March 4, 2022

U.S. Cannabis Spot Index — March 4, 2022

U.S. Cannabis Spot Index — Published March 4, 2022

The U.S. Cannabis Spot Index decreased 2.9% to $1,177 per pound.

 

The simple average (non-volume weighted) price decreased $31 to $1,465 per pound, with 68% of transactions (one standard deviation) in the $643 to $2,287 per pound range. The average reported deal size was nominally unchanged at 2.5 pounds. In grams, the Spot price was $2.59 and the simple average price was $3.23.

 

The relative frequency of transactions for indoor flower was down about 1%, while those of greenhouse and outdoor flower were essentially unchanged this week. 

                 

 

The relative volume of indoor flower fell over 2%; that of greenhouse flower was up 1% and that of outdoor flower rose 2%. 

 

U.S. Spot price fell $35 this week with legacy states and, more recently, high population states with younger markets steering the index. California Spot slipped $40 per pound on a 20-week average loss of $15.74. Washington State shed $9 with 20-week average losses narrowing to just over $8. Oregon Spot rose $21 per pound, also on a contracting 20-week average loss of $16.72. Colorado’s 20-week average losses have been narrowing as well over the past two months, falling below $6 per week with Spot gaining $7 this week. 

 

High population states that are relatively new to the adult use market continue to see price pressure, with growers increasingly making bulk deals at lower rates, thus dragging down spot prices. Michigan shed $47 per pound this week, pushing the 20-week average loss to $53. Massachusetts Spot fell $45 per pound on a 20-week average loss of $53. Even Illinois is seeing a bit of price erosion, falling $29 per pound this week. 

 

While each state has its own supply / demand profile, even newer states are beginning to see significant price erosion and, country-wide, prices are mostly lower than last year. Wholesale prices are likely to continue lower, with outdoor flower prices pulling down overall prices in legacy markets. Prices in new states will be weighed down mostly by increasing numbers of and expanding growers nailing down production methods even as supply is outpacing demand. 

 

Longer term, prices across the country are bound to converge even though state supply and demand profiles differ. Markets seek efficiency in production and distribution methods that will drive prices together. At the end of the day, it is all one commodity for the purposes of the overall market and therefore should not be priced differently across the country. 

 

 

Cannabis Benchmarks U.S. Spot Index reflects price information collected from across the country and will set a price standard that can be used to hedge every product across the supply chain. When the market is traded legally on an exchange, the likely contract will reflect the collected prices – the index – of prices across the country, creating an efficiency the current market lacks. One way to think about legally traded cannabis is to look at other indexes: the S&P 500, for example, represents 500 differently priced stocks and is arguably the most efficient way to trade the stock market, as it encompasses diversification with standards for inclusion therein. Ultimately, an index of spot prices traded on a futures exchange will allow for hedging cannabis prices so growers – and everyone else across the supply chain – can lower business risk and plan for the future in a more efficient fashion.

 

 

September 2022 Implied Forward initially assessed at $1,265 per pound.

 

The average reported forward deal size increased 7 pounds to 75 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were unchanged at 32%, 52%, and 16% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 90 pounds, 70 pounds, and 59 pounds, respectively.

 

 

At $1,225 per pound, the April 2022 Implied Forward represents a premium of 4.1% relative to the current U.S. Spot Price of $1,177 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

February Sales Slip Again

Nevada

November Sales Fall on Lower Prices

Illinois

Adult Use Sales Down in February, Demand Softens

California

Proposed Bills May Circumvent Federal Regulation

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

4 March 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

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

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

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

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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

February 4, 2022

U.S. Cannabis Spot Index — February 4, 2022

U.S. Cannabis Spot Index — Published February 4, 2022

The U.S. Cannabis Spot Index decreased 0.7% to $1,229 per pound.

 

The simple average (non-volume weighted) price decreased $34 to $1,517 per pound, with 68% of transactions (one standard deviation) in the $682 to $2,352 per pound range. The average reported deal size decreased to 2.3 pounds. In grams, the Spot price was $2.71 and the simple average price was $3.34.

 

The relative frequency of transactions for indoor product fell 1%, as did that for greenhouse product. Outdoor frequency was essentially unchanged.   

            

 

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

 

Legacy state prices remain under tremendous pressure, a condition exacerbated by massive harvests in fall 2021, falling unemployment, and the loss of the 2021 Child Tax Credit payments and supplemental unemployment benefits. Add to this the highest level of inflation since 1982 and a massive reversal in consumer spending was bound to happen, with discretionary spending impacted first. Furthermore, in an effort to stem inflation, it appears the Federal Reserve will raise interest rates several times in 2022, which will translate into higher consumer rates on credit cards, homes, and cars. Raising interest rates is intended to curtail inflation by suppressing demand and should result in lower consumer spending across the board – eventually. 

 

 

For cannabis businesses, particularly in mature western markets, this may be a year of transformation, where cannabis prices adjust downward in ways previously unthinkable. Practically, this means outdoor flower prices falling even further, perhaps to $100 a pound, as predicted in our California interview below. Another result may be a pick up in price convergence across grow types. In fact, price convergence in the world’s largest cannabis market – California – has begun in earnest, with greenhouse flower prices converging toward outdoor with unprecedented speed.

 

The convergence of greenhouse and outdoor product prices was expected, although the pace of convergence was likely accelerated by fundamental factors – primarily oversupply. The spread between greenhouse prices and those for outdoor product fell below $100 this month from a peak of over $500 in February 2021.

 

 

August 2022 Implied Forward initially assessed at $1,315 per pound.

 

The average reported forward deal size was 63 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 83 pounds, 56 pounds, and 43 pounds, respectively.

 

 

At $1,310 per pound, the March 2022 Implied Forward represents a premium of 6.6% relative to the current U.S. Spot Price of $1,229 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

California Lessons: Prices, Taxes, and the Illicit Market – Interview

Colorado

Extractors Make Good Partners – Interview

Massachusetts

Cannabis Laws: Community Host Agreements Draw Scrutiny

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

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