May 13, 2022

CANADA CANNABIS SPOT INDEX — May 13, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 13, 2022
CCSI image 1 2022-05-13

*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 0.4% from last week’s C$5.18 per gram. This week’s price equates to US$1,815 per pound at the current exchange rate.

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This week we examine how legal cannabis sales in Canada have impacted alcohol sales. With the legalization of recreational cannabis in October 2018, some alcoholic beverage companies stated that they feared they would see a reduction in sales, as consumers of legal age may opt to substitute cannabis for alcohol. (In Canada, one must be 18 or older to purchase cannabis; for alcohol, the legal age varies between 18 and 19, depending on the province.) The Canadian government recently released monthly retail sales data for both cannabis and alcohol (beer, wine, and liquor), which gives us a view of whether cannabis has impacted alcohol sales.

 

Below is monthly data from October 2018 through early this year, showing sales of both categories. The chart illustrates that alcohol and cannabis sales were both growing steadily up until 2021. (The spike in alcohol sales in March 2020 was due to bulk buying ahead of COVID-19 lockdowns.) Alcohol sales dropped in early 2021 and leveled off a few months before cannabis sales began to plateau in late summer 2021. That being said, since January 2020, monthly alcohol sales have grown by C$215M to C$2.27B, while cannabis sales grew by a little less – C$182M – to reach C$282M.

With consumers having a finite amount of money to spend in these categories, increased accessibility and education around cannabis has led to a larger proportional expenditure for the new category. As shown in the chart below, cannabis sales’ share of the total dollars spent towards alcohol and cannabis has increased steadily since legalization. Currently, cannabis’ share stands at 12.9% of the total spend of the combined categories.

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

13 May 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

U.S. Cannabis Spot Index — May 13, 2022

U.S. Cannabis Spot Index — Published May 13, 2022

The U.S. Cannabis Spot Index decreased 1.0% to $1,248 per pound.

 

The simple average (non-volume weighted) price decreased $12 to $1,506 per pound, with 68% of transactions (one standard deviation) in the $685 to $2,326 per pound range. The average reported deal size was nominally unchanged at 2.3 pounds. In grams, the Spot price was $2.75 and the simple average price was $3.32.

 

The relative frequency of transactions for indoor flower rose 1%, while that of greenhouse flower fell 1%. Outdoor transaction frequency was unchanged.   

   

 

The relative volume of indoor flower was unchanged, while that of greenhouse flower fell 2%.  The relative volume of outdoor flower was unchanged.

 

U.S. Spot price slid $13 this week to trade at $1,248 per pound on legacy state net change of +$4 per pound. All legacy state spot prices are trading below the $1,000 per pound handle.

 

Massachusetts, Illinois, and Michigan netted a +$14 per pound change this week with Michigan gaining $59 this week. Michigan’s recent price crash is overdone by any measure. Moves of this magnitude in any market tend to revert back to a mean level, either in a rather spectacular run or over a period of months, or even years. A rapid return to the midway point of the crash is just below $1,800, but such a move would be in opposition to Michigan market fundamentals; specifically, the uncapped licensing scheme and burgeoning outdoor production capacity.

 

Massachusetts prices fell $92 per pound this week. Losses so far in 2022 are $1,245 per pound, or 36.3%. Spot price is at an all-time low in the state, having taken out the 2018 low of $2,292 in the last week of April 2022. 

 

Illinois spot price rose $19 per pound this week, representing a 19.1% loss since fall 2021. Spot is now trading at levels not seen since July 2020 when price was ramping up with pandemic demand. In short, Spot is nearing pre-pandemic levels. 

 

 

Even with these rather spectacular price moves, the fact remains newer states are still trading at a fat premium to legacy states, due in part to new states’ lack of large amounts of outdoor production, which tends to drag legacy state prices down. That being said, there is some scope for a bifurcated nationwide market in which states without huge amounts of outdoor production maintain a premium over states with extremely voluminous outdoor cultivation. A bifurcated market supports the notion of using outdoor-grown product as the basis for a futures contract, as it would be a direct hedge for the largest volume crop type. States without a large outdoor crop that trade at a premium to legacy states would be able to ratio hedge, adding significant liquidity to the base contract. 

 

June 2022 Implied Forward assessed down $15 to $1,300 per pound.

 

The average reported forward deal size was 79 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 44%, 43%, and 14% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were nominally unchanged at 86 pounds, 76 pounds, and 60 pounds, respectively.

 

 

At $1,300 per pound, the June 2022 Implied Forward represents a premium of 4.2% relative to the current U.S. Spot Price of $1,248 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

March Sales Figures Surge

Massachusetts

Adult Use Retail Sales Gain Slows to 1.7% M-o-M

Maine

Monthly Sales Hit Record High – Again!

Connecticut

State’s First Lottery Will Award 12 Retailer Licenses

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

13 May 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

May 6, 2022

U.S. Cannabis Spot Index — May 6, 2022

U.S. Cannabis Spot Index — Published May 6, 2022

The U.S. Cannabis Spot Index decreased 1.3% to $1,261 per pound.

 

The simple average (non-volume weighted) price increased $3 to $1,518 per pound, with 68% of transactions (one standard deviation) in the $688 to $2,348 per pound range. The average reported deal size was nominally unchanged at 2.3 pounds. In grams, the Spot price was $2.78 and the simple average price was $3.35.

 

The relative frequency of transactions for indoor flower was unchanged. Greenhouse transaction frequency rose 1% and outdoor transaction frequency fell by 1%.  

   

 

The relative volume of indoor flower fell 1%, while that of greenhouse flower rose 2%. The relative volume of outdoor flower was unchanged.

 

U.S. Spot fell nearly $17 this week, weighed down by losses in new states even as some legacy states saw gains. Washington State was up nearly $3 per pound wholesale on a narrowing 10-week average loss of just $0.97 per pound. Oregon leapt up over $39 per pound amid a narrowing 10-week average loss of just $2.41. 

 

New Mexico Spot fell nearly $17 per pound basis spot, with a 10-week average weekly gain of $25.42. Contacts in New Mexico say they are being offered indoor flower at $3,200 per pound wholesale, while some stores have delayed opening due to the high price of indoor product. 

 

Nevada prices made some gains this week amid a sharp sell-off in the wholesale market this year, adding $57.50 per pound. As noted in this week’s Premium Report, Nevada tourist numbers jumped in March, which may account for recent price gains. 

 

Maine Spot price shed over $60 and pushed the 10-week average weekly price change into negative territory at -$5.91 per pound. 

 

 

Almost all cannabis consumers can either buy in their home state or are just a state away from legal purchases. The widespread availability of cannabis is driving price compression across the country, leading to newer markets seeing prices crater despite still experiencing expanding demand. When all of New England plus New York and New Jersey have fully developed adult use markets – a point which is still at least two years in the future – prices should become competitive almost immediately and price pressures are likely to exceed those of legacy states.

 

November 2022 Implied Forward initially assessed at $1,225 per pound.

 

The average reported forward deal size was unchanged at 78 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 41%, 44%, and 14% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 86 pounds, 76 pounds, and 60 pounds, respectively.

 

 

At $1,315 per pound, the June 2022 Implied Forward represents a premium of 4.3% relative to the current U.S. Spot Price of $1,261 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:

Nevada

Sales Down Four Months Running

Illinois

April Sales Surge 14.6% Year-on-Year

Montana

Adult Use Sales Swamping Medical Sales

National

Fed Rate Hike Means More Expensive Financing for Cannabis Businesses

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Do you support wholesale market transparency?

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

6 May 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — May 6, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 6, 2022
CCSI image 1 2022-05-06

*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$5.18 per gram this week, up 0.4% from last week’s C$5.16 per gram. This week’s price equates to US$1,831 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 additional analysis on the optimal number of recreational cannabis stores in Canada. The Canadian cannabis industry continues to open new retail outlets across the country at a steady pace. As of the end of April, we counted 3,162 licensed retailers. The pace of store openings has slowed considerably in 2022 so far relative to 2021. In 2021, we counted 125 new stores opened each month, on average, with 70% of new store openings occurring in Ontario. So far in 2022, new store openings have declined to an average of 62 each month.

Alberta remains an outlier, with stores continuing to open despite it having the smallest population of the four major provinces. We expect the number of stores in Alberta to decline over the next 24 months, as competition intensifies and store economics become less favorable. British Columbia’s store count, meanwhile, is growing at a steady rate, while Ontario’s exponential growth in 2021 allowed it to catch up to a more respectable level. Quebec remains the biggest laggard this year, with the slowest rollout due to the provincial government owning and operating all cannabis retail operations.

 

The table below shows the average number of people each store serves in all the major provinces. To better understand the number of stores required, we looked to Colorado and Oregon, two of the most mature legal cannabis markets in the U.S. that do not place an artificial cap on the number of stores permitted to open. In Colorado, there is one recreational retailer for about every 9,600 residents while in Oregon there is one legal store for about every 6,150 people.

Using that example, we assume one store should ideally serve around 7,500 people. Based on this analysis, Canada as a whole would require a total of 5,137 stores, or 1.6 times the current number of retailers.

In the chart below, we show how each province is performing relative to the optimal store count. Other than Alberta, every province is still behind its optimal level. That being said, we saw meaningful progress made in comparison to 2021 and continue to see this trend moving in the right direction.
Source: Cannabis Benchmarks

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

6 May 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved