April 24, 2020

U.S. Cannabis Spot Index — April 24, 2020

U.S. Cannabis Spot Index — Published April 24, 2020

U.S. Cannabis Spot Index up 1.2% to $1,368 per pound.

 

The simple average (non-volume weighted) price increased $48 to $1,588 per pound, with 68% of transactions (one standard deviation) in the $861 to $2,315 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $3.02 and the simple average price was $3.50.

 

The relative frequency of trades for outdoor flower increased by almost 2% this week. The relative frequencies of deals for indoor and greenhouse product decreased by about 1% each. 

 

Outdoor flower’s share of the total reported weight moved expanded by over 2% this week. The relative volumes of warehouse and greenhouse product each contracted by about 1%.

In recent weeks, large month-over-month increases in March sales figures in Oregon and Arizona have been framed by some reports as a direct result of the COVID-19 pandemic and accompanying panic-buying. Cannabis consumers and patients in several markets have indeed been stocking up ahead of stay-at-home orders going into effect, or based on general apprehensions of the possibility of the closure of cannabis retail, as demonstrated by the long lines at licensed shops documented in numerous states prior to restrictions on movement being put in place. 

 

However, a more detailed and contextualized look at official sales figures suggests that established seasonal sales patterns and previously-existing growth trends may be primarily responsible for impressive March sales figures, with coronavirus-related purchasing contributing to boost sales higher than they might have been otherwise. In what follows, we focus on Oregon and Arizona, two of the markets for which official March sales data is available, along with several years of historical data.

 

First, seasonal sales patterns must be acknowledged. In recent years, March has established itself in many legal cannabis markets as the strongest sales month of the first quarter, and sometimes of the first half, of any given year. Additionally, March sales in numerous markets in past years have frequently represented new record retail revenue figures, which are typically then surpassed in the summer months. 

 

In Oregon, March sales represented record highs for the state’s market at the time in each year from 2017 through 2019, making 2020 the continuation of a trend that has been documented from the outset of the state’s licensed system. In Arizona, total sales volume of all products and flower sales volume specifically also set new records for the state’s market in March in each year from 2017 through 2019, just as another new record was established this year. 

 

Second, while month-over-month sales increases reported for March 2020 out of Oregon and Arizona are impressive, they are not substantially out of line with those documented in prior years. In Oregon, March 2020’s retail revenues rose by about 24% from February. In 2017, sales rose by about 21% from February to March; 2018 saw around an 18% increase in the same period; while 2019 saw a roughly 19% climb. Overall for 2019, annual sales in Oregon were up by about 22% from the year before. March 2020’s month-over-month increase did outpace those of prior years, but growth rates for the February-March period in Oregon have typically been about 20% since the state’s licensed market opened. 

 

March sales in Arizona’s medical cannabis market have also consistently seen robust growth in the years leading up to and including this one. Total sales volume of all products rose by 14.8% month-over-month in March 2020. In March 2017, the rate of increase in this metric was 15.5%; it was 16.3% in 2018, and 11.7% in 2019. Flower sales volume rose by 15.1% in March 2020, a larger magnitude than the 10.9% increase recorded in March 2019, but in line with the 15.9% and 15.5% increases in this metric documented in March 2018 and 2017, respectively.

May Forward closes unchanged at $1,400 per pound.

 

The average reported forward deal size was nearly 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 36 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 2.4% relative to the current U.S. Spot Price of $1,368 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:

National

Are Robust March Sales the Result of COVID-Related Bulk Buying or Existing Seasonal Trends and Market Growth?

Oregon

Rule to Allow Random Testing of Products for Adulterants and Contaminants Now in Effect

 

Michigan

Adult-Use and Medical Sales Rise Sharply in March as Supply Appears to Begin to Loosen

       

Arizona

Total Sales Volume Tops 17,000 Pounds in March, Establishing New Record for State’s Medical Market

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

24 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

April 17, 2020

U.S. Cannabis Spot Index — April 17, 2020

U.S. Cannabis Spot Index — Published April 17, 2020

U.S. Cannabis Spot Index down 0.5% to $1,352 per pound.

 

The simple average (non-volume weighted) price decreased $16 to $1,540 per pound, with 68% of transactions (one standard deviation) in the $832 to $2,249 per pound range. The average reported deal size was nominally unchanged at 2.1 pounds. In grams, the Spot price was $2.98 and the simple average price was $3.40.

 

The relative frequency of trades for outdoor flower decreased by almost 3% this week. The relative frequencies of deals for indoor and greenhouse product increased by about 1% and 2%, respectively. 

 

Outdoor flower’s share of the total reported weight moved contracted by over 2% this week. The relative volume of greenhouse product expanded by the same proportion, while that for warehouse flower was unchanged.

The U.S. Spot Index declined by 0.5% this week to settle at $1,352 per pound. It may be tempting to interpret the recent downward trend in the national composite price in light of reports of reduced sales due to the COVID-19 pandemic and accompanying stay-at-home orders in all of the country’s five largest legal cannabis markets, and others. This is especially true at this time of year, with 4/20 approaching, which usually results in a spike in retail sales. 

 

However, the U.S. Spot’s decline in recent weeks is not uncharacteristic for the period ahead of 4/20, although this year’s is of a slightly larger magnitude than last year’s. For 2020, the national composite price’s current peak is $1,459 per pound, which occurred on February 14. Since then, the U.S. Spot has declined by 7.3%. In 2019, the national average rate was largely steady from the outset of the year until February 15, after which it declined by 6.3% from that point to the week ending April 19, 2019, movement very similar to this year. In 2018, the U.S. Spot rose in March, but then fell by 4.4% from the final week of that month to the week ending on April 20, 2018. 

 

While the movement of the U.S. Spot leading up to 4/20 this year has not departed significantly from prior trends, the reasons behind the movement may have changed. Declining prices in the weeks ahead of 4/20 in prior years have been attributed to better supply-chain management (retailers not waiting until the week or two just before the holiday to stock up), generally looser supply (compared to 2015 or 2016, for example), and retailers increasingly choosing lower-priced outdoor product to sell in larger-volume increments at discounted prices. 

 

Although the national average deal size for outdoor flower grew this week, the relative volume of such product contracted in California and Oregon, but expanded in Colorado and Washington, significantly in the latter. Overall wholesale prices have not seen dramatic swings in recent weeks in any of the four largest legal cannabis markets mentioned above, even as significant alterations to sales have occurred due to COVID-19. Meanwhile, the downward trend in Michigan’s Spot is likely attributable to both loosening supply as licensed growers continue to ramp up, along with lower sales while the state is under a stay-at-home order. 

 

 

As we have pointed out in the past, Nevada’s market is likely to be the one of the hardest hit by COVID-19, as Las Vegas tourism has virtually disappeared. Sales in the Las Vegas metropolitan area make up a vast majority of those that take place statewide, but the region’s resident population of about 2.2 million is usually supplemented with between roughly 3.2 and 3.7 million tourists monthly. Overall, the downturn in Nevada’s Spot is almost certainly attributable largely to the dramatic reduction in demand taking place in the Las Vegas area.

May Forward unchanged at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 36 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 3.6% relative to the current U.S. Spot Price of $1,352 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

February Adult-Use and Medical Cannabis Sales Total Almost $140 Million, Essentially Flat from January and Up 17% YoY

Massachusetts

Judge Upholds Governor’s Closure of Adult-Use Cannabis Retailers in Response to COVID-19

 

Illinois

March Medical Cannabis Sales Set New Record for State’s Program at Nearly $30 Million; Average Retail Price for Flower in Medical Market Declined for the First Time in Six Months

       

New Mexico

Supply Outpaced Growing Demand in State’s Medical Market in Q4 2019, Leading to Expanding Unsold Inventory and Falling Wholesale Flower Prices

 

Maine

Beginning of Adult-Use Sales Delayed Indefinitely Due to COVID-19

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

17 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

April 10, 2020

U.S. Cannabis Spot Index — April 10, 2020

U.S. Cannabis Spot Index — Published April 10, 2020

U.S. Cannabis Spot Index down 2.1% to $1,359 per pound.

 

The simple average (non-volume weighted) price decreased $32 to $1,556 per pound, with 68% of transactions (one standard deviation) in the $820 to $2,293 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.00 and the simple average price was $3.43.

 

The relative frequency of trades for outdoor flower increased by almost 2% this week. The relative frequency of deals for greenhouse product decreased by the same proportion, while that for transactions for indoor flower was unchanged. 

 

Outdoor flower’s share of the total reported weight moved expanded by almost 2% this week. The relative volume of greenhouse product contracted by the same proportion, while that for warehouse flower was unchanged. 

The U.S. Spot Index declined by 2.1% this week to settle at $1,359 per pound. In the weeks since the COVID-19 pandemic has gripped the U.S. in earnest, the national composite price for cannabis flower in legal markets has been relatively stable. From the week ending March 20 through this week, the U.S. Spot has ranged between a low of $1,357 and a high of $1,388 per pound, while averaging $1,370 per pound during the four-week period. 

 

That price is down compared to the average national composite price of $1,415 per pound observed from the opening of this year through the week ending March 13. However, the U.S. Spot was already trending downward prior to the drastic measures taken by federal, state, and local officials in response to COVID-19, after peaking at $1,459 per pound in the week ending February 14. Based on input from market participants and our own analysis, we expect the negative trend to be exacerbated by the pandemic and have in prior weeks adjusted Forward prices downward. 

 

On the state level, the chart above shows that only Washington has seen wholesale flower prices climb since late March. The other three of the Big Four markets – California, Colorado, and Oregon – have seen rates slide downward gradually, continuing previously existing trends. While reports indicate that sales are suffering in numerous markets, it is likely that Nevada will be disproportionately affected, as a significant portion of the state’s sales are to tourists visiting Las Vegas, a consumer base that is now completely absent.

May Forward unchanged at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 37 pounds, respectively.

 

 

At $1,400 per pound, the May Forward represents a premium of 3% relative to the current U.S. Spot Price of $1,359 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

Cannabis Benchmarks Debuts State Spot Index, which Settled at $2,084 Per Pound this Week

Oregon

March Sales Set New Record at Almost $85 Million as COVID-19 Pandemic Gripped State

 

Michigan

State Officials Abruptly Disallow Caregiver Product to Enter Adult-Use Market

       

Massachusetts

Adult-Use Sales in March Reached Over $50 Million Despite Ceasing for Final Week of the Month as Part of Governor’s COVID-19 Stay-at-Home Order

 

Illinois

March Adult-Use Sales Up from February, But Average Daily Sales Figures Show Month-Over-Month Declines

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

10 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

April 3, 2020

U.S. Cannabis Spot Index — April 3, 2020

U.S. Cannabis Spot Index — Published April 3, 2020

U.S. Cannabis Spot Index up 2.3% to $1,388 per pound.

 

The simple average (non-volume weighted) price increased $23 to $1,588 per pound, with 68% of transactions (one standard deviation) in the $815 to $2,361 per pound range. The average reported deal size was nominally unchanged at 2.2 pounds. In grams, the Spot price was $3.06 and the simple average price was $3.50.

 

The relative frequency of trades for outdoor flower decreased by 5% this week. The relative frequencies of deals for indoor and greenhouse product increased by 2% and 3%, respectively. 

 

Outdoor flower’s share of the total reported weight moved contracted by almost 5% this week. The relative volumes of warehouse and greenhouse product expanded by about 2% and 3%, respectively. 

Accounts from several states across the country indicate that cannabis sales are down after experiencing a surge ahead of shelter-in-place and stay-at-home orders issued by numerous states and localities in response to the COVID-19 pandemic. This development is not particularly surprising; during the sales surge, reports frequently told of customers purchasing outsized amounts of product, resulting in ample personal supplies and no need to make further purchases for a longer-than-usual period. Similar situations have been observed in prior years, particularly after 4/20 and other traditional holidays when cannabis retailers run sales and promotions; consumers take advantage of lower prices to purchase larger volumes, which leads to lower sales in subsequent weeks.

 

Speaking of 4/20, it appears that the industry holiday will not provide its customary sales spike this year, as physical distancing recommendations and stay-at-home orders have in many cases been extended through the end of April. The free 4/20 concert held annually in Denver has already been canceled, while Nevada Governor Steve Sisolak announced this week that casinos and hotels in the state would remain closed through the end of this month. The New Mexico Cannabis Chamber of Commerce is urging patients and businesses to forego, or at least delay, 4/20 sales and celebrations this year until the pandemic subsides, according to New Mexico Political Report.  

 

While most developments are pointing to a period of suppressed demand as consumers are largely complying with stay-at-home orders in many parts of the country, at least one positive sign for cannabis sales was reported this week. According to Bloomberg, recent survey data indicates that demand for cannabis “appears to be just as inelastic as demand for alcohol,” even in a period of economic downturn. However, this is the first time that the legal cannabis industry has experienced a recession, and the first time that virtually all consumers have endured a pandemic of this nature generally, so it is possible that the findings of the survey could be altered as the situation persists.

October Forward initially assessed at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 37 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 0.9% relative to the current U.S. Spot Price of $1,388 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:

National

COVID-19 Pandemic and Resulting Stay-At-Home Orders Likely to Dampen or Eliminate 4/20 Sales Spike this Year

Colorado

Officials Allow Adult-Use Retailers to Serve Customers in Stores, After Limiting Them to “Curbside” Pickup Last Week

 

Oregon

February Sales Increase Slightly From Prior Month, Up 30% YoY

       

Nevada

Total January Retail Revenue Reaches New Record at over $64 Million

 

Massachusetts

Adult-Use Sales Swelled to New Peak in February, Topping $55 Million

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

3 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

March 27, 2020

U.S. Cannabis Spot Index — March 27, 2020

U.S. Cannabis Spot Index — Published March 27, 2020

U.S. Cannabis Spot Index down 1.3% to $1,357 per pound.

 

The simple average (non-volume weighted) price decreased $26 to $1,565 per pound, with 68% of transactions (one standard deviation) in the $799 to $2,330 per pound range. The average reported deal size increased to 2.2 pounds. In grams, the Spot price was $2.99 and the simple average price was $3.45.

 

The relative frequency of trades for greenhouse flower increased by over 2% this week. The relative frequency of deals for indoor product decreased by the same proportion, while that for transactions involving outdoor flower was unchanged. 

 

Warehouse flower’s share of the total reported weight moved contracted by over 2% this week. The relative volume of greenhouse product expanded by the same proportion, while that for outdoor flower was unchanged.

The COVID-19, or coronavirus, crisis continued to reshape legal cannabis markets in the U.S. this week. For the most part, cannabis businesses up and down the supply chain have been declared “essential” by regulators and remain open even under shelter-in-place or stay-at-home orders issued by state and local officials. However, in many cases operations have been compelled to alter their practices significantly, while some state and local regulators have shown a willingness to shutter adult-use cannabis businesses for public health concerns.

 

Early indications from California suggested that stay-at-home, shelter-in-place, and similar orders result in a surge of sales ahead of their effective period, but could result in a steep drop in demand if residents comply with the directives. Requirements to carry out sales “curbside” or via delivery now in effect in numerous states may also slow down the pace of sales, due to each customer taking longer to serve, and result in lower revenues generally.

 

Notably, the only current official sales data able to be located to this point comes from Oregon. As part of its announcement of temporary rules, noted below, the OLCC stated, “During the period of March 1-18, 2020, OLCC marijuana retailers have seen a 25-30% increase in sales compared to the same period last year.” However, the year-over-year increase noted by Oregon officials for the first two-and-a-half weeks of March is largely consistent with general sales growth observed in the state since last year. For 2019, annual sales increased by 23% compared to 2018, as we detailed in our report for January 24. We also noted last week that February 2020’s sales were up by 30% relative to those recorded in February 2019.

 

Given this context, it does not appear that the COVID-19 crisis spurred consumer demand for cannabis in Oregon significantly greater than the growth that was taking place already. However, in markets where year-over-year growth has been slowing – such as Colorado and Washington State, as well as Nevada – ramifications of the pandemic and reactions of consumers to stay-at-home orders may have led to different results.

April Forward closes down $25 to $1,375 per pound.

 

The average reported forward deal size was 37.5 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 47%, 35%, and 18% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 30 pounds, and 37 pounds, respectively.

 

 

At $1,375 per pound, the April Forward represents a premium of 1.3% relative to the current U.S. Spot Price of $1,357 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:

National

 

  • Most Stay-at-Home Orders Classify Cannabis Businesses as Essential, Some States Mandate Major Operational Changes in Light of COVID-19
  • Apprehension About Possible Closures, Unwillingness to Take in Inventory Applying Downward Pressure to Wholesale Prices Despite Strong Demand

Colorado

Adult-Use Cultivators Will See Lower Tax Rate on Internal Transfers of Flower in Q2

 

Washington

Tax Payments and Late Payment Penalties Deferred Until Late April for Cannabis Businesses

       

Nevada

Cannabis Sales Permitted Only by Delivery; Lack of Tourism in Las Vegas Likely to Depress Demand Significantly

 

Massachusetts

Adult-Use Cannabis Operations Ordered to Cease Operations, Medical Businesses Still Open

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

27 March 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved