April 30, 2021

U.S. Cannabis Spot Index — April 30, 2021

U.S. Cannabis Spot Index — Published April 30, 2021

U.S. Cannabis Spot Index up 2.5% to $1,554 per pound.

 

The simple average (non-volume weighted) price decreased $1 to $1,770 per pound, with 68% of transactions (one standard deviation) in the $1,011 to $2,530 per pound range. The average reported deal size was 2.2 pounds. In grams, the Spot price was $3.43 and the simple average price was $3.90.

 

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

 

 

The relative volumes of greenhouse and outdoor flower both contracted marginally this week, with that for warehouse product expanding slightly.

The U.S. Spot Index rose to a year-to-date peak this week to touch its highest point since late November 2020, when a fall harvest-related decline in national wholesale flower prices commenced. Additionally, after the monthly average U.S. composite price was largely stable from February to March, April saw the U.S. Spot average $1,527 per pound, an increase of 1.3% from the previous month. 

 

The gradual upward trend in wholesale flower prices to begin Q2 2021 contrasts with behavior observed last year, when the U.S. Spot slid downward from mid-February through late May. At that time, the COVID-19 pandemic was just arriving and beginning to take hold in America, and market participants faced significant uncertainty as to how consumer demand for cannabis would respond. 

 

 

Now, however, legal cannabis businesses have experienced roughly a year of elevated demand, while historical trends indicate that sales will continue to increase in the coming months. Newer markets in higher-population states continue to expand as well. Meanwhile, the first full month of adult-use sales in Arizona saw the state’s licensed businesses post impressive total revenue figures, but also suggested significant room for growth in the new recreational sector.

May 2021 Implied Forward closes at $1,550 per pound.

 

The average reported forward deal size was 51 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 33%, and 13% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 63 pounds, 41 pounds, and 27 pounds, respectively.

 

At $1,550 per pound, the May Implied Forward represents a discount of 0.2% relative to the current U.S. Spot Price of $1,554 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:

Arizona

Combined Adult-Use and Medical Cannabis Sales Reach Over $93.5 Million in February; Medical Revenues Still Significantly Higher in First Full Month of Recreational Sales

Oklahoma

February Medical Cannabis Sales Rise to Almost $85 Million, Up 9% from January

Michigan

Licensing Adult-Use Businesses in Detroit Delayed Until at Least Late May by Litigation; City Officials May Scrap Licensing Ordinance Altogether if Social Equity Program Struck Down by Court

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

30 April 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — April 30, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 30, 2021
2

*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$5.77 per gram this week, up 0.8% from last week’s C$5.73 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

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As competition intensifies in the cannabis cultivation sector, Licensed Producers (LPs) continue to scrap existing indoor growing facilities and future development plans. With cost in mind, an increasing number of Canadian cannabis growers are shifting production capacity to outdoor operations. 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 or HVAC needs.

 

The latest data from Statistics Canada shows outdoor cannabis cultivation capacity expanding at a consistent rate, while indoor space is on a decline. As of December 2020, there were 628 hectares licensed to grow cannabis outdoors. This is a massive jump relative to the same period last year.  Over the 12 months, outdoor cannabis cultivation capacity grew by 396 hectares or 270%. 

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

Here we clearly see the growing disconnect between outdoor and indoor cultivation. This makes sense when one considers that legal markets have a growing inventory problem that can only be solved by either reducing supply or increasing demand. Regarding the latter, it is likely more straightforward in the near term for the legal market to attempt to take the share of existing demand captured currently by the illicit market, rather than convert individuals who never used cannabis previously to being regular consumers. 

 

Outdoor cultivation’s lower production cost makes it more competitive with illicit supply, but the resulting cannabis is frequently perceived to be of lower quality. As a result, significant portions of outdoor-grown product might not be as marketable for smoking in its raw form, relative to indoor-grown flower. However, outdoor-grown cannabis is very suitable as low-cost raw material for manufacturing cannabis 2.0 products such as edibles, beverages, and vapes. Such products are also typically less readily available from illicit sources and could bring existing consumers seeking novel products and experiences into the legal market. 


As we have noted in the past, outdoor cultivation does have risks. In Canada, weather can be responsible for destroying an entire harvest. On the other hand, the 628 licensed hectares could oversupply the market leading to lower prices and worsening economics for cultivators. This past October we saw a massive bump in unpackaged supply. From September to October we saw a 66% month-over-month jump in nationwide production due to the outdoor harvest.

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

30 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

April 23, 2021

U.S. Cannabis Spot Index — April 23, 2021

U.S. Cannabis Spot Index — Published April 23, 2021

U.S. Cannabis Spot Index down 0.8% to $1,516 per pound.

 

The simple average (non-volume weighted) price increased $2 to $1,771 per pound, with 68% of transactions (one standard deviation) in the $1,005 to $2,538 per pound range. The average reported deal size was 2.3 pounds. In grams, the Spot price was $3.34 and the simple average price was $3.90.

 

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

 

 

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

New data this week out of Michigan shows that the state’s young adult-use market saw a sales boom in March. Combined with revenue generated by medical cannabis dispensaries, total legal cannabis sales in Michigan reached over $145 million. Notably, Michigan’s March sales outpaced by a significant measure the over $109 million in revenue racked up by licensed retailers in Oregon in the same month, despite Michigan’s adult-use market being open for fewer than 18 months, making it roughly three years younger than Oregon’s. 

 

As we have noted in our reports throughout this month, the younger markets of Massachusetts, Illinois, and Michigan are now seeing sales comparable to or in excess of those out of more mature, but less-populated Western states, such as Oregon and Nevada. Despite rapidly-climbing sales, however, the state Spot Indices of Illinois and Michigan have both trended downward so far this year, indicating that production capacity in each state continues to ramp up and is better meeting demand compared to a year ago. 

 

 

The U.S. Spot has exhibited modest gains this month on the back of rising supply side rates in California and Arizona. Producers in Arizona are still building out additional production capacity after a faster-than-expected start to adult-use sales. California’s composite price has been lifted in part by the robust premium commanded by indoor-grown flower in the state, which is unique amongst other large Western markets.

May 2021 Implied Forward unchanged at $1,550 per pound.

 

The average reported forward deal size was 51 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 33%, and 13% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 63 pounds, 41 pounds, and 27 pounds, respectively.

 

At $1,550 per pound, the May Implied Forward represents a premium of 2.2% relative to the current U.S. Spot Price of $1,516 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

Denver Approves Cannabis Delivery, Lifts Business License Cap for Social Equity Applicants in New Legislation

Michigan

Monthly Adult-Use and Medical Cannabis Sales Spike 38% in March to Total Over $145 Million

Arizona

Newly Awarded Adult-Use Licenses Will Bring Storefronts to Rural Areas and Increase Statewide Production Capacity

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

23 April 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — April 23, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 23, 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$5.75 per gram this week, down 1.0% from last week’s C$5.81 per gram. This week’s price equates to US$2,083 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 touch on the significant problems resulting from the monthly supply and demand mismatch in the Canadian cannabis market. Most commodities require strategically located storage to balance uneven patterns of supply or demand. For example, seasonally harvested row crops like wheat, corn, and soy bring the majority of their supply to market over a period of a few months, while demand is spread evenly throughout the year. Conversely, a commodity like natural gas sees seasonal demand fluctuations, as it is used heavily in the winter months to heat homes, while supply is produced consistently throughout the year. In both cases, lack of alignment in the timing of supply and demand necessitates economical storage facilities and distribution infrastructure.

 

In simple terms:

  • When Quantity Supplied > Quantity Demanded the excess supply goes into storage for later use;
  • When Quantity Supplied < Quantity Demanded  the supply shortfall comes from storage.

 

Not only does storage provide a physical container for the product, but it also helps manage price volatility by storing excess inventory at a reasonable cost.

Source: Quora.com

As an emerging commodity, supply and demand dynamics for cannabis are still coalescing and evolving, making decisions about production capacity, storage, and distribution needs difficult to assess. However, with Canada’s regulated market open for business for over two years now, operators can examine trends in supply and demand, and begin to make more informed decisions that should help move the market closer to equilibrium. 

 

Demand for cannabis sold through legal channels has been growing at a rapid rate, as the regulated market is both attracting new customers and drawing in existing consumers who previously purchased from illicit sources. However, the increased demand has not to this point been nearly sufficient to absorb the staggering, and still-growing, supplies generated by cultivators. Oversupply in Canada’s legal market came initially from Licensed Producers (LPs) overshooting indoor growing capacity; it has been exacerbated by increasing outdoor production capacity, which has led to supply peaking in October in each of the past two years.

Source: Cannabis Benchmarks

The mismatch between production and consumption has resulted in a huge oversupply of both packaged (finished) and unpackaged (unfinished) products across the country. Statistics Canada’s most recent data for November 2020 shows unpackaged and packaged inventory ballooning to 1,165,725 kg, representing over 38 months of supply at current demand levels.

Source: Cannabis Benchmarks

Our current forecast for cannabis sales projects monthly spending to reach C$433M by the end of 2021. If we assume an average annual alcohol sales growth of 1.5% each year, then we can expect monthly alcohol sales to reach C$2.33B by end of the year. At those levels, cannabis sales would grow to represent 16% of the total spend on the two categories.

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

23 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

April 16, 2021

U.S. Cannabis Spot Index — April 16, 2021

U.S. Cannabis Spot Index — Published April 16, 2021

U.S. Cannabis Spot Index up 0.5% to $1,529 per pound.

 

The simple average (non-volume weighted) price increased $1 to $1,769 per pound, with 68% of transactions (one standard deviation) in the $1,001 to $2,537 per pound range. The average reported deal size was 2.2 pounds. In grams, the Spot price was $3.37 and the simple average price was $3.90.

 

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

 

 

The relative volume of indoor flower expanded by 1% this week. The relative volume of greenhouse product contracted by the same proportion, while that for outdoor flower was stable.

While the U.S. Spot Index has been relatively stable to this point in 2021, there has been an overall upward trend, albeit a modest one, since late January. Month-to-date, the national composite price is averaging $1,521 per pound for April, up from $1,508 per pound last month. In 2020, the U.S. Spot trended downward from late February through late May, before robust demand during the pandemic began to pressure supplies and push prices upward. 

 

As we pointed out last week in regard to several significant state markets, demand remains strong this year. However, new February sales data out of Colorado shows that year-over-year growth in retail revenue slowed compared to the prior month. In last week’s report, we pointed out a similar observation in regard to Oregon’s sales; namely, that although annual growth rates remain impressive – in excess of 20% for both of the markets under discussion for the most recent month that sales data are available – they represent slowdowns compared to the booming annual growth rates documented in 2020. 

 

 

The slowdown in sales growth in more mature markets has been accompanied by a documented increase in production in Oregon. While such data is not yet available for Colorado, previous information from the state has shown that licensed producers there are not close to utilizing their allowed production capacity fully, providing for the possibility of increased cultivation to meet the expanded demand that has manifested over the past year. Production is also ramping up in newer markets, which is likely contributing to the stability of the U.S. Spot this year. 

May 2021 Implied Forward unchanged at $1,550 per pound.

 

The average reported forward deal size was 51.4 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 34%, and 12% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 64 pounds, 41 pounds, and 26 pounds, respectively.

 

At $1,550 per pound, the May Implied Forward represents a premium of 1.4% relative to the current U.S. Spot Price of $1,529 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 Exceed $167M in February, Up 21% YoY

Washington

Bill to Exempt Medical Cannabis Patients from 37% Retail Excise Tax Fails to Pass into Law

Michigan

Federal Judge Orders Detroit to Cease Adult-Use Cannabis Business Licensing Due to Lawsuit Over City’s Equity Program

Arizona

March Medical Cannabis Sales Volume Down YoY for Second Straight Month After Opening of Recreational Sales

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

16 April 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved