periods of relatively low demand. Sales figures out of Illinois show that growth in the adult-use sector continued in January, but the pace of increase subsided compared to the large uptick seen in December. 

 

 

Sales are reportedly brisk in Arizona, the country’s newest functioning adult-use market. However, a member of our Price Contributor Network – a vertically integrated operation encompassing cultivation, product manufacturing, and multiple storefronts – this week told Cannabis Benchmarks that the company was keeping all of its flower in-house to supply its own retailers. Additionally, while they noted that wholesale sales of extracts and edibles had increased, they stated prices for such products remained relatively constant. As we have reported previously, production in Arizona’s long standing medical market is robust, with no capacity limits for cultivators. This should prevent, or at least ameliorate, the supply crunch seen in many new adult-use markets, at least in the near term.

August 2021 Implied Forward initially assessed at $1,650 per pound.

 

The average reported forward deal size was 39.7 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 35%, and 12% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 54 pounds, 22 pounds, and 26 pounds, respectively.

 

At $1,540 per pound, the March Implied Forward represents a premium of 1.9% relative to the current U.S. Spot Price of $1,512 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:

Oregon

State Report Shows Surging Demand During COVID Helped Balance Market, But 2021 Outlook Suggests Continued Expansion of Supply

Washington

University Study States Sales Rose 21% from 2019-2020; 15% Growth Projected for 2021

Proposed Legislation Would Allow Small Cultivators to Gain New Licenses, Expand Production Capacity, and Sell Directly to Consumers On-Site

Illinois

Adult-Use Sales Expanded Again in January, While Medical Sales Declined

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

5 February 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 5, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 5, 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$5.88 per gram this week, down 0.3% from last week’s C$5.89 per gram. This week’s price equates to US$2,082 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 examine the growing number of cultivators in Canada’s market. There are two types of cultivation licenses issued by Health Canada: a standard cultivation license and a micro-cultivation license. The standard license has no size limit on the growing area for the facility, while a micro-cultivator is limited to 200 square meters (about 2,150 square feet) of growing area. 

 

Micro-cultivators are likely to focus on quality over quantity – much as craft brewers do in the beer industry. These smaller growers often focus on unique strains to differentiate their product and receive a premium price. 

Source: Cannabis Benchmarks

Regardless of type, Health Canada takes the same approach in reviewing cultivation applications. The completed form requires municipal permits, property details and layouts, executive team security clearances, approvals from local fire and police associations, and much more. The average time to receive a license takes anywhere from three to nine months depending on the completeness of the application. 

 

Health Canada has been working through the backlog of cultivation licenses and there are currently 513 active cultivation licenses split amongst standard and micro-cultivation grow operations. Approximately two-thirds of the licenses are standard licenses.

Source: Cannabis Benchmarks, Health Canada

As seen in the chart below, the micro-cultivation license is a relatively new phenomenon. The issuance of standard licenses accelerated quickly ahead of the legalization of cannabis on October 17, 2018, but the same phenomenon for micro-cultivation was not seen until the following year. 

Source: Cannabis Benchmarks, Health Canada

Lastly, we break down in which provinces the licenses are issued. Ontario with its sizable population and British Columbia with its favorable climate have seen the largest numbers of licensed cultivators in their jurisdictions.

Source: Cannabis Benchmarks, Health Canada

We should note that at the moment not all licensees are operational. However, if each license holder builds their cultivation facility and begins producing, we can expect Canada’s production capacity will continue to outstrip domestic demand. Furthermore, if options to export significant amounts of product remain limited, as they are currently, the growing surplus inventory would likely need to be destroyed as the cost of carry outweighs the economic value of the product. 

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

05 February 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.