October 29, 2021

CANADA CANNABIS SPOT INDEX — October 29, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending October 29, 2021
CCSI image 1 2021-10-29

*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$5.14 per gram this week, down 0.2% from last week’s C$5.15 per gram. This week’s price equates to US$1,885 per pound at the current exchange rate.

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Last week, Statistics Canada released retail sales data for August 2021, with nationwide legal cannabis sales reaching a new monthly high of C$356.9M. This is the first month where sales have exceeded the C$350M threshold, which puts the current annual run rate at C$4.3B. At this rate, we estimate the illicit market still controls nearly half of the total retail cannabis market.

 

To correct for the different number of days in each month, we look at average daily sales. As seen in the chart below, August 2021 sales reached C$11.5M per day. This is a significant increase from the previous month, which was at C$10.9M per day. We have observed seasonality in consumption, with August typically being a strong sales month; hence we believe September sales might ease from these levels. The strong August sales are easily explainable, with good weather and summer holidays leading to more opportunities to consume cannabis.

SOURCE: Cannabis Benchmarks, StatsCan

This week, as we did this past July, we sliced up the above data to calculate the average monthly sales per cannabis user. Each province has a different usage rate that is estimated by Statistics Canada through a quarterly survey. With the last quarterly survey being conducted in Q4 2020, we made some adjustments to this baseline to account for new cannabis users, as well as better accessibility to cannabis; a factor that allows customers to transfer their purchasing habits from the illicit market to the legal markets. Overall, we estimate 17% of the Canadian population consumes cannabis.

 

This is a flow diagram of the calculation we performed for each province.

The result of these calculations is shown by month in the chart below.
SOURCE: Cannabis Benchmarks, StatsCan
Alberta continues to lead the way with its spending habits. We estimate a typical Alberta cannabis user who purchases cannabis from the legal market spends C$8.20 each month. This is approximately C$1.10 or 15% more than they spent last year. The strong Alberta spending rate makes sense, as the province boasts the largest retail footprint per capita in Canada. With Ontario picking up the pace on opening retail stores, we see that Ontario cannabis users are also spending  more in licensed stores as they move their buying habits away from the illicit market. We estimate that the average Ontario cannabis user now spends C$6.80 each month in licensed stores.

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

29 October 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

U.S. Cannabis Spot Index — October 29, 2021

U.S. Cannabis Spot Index — Published October 29, 2021

U.S. Cannabis Spot Index decreased 1.8% to $1,384 per pound.

 

The simple average (non-volume weighted) price decreased $6 to $1,673 per pound, with 68% of transactions (one standard deviation) in the $835 to $2,511 per pound range. The average reported deal size was 2.3 pounds. In grams, the Spot price was $3.05 and the simple average price was $3.69.

 

The relative frequency of transactions for indoor flower was largely unchanged this week, as was that for greenhouse product. The transaction frequency for outdoor flower was down 1% this week.

            

The relative volume of indoor product was unchanged this week, while that of greenhouse flower rose 1%. The relative volume of outdoor product fell 1% this week. 

 

 

U.S. Spot prices were further weighed down this week as two legacy states, Colorado and Oregon, eked out week-on-week gains. Colorado spot was up $8 and Oregon was up $25 this week, though the downtrend in Washington, Oregon, Colorado, and California markets remains intact.

 

Oregon Spot price rose $25 this week as the OLCC extended its moratorium on new producer licenses. When asked if the OLCC license moratorium would help steady prices in Oregon, Will Fitzgerald, an independent grower, said, “in theory it should steady pricing, but it really doesn’t speak to the still oversupply Oregon has in light deprivation and outdoor markets.” Fitzgerald believes that “legalization takes a long time to figure out … and laws are typically reactionary.” He noted this does not mean “illegal stuff is not happening,” but he senses that West to East coast illicit traffic is slowing due to legalization efforts across the country. 

 

 

Cannabis Benchmarks has previously noted price convergence in legacy markets. There is a reasonable expectation that high population markets will see price convergence in outdoor and greenhouse prices, even as bespoke, well-marketed, high end indoor product enjoys a large premium over other grow types.

 

November 2021 Implied Forward closes down $25 to $1,390 per pound.

 

The average reported forward deal size was 66 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 38%, 46%, and 16% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 98 pounds, 49 pounds, and 36 pounds, respectively.


At $1,390 per pound, the November Implied Forward represents a premium of 0.4% relative to the current U.S. Spot Price of $1,384 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:

Illinois

Cannabis Retailer Licensing Delays Piling Up

Michigan

Legislators and Manufacturers Association Backing Legislation to Impose New Requirements on Medical Cannabis Caregivers

Ohio

High Prices Drive Patients to Michigan

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

29 October 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

October 22, 2021

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

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

U.S. Cannabis Spot Index decreased 0.6% to $1,410 per pound.

 

The simple average (non-volume weighted) price decreased $3 to $1,679 per pound, with 68% of transactions (one standard deviation) in the $833 to $2,524 per pound range. The average reported deal size was unchanged at 2.2 pounds. In grams, the Spot price was $3.11 and the simple average price was $3.70.

 

The relative frequency of transactions for indoor flower was largely unchanged this week; that for deals for greenhouse product rose about 1%, as did that for trades for outdoor flower.    

       

 

The relative volume of indoor product fell 1%, as did that for greenhouse flower. The relative volume of outdoor product rose by 2% this week.

 

 

U.S. Spot Price remains under pressure with western states undergoing a significant sell-off over the past 10 to 12 weeks, even as states in other regions maintain prices at two and three times the rates seen in California, Oregon, and Washington. The eastern markets, many of which have only medical programs to date or are relatively new to the adult use market, see less volume than legacy markets in the West, but still exert enough pull on the national Spot Index to keep it above the recent convergence of western state prices. 

 

Convergence happens when like commodities are priced differently and the market exerts pressure on prices to move them into concert with one another. In traditional crop markets, arbitrage opportunities arise very rarely and are immediately closed; buyers swoop in to buy the less expensive commodity and sell it into a like market until it is no longer profitable to do so because prices have converged.  

 

 

The West Coast states are all in a downtrend that has become so persistent it has pulled the U.S. Spot Index sharply lower, yet the spread between the Cannabis Benchmarks U.S. Spot Index and those of western states has widened. The widening spread between the national price and West Coast prices suggests at least one western state may start to trade sideways, instead of downward.

 

November 2021 Implied Forward down $10 to $1,415 per pound.

 

The average reported forward deal size was 65 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 38%, 45%, and 17% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 98 pounds, 47 pounds, and 36 pounds, respectively.

 

At $1,415 per pound, the November Implied Forward represents a premium of 0.3% relative to the current U.S. Spot Price of $1,410 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:

National

U.S. Spot Index Price Under Pressure

West Coast

California, Oregon, Washington Cannabis Spot Prices Converge

Massachusetts

Year-to-Date Adult Use Sales Top $1 Billion

Alaska

Flower Demand Fading, Extracted Products on the Rise

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

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

CANADA CANNABIS SPOT INDEX — October 22, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending October 22, 2021
CCSI image 1 2021-10-22

*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$5.15 per gram this week, up 1.0% from last week’s C$5.10 per gram. This week’s price equates to US$1,890 per pound at the current exchange rate.

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This week we examine the number of cannabis processing licenses issued in Canada. This data comes from the same data set we looked at last week, which showed the number of cultivation licenses that have been issued. As with the cultivation licenses, we see a steady growth trend for both standard and micro-processing licenses. As a reminder, a standard processor has no production limits, while a micro-processor can process up to 600 kilograms of dried cannabis in a calendar year. If a micro-processing licence holder also holds a micro-cultivation licence for the same site, the processing limitation does not apply since the license holder will be processing cannabis plant material from its own integrated grow operation.
 

Regardless of processing license type, Health Canada takes a uniform approach in reviewing the applications. As a prerequisite, the applicant must have a production-ready facility prior to submitting a license application. The application has numerous requirements, including municipal permits, property details and layouts, executive team security clearances, and approvals from local fire and police departments. The average time to receive a license takes anywhere from three to nine months, depending on the completeness of the application.

 


Health Canada shows there are currently 448 active processing licenses split amongst standard and micro operations. A little under one-fifth of the licenses are micro-processing licenses. As with the cultivation licenses, we do not believe most of the licensees are operational.

SOURCE: Cannabis Benchmarks, Health Canada
As illustrated in the chart below, the micro-processing license is a relatively new phenomenon that really kicked off last year.
SOURCE: Cannabis Benchmarks, Health Canada
Lastly, we break down the licenses by province. This looks very similar to the provincial distribution of cultivation licenses, as most processing facilities are being built alongside cultivation sites.
SOURCE: Cannabis Benchmarks, Health Canada

Cannabis Benchmarks has a complete, cleaned-up list of Health Canada licensed cultivation operations showing the name, type of operation, issue date, and the products authorized to sell. Email us to get the complete list.

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

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

October 15, 2021

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

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

U.S. Cannabis Spot Index decreased 1.1% to $1,419 per pound.

 

The simple average (non-volume weighted) price decreased $9 to $1,682 per pound, with 68% of transactions (one standard deviation) in the $837 to $2,527 per pound range. The average reported deal size was unchanged at 2.2 pounds. In grams, the Spot price was $3.13 and the simple average price was $3.71.

 

The relative frequency of transactions for indoor flower rose over 1%, greenhouse was down about 2% and outdoor was unchanged over the week.  

        

 

The relative volume of indoor product was unchanged this week. The relative volume of greenhouse flower rose about 2% and the relative volume of outdoor product fell by roughly 1%.

 

 

U.S. Spot prices continued their sharp downturn as legacy states suffering from oversupply issues weigh on the index price. California, Oregon, Washington, and Colorado are in what is considered a “bear market,” a downtrend that has breached all near term price supports. The oversupply in these markets is exacerbated by illicit production. Some legal growers have complained unlicensed growers continue to undermine legal prices in-state and across state lines.  

From a technical perspective, the U.S. Spot fell through the two year average price – $1,497 per pound – in early September; that level is now resistance and, not coincidentally, in a pivot price area, where price consolidates at the pivot before starting the next leg down. Support below current price is down at $1,402 per pound, a “retracement level” often used in futures markets. 

 

What can pull U.S. spot prices out of the downtrend? A fundamental change in either supply or  demand. Yet, there looks to be no scarcity in legacy markets, especially with demand plateauing. Some growers have not expressed interest in cutting back on supply, having turned their hopes to federal legalization instead. While legacy states’ prices will not directly benefit from new populous states coming on line over the next couple of years, the U.S. Spot Index trend could reverse as new states undergo a demand spiral. New York’s 19.5 million residents, plus New Jersey’s 9.5 million and Connecticut’s 3.5 million, will rival California in demand dynamics, putting upward pressure on the U.S. Spot in the first year or two after sales begin.

November 2021 Implied Forward down $10 to $1,425 per pound.

 

The average reported forward deal size was 65 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 37%, 45%, and 17% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 101 pounds, 47 pounds, and 36 pounds, respectively.

 

At $1,425 per pound, the November Implied Forward represents a premium of 0.5% relative to the current U.S. Spot Price of $1,419 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

Monterey County Supports Growers with Tax Adjustment

Colorado

Combined Adult Use and Medical Sales on Pace to Top 2020 Total

Arizona

Adult Use Sales Continue to Lag Behind Medical

Oklahoma

Retailers Competition Weighs on Price

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

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