September 10, 2021

U.S. Cannabis Spot Index — September 10, 2021

U.S. Cannabis Spot Index — Published September 10, 2021

U.S. Cannabis Spot Index down 3.3% to $1,457 per pound.

 

The simple average (non-volume weighted) price decreased $46 to $1,741 per pound, with 68% of transactions (one standard deviation) in the $928 to $2,554 per pound range. The average reported deal size was nominally unchanged at 2.4 pounds. In grams, the Spot price was $3.21 and the simple average price was $3.84.

 

The relative frequency of transactions for indoor flower increased by 1% this week. The relative frequency of trades for greenhouse product and outdoor product were essentially unchanged this week.  

      

 

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

 

U.S. Spot Prices ticked up at the end of last week, after having sold off rather sharply since June 2021, losing $170 per pound after large volume, legacy state pricing came under pressure. Given recent developments in such states, Cannabis Benchmarks inquired after current and expected price trends in Oregon, an especially hard-hit state. We learned there may not be a reprieve in downward price pressures from upcoming holiday sales, as we discuss in more detail in this week’s Premium Report. In California, some members of our Price Contributor Network have reported prices for greenhouse and outdoor-grown product falling sharply. As a result, they stated that some growers are choosing to store their recent harvests due to decreasing interest from buyers and in hope of rebounding prices. 

 

This week, the U.S. Spot returned to its downward trend after last week’s momentary interruption. We have already seen employment and consumer spending pull back as the Delta variant of the coronavirus has gained increasing traction, resulting in economic uncertainty. Retail sales fell in May and July and eked out only a 0.7% gain in June. When consumers pullback due to economic uncertainty, they cut discretionary spending. Cannabis is a primarily discretionary purchase, so it is reasonable to guess cannabis purchases could fall off, prompting lower prices if the economy does not regain its footing in Q4 2021. 

 

While the pandemic and associated economic uncertainty did not dent cannabis sales in 2020, at this point federal programs that were in place last year to support individuals and the economy – e.g., stimulus checks, enhanced unemployment protections, and the eviction moratorium – have been allowed to lapse by the Biden administration.

 

The U.S. Spot remains driven mainly by states with higher trading volumes, but newer markets with high prices are in the mix and growing rapidly. The uptick in the U.S. Spot price may not last if large state markets continue to see prices trend lower and the Delta variant causes a more significant pullback in consumer discretionary spending. 

 

October 2021 Implied Forward down $15 at $1,500 per pound.

 

The average reported forward deal size was 70 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 92 pounds, 59 pounds, and 30 pounds, respectively.

Headlines from this week's Premium Report:

National

U.S. Spot Cannabis Price Returns to Downward Trend

Oregon

Oregon Market Oversupply Here to Stay

Maine

Maine Adult-Use Sales Vault Over $10 million in August

Illinois

Illinois’ Adult-Use Sales Tick Down in August

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

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

September 3, 2021

U.S. Cannabis Spot Index — September 3, 2021

U.S. Cannabis Spot Index — Published September 3, 2021

U.S. Cannabis Spot Index increased 2.1% to $1,507 per pound.

 

The simple average (non-volume weighted) price decreased $6 to $1,787 per pound, with 68% of transactions (one standard deviation) in the $959 to $2,615 per pound range. The average reported deal size was 2.4 pounds. In grams, the Spot price was $3.32 and the simple average price was $3.94.

 

The relative frequency of transactions for indoor flower decreased by 1% this week. The relative frequency of trades for greenhouse product was unchanged and the frequency of outdoor transactions increased by 1%. 

       

 

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

 

The U.S. Spot Price has been in a downward spiral recently, losing just over $192 in August. Price has come under pressure in legacy legal states with large licensed markets – namely, California, Oregon, and Colorado – all experiencing significant price pressure leading into harvest season. In brief, light-deprivation and outdoor crops are coming to markets over-supplied with last year’s inventory. Over the past several weeks northern California and Oregon growers have noted a large inventory overhang, with price pressure most marked on outdoor-grown flower. Reports from market participants told of outdoor product fetching as low as $200 per pound, while trim was seen trading down at $50 per pound. 

 

As noted in last week’s report, legacy, high production states are weighted more heavily in the U.S. Spot Index by virtue of the larger trading volumes in those markets, thus pushing spot prices sharply lower over the past several weeks as losses accumulate in these states. As of last week, California’s Spot Index was down just over $220 since the third week in July. Oregon’s Spot also fell off over $196 per pound since late July 2021. Colorado prices fell somewhat less, losing $127 from mid-June 2021 to late August 2021. Yet, from a longer term perspective, the U.S. Spot has fallen just $71 from late August 2020 to late August 2021, reflecting the fact that price pressures in legacy states started accumulating in the late spring and early summer of this year.

 

 

The chart below depicts the U.S. spot sell-off accelerating as the year-to-date trendline was tested and did not hold. There is a chance the U.S. Spot will recover in the coming weeks with demand for newly harvested flower ramping up and there is some technical support near current levels dating back to January 2021 and in July 2020. 

The chart illustrates a trading truism: the downside is fast and the upside is slow, meaning falling markets are more volatile than rising markets. It took from January 2021 to June 2021 for the U.S. Spot to gain $142 per pound, but it has taken just over three weeks for it to lose $134 per pound, illustrating the need to hedge downside exposure. As historical data demonstrates, cannabis prices have an element of seasonality that market participants will be able to hedge against, thus locking in price at their chosen level.

March 2022 Implied Forward initially assessed at $1,510 per pound.

 

The average reported forward deal size was 70 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 93 pounds, 61 pounds, and 30 pounds, respectively.

 

 

The chart below shows the Cannabis Benchmarks® U.S. Spot Index over the past year appended with the Implied Forward Curve.

Headlines from this week's Premium Report:

National

U.S. Spot Prices Catch Up with Legacy State Pricing

Nevada

June Sales Slip Month-on-Month

Oregon

Office of Economic Analysis Publishes Outlook for Cannabis Sales

Washington

State Implementing New Cannabis Traceability System

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

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

August 27, 2021

U.S. Cannabis Spot Index — August 27, 2021

U.S. Cannabis Spot Index — Published August 27, 2021

U.S. Cannabis Spot Index decreased 2.5% to $1,476 per pound.

 

The simple average (non-volume weighted) price decreased $50 to $1,793 per pound, with 68% of transactions (one standard deviation) in the $975 to $2,612 per pound range. The average reported deal size was nominally unchanged at 2.6 pounds. In grams, the Spot price was $3.25 and the simple average price was $3.95.

 

The relative frequency of transactions for indoor flower increased by 1% this week. The relative frequency of trades for greenhouse product decreased by the same proportion, while that for deals for outdoor flower was stable.   

    

 

The relative volume of outdoor product expanded by 1%. The relative volume of greenhouse flower contracted by the same proportion, while that for warehouse product was unchanged.

 

The U.S. Spot Index fell below the $1,500 per pound threshold for the first time since January of this year. In fact, this week’s assessed national composite price is $1 below that observed in the week ending January 15, 2021, which ended up being the lowest observed U.S. Spot price in the wake of 2020’s autumn harvest. 

 

That prices are already dipping below those documented after last year’s crop was brought in, with this year’s full-term plants yet to be cut down, suggests that wholesale flower rates could slide significantly lower. As we have noted in recent weeks, the drop in the overall national price is being driven largely by a reported glut of available supply in California and Oregon, consisting of both inventory harvested in 2020 and introduced in commerce recently and fresher product from this summer’s light-deprivation crops. 

 

The current situation appears somewhat reminiscent of that documented by Cannabis Benchmarks beginning in the summer of 2016. At that time, cultivation capacity that had begun to be set up in the wake of legalization in Colorado and Washington hit its stride, while California and Oregon growers were being typically prolific. The overbuilding of production capacity was compounded by large summer and fall harvests in 2017 and the U.S. Spot experienced a prolonged and dramatic erosion from mid-2016 through nearly all of 2018. 

 

 

Whether the current situation will play out in a similar manner remains to be seen. While California’s situation recalls that observed previously in Colorado and Washington in some ways – in terms of planned cultivation capacity coming online and producing at scale in the years after the licensed market opened – the Golden State’s retail side has significantly more room to grow and absorb additional supply. Recently-released sales and tax data from California shows taxable sales increasing by 11% from Q1 to Q2 of this year; Q2 2021’s sales figures are also up almost 25% from the same period last year.

September 2021 Implied Forward closes down $40 to $1,535 per pound.

 

The average reported forward deal size was 71 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 46%, 38%, and 16% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 92 pounds, 63 pounds, and 30 pounds, respectively.

Headlines from this week's Premium Report:

California

Volume of Flower and Other Product Sold into Wholesale Market in Q2 2021 Up Significantly YoY, But Down Slightly from Q4 2020

Arizona

Sales Data from January – June Shows Share of Total Made up by Adult-Use Market Increasing as Sales Plateaued Overall in Latter Months

New Jersey

Rules for Adult-Use Market Adopted, Setting Up First Sales to Commence in February 2022

New Mexico

State Adopts Rules for Adult-Use Producers, Including Production Capacity Limits

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

27 August 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

August 20, 2021

U.S. Cannabis Spot Index — August 20, 2021

U.S. Cannabis Spot Index — Published August 20, 2021

U.S. Cannabis Spot Index decreased 2.0% to $1,515 per pound.

 

The simple average (non-volume weighted) price decreased $27 to $1,843 per pound, with 68% of transactions (one standard deviation) in the $1,007 to $2,679 per pound range. The average reported deal size was 2.6 pounds. In grams, the Spot price was $3.34 and the simple average price was $4.06.

 

The relative frequencies of trades for each grow type were relatively stable from last week.  

    

The relative volumes of each grow type were also virtually unchanged from last week.

 

An increase in late summer supply – as well as supply from last year’s autumn harvest, in some cases – is pushing down assessed flower prices in California and Oregon. Meanwhile, surging demand in newer adult-use markets such as Michigan is lifting or stabilizing wholesale flower prices in those states. 

 

In some states, such as Illinois, the state’s Spot Index has recently climbed above $4,000 per pound, a milestone that it tested, but did not exceed in all of 2020, the first year of adult-use sales in the state. In Massachusetts, observed wholesale flower prices have stabilized at around $3,500 – $3,550 per pound in recent weeks. 

 

Arizona has also seen its Spot price remain steady. Despite Arizona’s adult-use market being only about seven months old, the state’s Spot has tracked at prices roughly half those observed in Massachusetts recently. Arizona’s medical cannabis program already boasted robust production, which operators have been able to expand upon in recent months, as the state has no capacity limits on individual cultivators. 

 

Still, surging sales and higher prices in newer markets have not yet reached a magnitude sufficient to direct the course of the U.S. Spot as a whole. This is due to the fact that significantly higher prices in those states belie significantly smaller volumes traded. For example, in Massachusetts, Cannabis Benchmarks projects that around 110,000 pounds will be sold to consumers in the state’s adult-use market by the end of 2021. This figure is less than half the 250,000 pounds of flower we estimate were sold in Oregon last year.

September 2021 Implied Forward assessed down $15 to $1,600 per pound.

 

The average reported forward deal size increased 6% to 67 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 47%, 40%, and 13% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 85 pounds (up nearly 8% from 79 pounds last week), 52 pounds, and 29 pounds, respectively.

 

 

At $1,600 per pound, the September Implied Forward represents a premium of 3.5% relative to the current U.S. Spot Price of $1,546 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:

Oklahoma

Oklahoma Cannabis Sales Down 6% in June, Even as Patient Count Rose

Michigan

Michigan Cannabis Sales Jump 17.8% in July

Illinois

Report: Illinois Cannabis License Lotteries Plagued by Lawsuits – No Licenses Yet Awarded

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

20 August 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

August 13, 2021

U.S. Cannabis Spot Index — August 13, 2021

U.S. Cannabis Spot Index — Published August 13, 2021

U.S. Cannabis Spot Index decreased 3.9% to $1,546 per pound.

 

The simple average (non-volume weighted) price decreased $16 to $1,870 per pound, with 68% of transactions (one standard deviation) in the $1,031 to $2,709 per pound range. The average reported deal size was 2.5 pounds. In grams, the Spot price was $3.41 and the simple average price was $4.12.

 

The relative frequencies of trades for each grow type were relatively stable from last week.

  

 

The relative volume of indoor flower contracted by 3% this week. The relative volumes of greenhouse and outdoor product expanded by 2% and 1%, respectively.

 

The U.S. Cannabis Spot Index saw a notable drop this week, breaking with the gradual uptrend that had been observed previously. Based on reports from the field and our analysis of state sales data, it appears that there are currently two countervailing pressures on the national wholesale flower price: Surging supply from light-deprivation crops and other expanded production, particularly in California and Oregon, and sales rebounding in July after stagnating across many state markets in Q2. 

 

At the moment, the former is ascendant and is pushing down wholesale prices in the large Western markets, which in turn are pulling down the U.S. Spot. In addition, and perhaps in response to expanded summer light-deprivation crops coming in, growers in Oregon and California may be trying to move last year’s harvests so as not to be stuck with months-old inventory with fresher product entering the market. We have in the past documented that Oregon growers in 2020 harvested 37% more wet weight than in 2019, with much of that increase generated by outdoor cultivators. While Cannabis Benchmarks did see a post-harvest price decline in the state, we did not observe one commensurate with such a large year-over-year supply increase. That product may be coming to market now, with this year’s fall harvest set to begin next month for some growers.

September 2021 Implied Forward assessed down $15 to $1,600 per pound.

 

The average reported forward deal size increased 6% to 67 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 47%, 40%, and 13% of forward arrangements, respectively. 

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 85 pounds (up nearly 8% from 79 pounds last week), 52 pounds, and 29 pounds, respectively.

 

 

At $1,600 per pound, the September Implied Forward represents a premium of 3.5% relative to the current U.S. Spot Price of $1,546 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

Report: Mendocino County Growers Seeing Lower Prices Now & In the Future

Colorado

Colorado Sales Downdraft Slows in June

Oregon

Growers Report Downward Price Pressure, but Market Conditions Vary Regionally

Massachusetts

July Gross Sales Continue Strong Uptrend

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

13 August 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved