May 28, 2021

CANADA CANNABIS SPOT INDEX — May 28, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 28, 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$5.55 per gram this week, down 0.6% from last week’s C$5.58 per gram. This week’s price equates to US$2,085 per pound at the current exchange rate.

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Last week, Statistics Canada released retail sales data for March 2021 with nationwide legal cannabis sales reaching a new monthly high of C$298.1M. 

 

Prior to March, we saw a decline in sales after December, which can be attributed to three main issues:

 

1) A decrease in spending after the holiday season;
2) fewer days in February; 

3) newly enforced COVID-related restrictions in Canada after the holiday season.

 

To correct for the different number of days in each month, we look at average daily sales in the chart below, which shows March 2021 edging out December 2020 by a small margin. March sales reached C$9.62M per day.

Source: Cannabis Benchmarks, Statscan

Looking at the month-on-month change in each province, sales have started to plateau in most provinces, with Ontario being the exception. Ontario’s cannabis industry continues its growth trajectory, as it plays a bit of catch-up in terms of the number of operational retailers in the province. 

Source: Cannabis Benchmarks, Statscan

While Ontario now has the largest overall retail store footprint, it still does not compare to the number of stores in Alberta per capita. Ontario has announced plans to continue to roll out stores, with an expectation of 1,000 stores by September. As seen in the chart above, sales growth in Canada this year is tied primarily to better accessibility in Ontario. Longer term, we are expecting a boost in sales across all provinces, as Canada’s legal market becomes more accessible, product variety and quality increases, and prices become increasingly competitive with or lower than those offered by illegal sources. 

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

28 May 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

May 21, 2021

CANADA CANNABIS SPOT INDEX — May 21, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 21, 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$5.58 per gram this week, down 0.8% from last week’s C$5.63 per gram. This week’s price equates to US$2,093 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 look at Canada’s expanding role in international medical cannabis markets. 

Dried cannabis flower and cannabis oil exports out of Canada more than doubled in 2020, while imports dropped to virtually zero.

In 2020, Canada exported an endorsed quantity of 15,684 kilograms of dried flower for medical and scientific purposes, a 131% year-on-year increase. Endorsed exports of cannabis oil also expanded substantially year-on-year to 22,342 litres, a 73% increase. The endorsed quantities are the actual quantities of cannabis exported or imported, with the exporter required to provide the Minister of Health with information related to the shipment within 15 days after the date of exportation.

Source: Cannabis Benchmarks

Canadian licensed producers have always had a close eye on the international market. The overbuilding of cultivation capacity relative to domestic demand was intended to supply global medical-use markets. Additionally, Canadian cultivators would thereby be the first to establish intellectual property, economies of scale, brand power, and cultivation experience in a sector expected to grow dramatically. 

 

The big jump in 2020 exports is no coincidence. In Canada, increased exports were driven in part by more cultivators receiving the proper certification to export to European markets. For the medical and pharmaceutical industries, including medical cannabis, manufacturers need to achieve the European Union’s compliance certificate for Good Manufacturing Practices (EU GMP). For the cannabis industry, obtaining EU GMP certification requires an inspected facility that meets mandated production guidelines to release medical cannabis products into European markets.

 

In late 2016, Tilray became the first Canadian medical cannabis producer to legally export medical cannabis products to the European Union and Australia. Today, more than a dozen cannabis cultivation sites have received EU GMP certification, increasing the production capacity available to generate supply to export to the EU. Some of the other firms that have EU GMP certification include Canopy Growth, Aphria, Aurora, Zenabis, TerrAscend, Northern Green, and Eve & Co.

Another reason for the increased level of exports is the opening of more international markets and the expansion of existing ones. In 2019, 95% of the dried flower exported by Canadian producers was sold into Germany. While Germany continues to increase its overall import level, it is now second to Israel, which in 2020 imported 10 tons of flower, or 63% of all Canadian exports by weight. Israel’s imports of Canadian medical cannabis last year were almost double the volume of Germany’s. 

 

Over the next five years, we expect Canadian medical cannabis exports to continue to grow as more countries legalize and import medical cannabis. While Canada will continue to be a major global supplier, over the longer term we expect lower-cost operations located in Africa, Latin America, and the Caribbean will take a larger share of the market.

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

21 May 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

May 14, 2021

CANADA CANNABIS SPOT INDEX — May 14, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 14, 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$5.63 per gram this week, down 1.7% from last week’s C$5.72 per gram. This week’s price equates to US$2,103 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 overview of Canadian hemp production in recent years. Commercial production became legal in Canada in 1998, with grower licenses and other regulatory provisions covering farming, processing, transportation, delivery, and sale provided by Health Canada. Prior to 2018, regulations limited commercial hemp production to fiber and grain products; hemp rules were then overhauled to allow CBD varieties as part of the Cannabis Act, which legalized cannabis for adult-use in the country. As a result, Canada has historically produced hemp for the food and nutrition market, with roughly 70% of the country’s production exported to the United States.

 

Health Canada sets out a list of hemp cultivars approved for commercial cultivation each year. All seeds planted need to be certified, with inspectors enforcing compliance. Due to previous rules, seeds approved for hemp production in Canada have until recently been exclusively grain and fiber varieties, but this year the federal government has approved new CBD dominant genetics originating from within the country, as well as those from the U.S.

Choosing the right cultivar is very important to farmers, as it determines the resulting production target (seeds, grain, fiber, and / or flower), yield, and other factors. Additionally, logged data gives farmers information on which cultivars grow best in the various regional climate and soil conditions across Canada. For example, certain cultivars grow best in drier soil conditions, such as those found in the western part of the country.

 

Based on data from Health Canada, we examined the top five cultivars planted in the past three years, which make up roughly 80% of total hemp acres planted in the country. Four of the five cultivars have been the same in each of the past three years, which goes to show that experienced farmers looked to plant cultivars that are well suited for their climate and that generate strong, high-quality yields of the production targets desired by buyers.

Finola has been the dominant cultivar and made up almost 48% of the total hemp acreage planted last year. The Finola hemp variety has proved to be an excellent source of grain and fiber, but it also produces CBD-rich flowers only 120 days after germination. The table above shows a big increase in acres planted with Finola in 2020 relative to other cultivars. This occurred even as prices for CBD-rich hemp plant material plummeted after 2019’s harvest – market dynamics that are tracked by our Hemp Benchmarks division – which is reflected in the proportionally smaller amount of hemp harvested for flower and leaves in 2020, shown in the charts below. 

 

The versatile nature of hemp is what makes it so potentially beneficial for farmers. Not only does it promote soil regeneration and absorb carbon, but each acre of planted hemp can yield various production targets. In other words, each acre of hemp harvested can be equivalent to more since various product forms can come from it. According to Health Canada, the 92,503 acres planted in 2019 was equivalent to 177,981 acres, or almost double the actual acreage planted. The 54,906 acres planted in 2020 was equivalent to 88,832 acres, or 1.62 times the actual acreage farmed. 

This data is important for U.S. farmers, who are still in the early stages of establishing and diversifying their hemp industry. In the U.S., all forms of hemp – including grain and fiber varieties – were only legalized for commercial production in 2018. As put by the U.S. Department of Agriculture, “Canada is perhaps the most relevant analog for the U.S. hemp industry. Canada’s modern hemp industry developed following a similar legislative and policy path as the U.S. industry, but it began 20 years earlier.” While the U.S. market has in its early stages been focused primarily on CBD and other cannabinoid production, a small amount of grain acreage has found a foothold in some states and interest in fiber is growing. 

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

14 May 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

May 7, 2021

CANADA CANNABIS SPOT INDEX — May 7, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 7, 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$5.72 per gram this week, down 0.8% from last week’s C$5.77 per gram. This week’s price equates to US$2,120 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.

Last week, Statistics Canada released retail sales data for February 2021, along with some minor changes to sales figures going back to July 2020. There was nothing notable in the reissued figures. Nationwide legal cannabis sales reached C$262.9M in February.

 

January saw a small decline in daily sales. As we noted in our report from March 26, we attribute the drop to a decrease in spending after the holiday season. A similar phenomenon is common in established U.S. cannabis markets. February sales grew once again, reaching levels slightly shy of those posted for December. The chart below shows average daily sales each month by province. The growth in sales from January to February 2021 was C$0.38M per day.

Source: Cannabis Benchmarks

Looking at the month-on-month change in each province, we see that sales have started to plateau in most, with Ontario the exception. Ontario’s cannabis industry continues to see a growth trajectory as it plays a bit of catch-up in terms of the number of operational retailers in the province. 

Source: Cannabis Benchmarks

With the largest retail store footprint, Alberta continues to see a strong level of sales per legal-aged cannabis consumer. Based on the number of residents of legal age in Alberta and legal cannabis sales in the province, we calculate per capita spending amongst that cohort at C$15.42 per month. Meanwhile, in Ontario, per capita spending by legal-aged residents in the province’s regulated market is less than half that in Alberta, or C$7.63 per month.

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

07 May 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

April 30, 2021

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

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.

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.