February 25, 2022

U.S. Cannabis Spot Index — February 25, 2022

U.S. Cannabis Spot Index — Published February 25, 2022

The U.S. Cannabis Spot Index decreased 0.3% to $1,212 per pound.

 

The simple average (non-volume weighted) price decreased $1 to $1,496 per pound, with 68% of transactions (one standard deviation) in the $664 to $2,329 per pound range. The average reported deal size increased to 2.5 pounds. In grams, the Spot price was $2.67 and the simple average price was $3.30.

 

The relative frequency of transactions for indoor, greenhouse, and outdoor product were unchanged this week.        

          

 

The relative volume of indoor flower fell 2%, while that of greenhouse flower  was unchanged. Outdoor flower’s relative volume rose 2% this week.

 

Cannabis Benchmarks’ U.S. Spot Index fell slightly this week, losing $3.43 per pound with a 20-week average loss of -$11.25. Legacy states put in a mixed performance with Washington gaining nearly $4, Colorado skidded nearly $19, California falling nearly $26 and Oregon’s Spot rising nearly $19 per pound this week. 

 

States newer to adult use legalization with existing medical markets are undergoing a transformation in price. Michigan has seen a downward pace of -$45.25 per pound per week, on average, over the previous 20-week period. Cannabis Benchmarks has learned that new growers are bringing product to the Michigan market at significantly lower prices and the state has its first significant outdoor crop weighing on the market as well.

 

 

Significant losses in new, high population states are in part attributable to the market shift toward extracted products that first began in legacy markets. Outdoor grown product in particular is being vacuumed up by extractors keen to offer new products and price points in their respective state markets. Growers have told Cannabis Benchmarks they are selling significant portions of their production in bulk to extraction firms at significantly lower prices than transactions for smokable flower. A recent sell-off in Massachusetts reflects such bulk deals, where larger trades at lower price points have been increasingly reported. 

 

 

The speed at which the new markets are adopting strategies from legacy markets is affecting prices at a pace not previously seen. As a result, price adjustments are sudden and sharp in response to product demands – extracts and manufactured products containing them – that were born in legacy markets. Although it is not yet possible to trade interstate, industry developments – methods and products – are not so constrained, with new market uptake on legacy market practices affecting demand and pricing at a much faster pace.

 

 

March 2022 Implied Forward assessed down $15 to close at $1,235 per pound.

 

The average reported forward deal size was 68 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 32%, 52%, and 16% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 89 pounds, 60 pounds, and 51 pounds, respectively.

 

 

At $1,235 per pound, the March 2022 Implied Forward represents a premium of 1.9% relative to the current U.S. Spot Price of $1,212 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

Q4 2021 Cannabis Sales & Tax Receipts Decrease

Michigan

January Sales Fall Amid Price Crash

New Mexico

Water Rights Swamp Plant Count Increase for Micro Businesses

Montana

Recreational Market Opens in “Dead of Winter” to Some Disappointment – Interview

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

25 February 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 25, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 25, 2022
CCSI image 1 2022-02-25

*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$5.20 per gram this week, up 0.6% from last week’s C$5.17 per gram. This week’s price equates to US$1,848 per pound at the current exchange rate.

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Statistics Canada recently released retail sales data for December 2021, showing nationwide legal cannabis sales once again grew during the holiday month. Sales in December grew to C$382.4M. The month-on-month increase of C$31M or 8.5% led to the highest monthly sales since legalization.

In 2021, we saw a monthly increase in sales almost every month, as cannabis products became more accessible and acceptable, as well as more inexpensive. Specifically looking at December, we typically see a big boost in sales during this holiday month. In December 2020, we observed sales jump by C$38M from the previous month, which is comparable to this past December.

This latest report also gives us a complete view of 2021 sales, which totaled C$3.92B. This was a C$1.3B or 50% increase year-on-year. We expect 2022 will exceed last year’s sales as more stores are rolled out across key provinces, and lower price points and product variety continue to attract illicit market consumers to the legal markets. Based on the latest report, the annual sales run rate for 2022 is expected to hit at least C$4.5B.

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

25 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 18, 2022

U.S. Cannabis Spot Index — February 18, 2022

U.S. Cannabis Spot Index — Published February 18, 2022

The U.S. Cannabis Spot Index decreased 0.5% to $1,216 per pound.

 

The simple average (non-volume weighted) price decreased $19 to $1,497 per pound, with 68% of transactions (one standard deviation) in the $668 to $2,326 per pound range. The average reported deal size was nominally unchanged at 2.4 pounds. In grams, the Spot price was $2.68 and the simple average price was $3.30.

 

The relative frequency of transactions for indoor product rose 2%. Transaction frequency of greenhouse product fell 1%, as did that of outdoor flower. 

                

 

The relative volume of indoor flower rose 4%, while that of greenhouse flower fell 2%. Outdoor flower’s relative volume also fell 2%.

 

The U.S. Spot market remains in a very strong downtrend, reflecting price movements in legal markets across the country. Legacy markets – Colorado, California, Oregon, and Washington state – remain under pressure and might be considered markets capturing much of the fundamental information available about price, with well-established supply and demand fundamentals reflected in both sales and pricing. New markets – Michigan, Illinois, Massachusetts – are still establishing what demand will be in each. Still, pricing in each state reflects the same, though accelerated, movements influenced by new and expanding growers in the market, expanding licensing, and consumer demand.

 

While each state’s demand and supply profile is different – influenced by fundamental factors such as licensing rules, tax regimes, and population – the larger backdrop to each market is the anomaly of the COVID-19 pandemic years. Beginning in spring 2020, every state saw demand increase, to historically high levels in many cases, driving wholesale prices sharply higher while production ramped up to meet surging demand, even where supply was likely already ample. The elevated wholesale prices seen during the initial portion of the pandemic, which in most states peaked in Q4 2020, should be viewed as unsustainable, even in new markets where demand is still being determined. 

 

The current drop in prices across the country is more than the sum of its fundamental parts. It is a reversion to mean levels in which price moves to where it was before the anomaly occurred. In such instances, price will often overshoot mean levels, in this case on the downside. Market corrections in which price overshoots the mean – the average price before the anomaly – are themselves fleeting. 

 

That is, the current overshoot on price on the downside will itself correct higher, to a new mean, albeit one lower than pre-pandemic levels. In subsequent years, price data will clearly show the anomaly – the ongoing pandemic and the associated wholesale cannabis price rise and fall – as an isolated incident. Subsequently, we expect wholesale prices to set about reflecting supply and demand fundamentals more closely, rather than the technical pandemic correction occurring now, though when exactly this will take place remains uncertain. 

 

 

March 2022 Implied Forward assessed down $25 to $1,250 per pound.

 

The average reported forward deal size was 65 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were unchanged at 33%, 51%, and 17% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 87 pounds, 55 pounds, and 51 pounds, respectively.

 

 

At $1,250 per pound, the March 2022 Implied Forward represents a premium of 2.8% relative to the current U.S. Spot Price of $1,216 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

2021 Adult Use and Medical Sales Combine to Top $1.4 Billion

Alaska

Alaska Cannabis Flower Sales Slip in December

New Mexido

Texas Demand Will Buoy New Mexico’s Market – Interview

California

San Diego Set to Slash Cannabis Producer Taxes by 75%

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

18 February 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 18, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 18, 2022
CCSI image 1 2022-02-18

*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$5.17 per gram this week, up 0.7% from last week’s C$5.13 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 analyze data collected by Health Canada regarding trends in cannabis usage in the country. The agency conducts an annual Canadian Cannabis Survey to obtain “detailed information about the habits of people who use cannabis and behaviors relative to cannabis use.” The 2021 survey had over 10,000 responses split almost evenly between males and females from various provinces. The data is all reported at the national level, despite the agency having specific provincial data. While there is a plethora of data collected, in this week’s report we focus on a few high-level trends in cannabis usage and sources of cannabis. We begin by looking at the trends in Canada’s cannabis usage rate since 2018. In all categories, cannabis usage rose from 2018 through 2020, with a small drop in 2021. The drop-off in usage for 2021 can likely be explained by anomalously elevated usage in 2020, when stay-at-home orders during the initial surge of the COVID pandemic were in place, resulting in more free time and disposable income for consumers. At the national level, approximately 25% of the population used cannabis in 2021, down from 27% the year prior, with provincial estimates ranging from 17% to 38%. Also apparent in the data is that the male population is more likely to use cannabis products, with 20 to 24-year-olds the age group in which cannabis usage is most prevalent. The data indicates a steep drop-off in usage rates for those over 25.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

The next trend we examine are the factors that influenced where consumers sourced their cannabis over the past three years. The data was complete for 2020 and 2021, but we did need to make some assumptions for the 2019 dataset, as it was not as complete. What is apparent from the data is that cannabis users are most sensitive to price and safe supply, followed by quality and convenience.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

Lastly, we look at some trends in the medical cannabis market. While survey respondents could choose more than one source, the data clearly indicates that legal outlets – including licensed recreational storefronts and online options, as well as Health Canada licensed medical cannabis producers – are preferred to unlicensed sources. As seen over the past three years, there is an increasing trend to purchase cannabis from a legal, recreational source (online or storefront) and a negative trend to acquiring it from a dealer, friend, or illegal online source. 

 

Although this is good news for the legal cannabis industry as a whole, the increasing preference for legal recreational sources also came at the expense of cultivators licensed in the country’s medical cannabis program, which saw the proportion of survey respondents selecting that category as a preferred source wane from 2020 to 2021. As seen in the chart below, the last category, “Health Canada licensed producer,” the cannabis source for registered medical patients, garnered a relatively weak response. Only 21% of medical cannabis users get products directly from licensed medical providers, and it appears they increasingly prefer the convenience and product variety found in the legal recreational markets. Our modeling of demand for recreational versus medical cannabis affirms the survey findings, with total kilograms sold in the medical market consistently constituting only a small fraction of the volume sold in the recreational market.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

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

18 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 11, 2022

U.S. Cannabis Spot Index — February 11, 2022

U.S. Cannabis Spot Index — Published February 11, 2022

The U.S. Cannabis Spot Index decreased 0.6% to $1,222 per pound.

 

The simple average (non-volume weighted) price decreased $1 to $1,516 per pound, with 68% of transactions (one standard deviation) in the $676 to $2,356 per pound range. The average reported deal size increased to 2.4 pounds. In grams, the Spot price was $2.69 and the simple average price was $3.34.

 

The relative frequency of transactions for indoor product rose about 1%. That of greenhouse product was virtually unchanged, as was that of  outdoor flower.   

             

 

The relative volume of indoor flower fell 2%, while that of greenhouse flower fell 1%. Outdoor flower’s relative volume rose about 2%.  

 

Legacy states have led the U.S. Spot price sharply lower since summer 2021. Additionally, new, high population states with growing demand are also undergoing a downdraft in price as more cultivation licenses are granted and smaller growers undercut markets to carve out room for their brands where large Multi-State Operators (MSOs) have dominated. 

 

Operators in states with shorter growing seasons – which in these cases are states that also only began allowing legal outdoor cultivation relatively recently – are finding ways to grow outside; the first movers in outdoor cultivation, with expansive canopies and lower costs, can offer prices well below that of cannabis grown in more expensive and space-limited greenhouse or indoor environments. 

 

Michigan brought in its first significant outdoor harvest this year, helping to pull price down over 34% since late November. Growers there say they are offering lower prices on outdoor grown product to help create demand for their brands. Buyers used to paying upwards of $2,800 per pound wholesale have eagerly snapped up product offered near $1,600 per pound. 

 

While outdoor flower is not pervasive in Massachusetts yet, production data from state regulators shows a notable bump in the number of plants harvested in October, and buyers are clearly interested in less pricey options in one of the most expensive wholesale markets in the U.S. Massachusetts’ Spot has plummeted recently on rising production in general, with last year’s outdoor harvest contributing to increased supply, in conjunction with new and expanding indoor operations. 

 

Illinois prices have come off their previous highs near $4,200 per pound, but have not dropped by the same magnitude as in Massachusetts or Michigan. Illinois cannabis sales remain strong due to its high population and because no adjacent states have legal adult use markets (only one, Missouri, has a full medical cannabis market; Iowa’s is very limited in terms of licenses and products). The issuance of new licenses has been delayed, as the state’s licensing process has been fraught with litigation, keeping competition at bay. However, the resolution of legal issues will eventually put independent craft growers in the picture, as well as more retail outlets. That said, with no outdoor market, the number of retailers (wholesale buyers) set to more than double, and the impact of new supply from craft cultivators likely to be fairly small compared to the existing cultivation operations, Illinois spot will remain one of the most expensive in the U.S. for the foreseeable future.   

 

 

Each of these states are learning the lessons of legacy states: strong demand keeps prices high until competition starts in earnest, then prices start falling, first in the outdoor market and then in greenhouse and indoor markets. At the end of the day, cannabis prices will depend on some form of federal deregulation and interstate commerce to keep the markets growing.

 

 

March 2022 Implied Forward assessed down $35 to $1,275 per pound.

 

The average reported forward deal size was 64 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were unchanged at 33%, 52%, and 15% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 87 pounds, 55 pounds, and 43 pounds, respectively.

 

 

At $1,275 per pound, the March 2022 Implied Forward represents a premium of 4.3% relative to the current U.S. Spot Price of $1,222 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

Businesses Seek Licensing Moratorium on Cultivators, Wholesalers, Retailers

Illinois

Combined Adult Use and Medical Sales Tank 15% in January

Massachusetts

Adult Use Sales Fall 11.5% in January

Oklahoma

2021 Medical Sales Total Almost $950 Million

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

11 February 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved