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

CANADA CANNABIS SPOT INDEX — October 15, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending October 15, 2021
CCSI image 1 2021-10-15

*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$5.10 per gram this week, down 0.3% from last week’s C$5.12 per gram. This week’s price equates to US$1,859 per pound at the current exchange rate.

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This week we re-examine the number of cultivators in Canada’s market, which shows a steady growth trend for both standard and micro-cultivation licenses. As a reminder, 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, with these smaller growers typically concentrating on unique strains to differentiate their product and receive a premium price. 

 

Regardless of type, Health Canada takes a uniform 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 shows there are currently 646 active cultivation licenses split amongst standard and micro-cultivation grow operations. A little under two-thirds of the licenses are standard licenses.

SOURCE: Cannabis Benchmarks, Health Canada
As illustrated in the chart below, the micro-cultivation license is a relatively new phenomenon that started in early 2020.
SOURCE: Cannabis Benchmarks, Health Canada
Lastly, we break down the licenses by provinces. Ontario, with its sizable population, and British Columbia, with its favorable climate, have seen the largest numbers of licensed cultivators. We should note that at the moment not all licensees are operational. However, if each license holder builds out their cultivation facility and begins production, we expect Canada’s production capacity will continue to outstrip domestic demand.
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

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

October 8, 2021

U.S. Cannabis Spot Index — October 8, 2021

U.S. Cannabis Spot Index — Published October 8, 2021

U.S. Cannabis Spot Index decreased 1.0% to $1,434 per pound.

 

The simple average (non-volume weighted) price decreased $3 to $1,691 per pound, with 68% of transactions (one standard deviation) in the $849 to $2,533 per pound range. The average reported deal size was 2.2 pounds. In grams, the Spot price was $3.16 and the simple average price was $3.73.

 

The relative frequency of transactions for indoor flower was unchanged this week, as were those for deals for greenhouse and outdoor flower.          

 

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

 

 

The U.S. Spot is trading at $1,439 per pound, a level not seen since June 2020, as the downturn in Western states with large trading volumes weighs on the index. The national Spot entered into the current downtrend in earnest in August 2021 when it failed to hold levels over $1,600 for the third time this year. Market ‘tops’ are very useful when deciding when to buy or sell product. They provide ‘resistance’ on the topside so that buyers might purchase large quantities of product below the $1,600 figure, while sellers might sell product as it approaches the $1,600 level. More speculative market buyers will ‘chase the market’ if price rallies through triple-top resistance above $1,600. 

 

On the downside, sellers might see the current sell-off as reason to dump inventory as price races lower each week. One effect of dumping product on a falling market is that eventually the market ‘clears;’ that is, sellers have sold the inventory they needed to sell and the downward pressure eases. Bargain hunters will come in and buy the market back up and price equilibrium, and a price range, will be established.

 

November 2021 Implied Forward unchanged at $1,435 per pound.

 

The average reported forward deal size was 62 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 38%, 44%, and 17% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 93 pounds, 48 pounds, and 29 pounds, respectively.

 

At $1,435 per pound, the November Implied Forward is nominally flat relative to the current U.S. Spot Price of $1,434 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

New State Report Details Soaring Sales in 2020

Oregon

Robust Supply and Stagnating Sales Continue to Weigh on Price

Nevada

Sales Turn Higher in July

Illinois

September Sales Slip but Still Top $121 Million

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

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

CANADA CANNABIS SPOT INDEX — October 8, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending October 8, 2021
CCSI image 1 2021-10-08

*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$5.12 per gram this week, down 0.7% from last week’s C$5.15 per gram. This week’s price equates to US$1,844 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 our cannabis retail sales estimate for the remainder of this year and next year. Over the past three years, the Canadian cannabis industry saw sales grow each month at a similar pace as the number of new retail outlets opening across the country. At the end of September, we crossed the milestone of 2,500 stores. We recently forecast that monthly retail sales across Canada reached C$333 as of September 2021.

 

For the remainder of 2021 and through 2022, we forecast that sales growth will continue as provinces such as Ontario, British Columbia, and Quebec make legal cannabis more accessible by adding more retail stores. In 2022, however, we expect growth to moderate as certain highly populated pockets of Canada become saturated with cannabis stores, leading to lower sales per store and a continued downtrend in retail prices across the provinces. Additionally, the conversion rate of buyers from the illicit market has slowed as some buyers remain committed to their informal sales channels. Overall, we see sales climbing to C$383M by December 2022, a 12% increase to July 2020, which is the last monthly figure published by Statistics Canada.

SOURCE: Cannabis Benchmarks, StatsCan
 

On a cumulative basis, 2022 sales are expected to grow to C$4.34B which is a 13% increase over our estimated total for 2021.

SOURCE: Cannabis Benchmarks, StatsCan
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

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

October 1, 2021

U.S. Cannabis Spot Index — October 1, 2021

U.S. Cannabis Spot Index — Published October 1, 2021

U.S. Cannabis Spot Index decreased 3.2% to $1,448 per pound.

 

The simple average (non-volume weighted) price decreased $28 to $1,694 per pound, with 68% of transactions (one standard deviation) in the $868 to $2,520 per pound range. The average reported deal size was nominally unchanged at 2.1 pounds. In grams, the Spot price was $3.19 and the simple average price was $3.73.

 

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

         

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

 

As we have covered recently, U.S. Spot prices for cannabis flower have come under a good bit of pressure, particularly in mature markets in the West. However, high population states that are newer to adult-use legalization have generally seen price increases as consumption expands and growers track demand higher as the market seeks equilibrium. 

 

Illinois and Massachusetts are both relative newcomers to the market. In Illinois, the younger of the two markets where adult-use sales started in January 2020, prices have been in a strong uptrend for two years. In Massachusetts, where adult-use sales commenced over a year earlier, prices have stuck to a $120 price range during the last two years; the more mature market appears to have found some price stability even as sales continue to grow this year. 

 

Michigan is another relative newcomer to adult-use legalization, having begun sales in late 2019. Michigan’s adult-use market opened about a year after Massachusetts’ and it has exhibited more price volatility, due in large part to decisions made by state officials. The pandemic effect saw prices run higher from April 2020 to January 2021, taking the state Spot up almost 20% in that period, after which price fell over $470 per pound through September 2021. 

 

Much of the price loss is due to the proliferation of production licenses in the state stemming from a rule change earlier this year. Beginning in March 2021, Michigan opened adult-use processor, retailer, and class B and C grower licenses to all applicants. Previously, one had to hold an equivalent medical cannabis business license from the state in order to obtain the aforementioned adult-use permits. Total adult-use grower licenses shot up from 327 in December 2020 to over 900 by July 2021. More cultivation operations coming online has increased available supply and put downward pressure on prices in the state. 

 

 

So, while markets seek equilibrium between supply and demand, state-initiated rule changes can reset the supply / demand dynamic and set the stage for price fluctuations. We expect that this will be the case in Illinois once legal battles over 185 new adult-use retailer licenses are resolved and those businesses can work toward opening their doors and making sales to consumers. Once all 185 retailers are operational, that will roughly triple the number of adult-use storefronts in Illinois, a major shakeup to market dynamics.

 

April 2022 Implied Forward initially assessed at $1,510 per pound. The average reported forward deal size was 61 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 39%, 44%, and 17% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 91 pounds, 47 pounds, and 30 pounds, respectively.

 

At $1,435 per pound, the November Implied Forward represents a discount of 0.9% relative to the current U.S. Spot Price of $1,448 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

Humboldt County to Support Growers with Micro-Grants

Oregon

State to Take Second Bite at the Producer License Moratorium Apple

Illinois

Adult-Use Retailer Licensing Case Still Moving at a Glacial Pace

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

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