October 18, 2019

CANADA CANNABIS SPOT INDEX — October 18, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 18, 2019

*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$6.83 per gram this week, up 0.3% from last week’s C$6.81 per gram. This week’s price equates to US$2,349 per pound at the current exchange rate.

 

This week marks the one year anniversary of cannabis being legalized in Canada. Year one was quite volatile in a variety of ways; virtually every aspect of the market experienced ups and downs. Some examples include: 

 

  • A shortage of supply followed by a surplus;

  • Too much demand, then not enough demand;

  • High stock prices crashed downward;

  • Elevated cannabis commodity prices were followed by a decrease in rates;

  • Expensive retail prices eroding to lower ones.

 

The preceding worked to dampen the overweening enthusiasm present in the run up to legalization and shortly after its outset. As a result, Canadian cannabis businesses experienced additional volatility in another sphere, as capital that had previously been easy to access is no longer as freely forthcoming. 


In what follows, we expand on the above summary by highlighting the key numbers that we have been collecting and modelling in our first year of reporting on Canada’s legal cannabis market. 

 

PRICES

 

The assessed wholesale price over the first year of legal recreational sales – the Canada Cannabis Spot Index – averaged C$7.05 per gram (this includes C$1.13 of excise duties paid to the federal and provincial governments). Prices started out strong with reported supply shortages, but stabilized by March 2019. Ultimately, weekly rates ranged between C$6.04 and C$8.27 per gram in the preceding year. 

 

The average retail price per gram over the same period was C$10.01 (sales include dry flower sold in varying quantities, and oils).

 

SUPPLY

 

According to data from Health Canada, 241 corporate entities hold a cultivation, processing, or sales license under Canada’s Cannabis Act. The race to supply this emerging market has resulted in cultivation area growing by 342% to 16.7 million square feet from October 2018 to June 2019. 

 

The net production from these facilities grew at an equivalent rate. Cannabis Benchmarks® estimates total Canadian monthly cannabis supply peaked in June at 62,671 kg. More supply is expected to come to market as facilities already under construction come online in the last quarter of 2019 and throughout 2020.

 

DEMAND

 

4.9 million people over the age of 15, or 16.1% of the Canadian population, reported cannabis use during Q2 2019. (Of course, only those over 18 or 19 years of age may make purchases at licensed retail outlets, depending on the province.) Our estimates show that only 15% of cannabis consumed in Canada in the last year was purchased from a legal source, namely one of the 561 operational cannabis stores or one of the provincially run online marketplaces. 

 

As access became easier and consumers more educated, daily Canadian cannabis sales grew from C$1.8M to C$4.6M over the course of the year, a 260% increase. Cannabis Benchmarks® estimates monthly legal consumption more than doubled throughout this period with October 2019 sales modelled to be 15,859 kg across medical and recreational markets.

 

INVENTORY

 

One of the most significant issues looming over Canada’s legal cannabis market is the large gap between supply and demand. This has contributed to a massive build up of inventory equating to more than 26 months worth of current demand, according to data from Health Canada. Some licensed producers are now looking to drop prices in order to be more competitive with the illicit market and move legal supplies, while others might be forced to write down unsellable inventory.

Over the coming months, we will continue to build out our data on current and projected supply and demand to give our readers a better perspective on market fundamentals. We have already had an overwhelming number of readers sign up to BETA test our fundamentals dashboard. If you have not signed up yet, please click the link below to register and we will email you directly as our platform becomes available.

*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..

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18 October 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved