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

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

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

September 24, 2021

U.S. Cannabis Spot Index — September 24, 2021

U.S. Cannabis Spot Index — Published September 24, 2021

U.S. Cannabis Spot Index increased 2.2% to $1,496 per pound.

 

The simple average (non-volume weighted) price decreased $2 to $1,722 per pound, with 68% of transactions (one standard deviation) in the $894 to $2,549 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.30 and the simple average price was $3.80.

 

The relative frequency of transactions for indoor flower was up about 2% this week. The relative frequency of trades for greenhouse flower fell roughly 1% and outdoor flower was largely unchanged. 

      

 

The relative volume of indoor product increased by 3% this week. The relative volume of greenhouse flower was down by 1% and outdoor product’s relative volume fell 2%. 

 

U.S. Spot price moved higher this week, gaining $23 per pound to trade at $1,496 per pound. The overall trend remains down with overproduction in legacy states still weighing on the national index. Washington, Colorado, California, and Oregon prices continue to converge below $1,200 per pound. Meanwhile, other states such as Nevada have seen price increases over the past six weeks and Michigan prices remain stable in the mid $2,300s. 

 

With the commencement of harvest season in the large western states and the rush to sell off existing inventory, spot prices are likely to remain under pressure in the coming weeks. In particular, outdoor cannabis may see a sell-off of unprecedented proportions due to large inventories, expansive growing efforts and, to some extent, waning demand. On the other hand, Massachusetts, a relative newcomer to the adult-use realm, is likely to see  price continue to increase as New York, New Jersey, and Connecticut have each pushed back expected start dates for adult-use retail sales.

October 2021 Implied Forward closes down $50 to $1,450 per pound.

 

The average reported forward deal size was 67 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 44%, 39%, and 17% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 91 pounds, 56 pounds, and 29 pounds, respectively.

Headlines from this week's Premium Report:

Oregon

Oregon August Monthly Sales down 4%

Michigan

Retail Prices Rise Even as Inventory Builds and Production Expands

Massachusetts

Monthly Sales Slip Slightly in August

New Jersey

Report: Adult-Use Business Licensing Will Not Begin On Time

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

24 September 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

September 17, 2021

U.S. Cannabis Spot Index — September 17, 2021

U.S. Cannabis Spot Index — Published September 17, 2021

U.S. Cannabis Spot Index increased 0.4%% to $1,463 per pound.

 

The simple average (non-volume weighted) price decreased $18 to $1,724 per pound, with 68% of transactions (one standard deviation) in the $895 to $2,552 per pound range. The average reported deal size decreased to 2.3 pounds. In grams, the Spot price was $3.23 and the simple average price was $3.80.

 

The relative frequency of transactions for indoor flower were unchanged this week at 58%. The relative frequency of trades for greenhouse product was also unchanged, but outdoor flower transaction slipped by 1%. 

       

 

The relative volume of indoor product increased by 2% this week. The relative volume of greenhouse flower was was down by 1% versus last week, while outdoor flower’s relative volume decreased by 1%. 

 

U.S. Spot is still under pressure but ticked up about $6 this week, as legacy states continue to see falling prices. Spot is currently trading at $1,463 per pound, near its lowest level since July 2020. The spot market rallied from $1,322 in May 2020 to a peak at $1,665 in October 2020, reflecting widespread demand during the initial phase of the pandemic. As noted previously, California and Oregon prices have been under persistent pressure, due primarily to ongoing oversupply issues. Indeed, growers see little reprieve on price. Some cultivators say they expect oversupply to remain a permanent condition, as states prepare for federal legalization within, possibly, the next two years. The sell-off in U.S. spot price may slow as new adult use states see increasing consumer demand. That process is expected to be slow, however,  as demonstrated in high-population states like Connecticut — where initial adult-use sales were pushed out to the end of 2022.

 

Economists were somewhat vindicated by this week’s lower-than-expected Consumer Price Index (CPI) data, with overall annual inflation falling 0.1% to 5.3% and monthly core inflation falling to 0.1%, the smallest increase since February 2021. As noted previously, retail sales have been falling and consumer spending has been slipping, with personal consumption expenditures falling from 1.1% in June to 0.3% in July; another indication that consumers are paring back spending. When consumers decide to cut spending, discretionary spending is first — and cannabis is largely a discretionary item. That being said, Alaska, Arizona and Colorado all reported sales increases month-over-month.

 

October 2021 Implied Forward unchanged at $1,500 per pound.

 

The average reported forward deal size was 68 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 45%, 39%, and 16% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 91 pounds, 58 pounds, and 29 pounds, respectively.

Headlines from this week's Premium Report:

Colorado

Colorado on Pace to Exceed 2020 Cannabis Sales

Connecticut

Connecticut First Adult Use Retail Sales Pushed to End of 2020

Arizona

Arizona Adult Use and Medical Sales Turn Higher

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

17 September 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

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