September 25, 2020

U.S. Cannabis Spot Index — September 25, 2020

U.S. Cannabis Spot Index — Published September 25, 2020

U.S. Cannabis Spot Index up 1.5% to $1,594 per pound.

 

The simple average (non-volume weighted) price decreased $28 to $1,768 per pound, with 68% of transactions (one standard deviation) in the $987 to $2,548 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.51 and the simple average price was $3.90.

 

The relative frequency of trades for greenhouse flower increased by almost 4% this week. The relative frequencies of transactions for indoor and outdoor product decreased by about 2% each.  

 

The relative volume of outdoor product contracted by almost 3%. The relative volumes of warehouse and greenhouse flower expanded by about 1% and 2%, respectively.

As we have covered in recent months, the major story of this year in the legal cannabis realm has been the dramatic increase in demand that has occurred under the specter of the COVID-19 pandemic. With data reported out of most major markets, it is clear that elevated sales continued through August. However, August is typically the peak month of the year for legal cannabis sales. Historical data shows that monthly revenues generally decline in each month from September through November, before picking up in December to close the year. Whether those seasonal sales trends will hold this year in light of unprecedented socio-economic circumstances is an open question. 

 

Even if sales do subside this autumn, it may not be enough to cause wholesale prices to fall to the levels seen earlier this year. New data out of Colorado covering the first half of 2020 illustrates a situation that is shared by numerous mature legal cannabis markets. Namely, production capacity and supply stabilized during the past two years, and is now being strained by the new, unanticipated demand that has manifested during the coronavirus crisis. 

 

If sales in the coming months remain at or close to the elevated levels seen this summer, new production may have to come online in order to bring down prices while satisfying a higher level of baseline demand. However, if serious shortages can be avoided and consumers will tolerate price rises at retail, cannabis businesses will likely be content to maintain current supply levels while enjoying relatively high wholesale rates not seen in several years

October Forward closes up $30 to $1,525 per pound.

 

The average reported forward deal size was 25 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 36%, 38%, and 26% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 27 pounds, 19 pounds, and 31 pounds, respectively.

 

At $1,525 per pound, the October Forward represents a discount of 4.3% relative to the current U.S. Spot Price of $1,594 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

Bill Preventing Increases in Cannabis Taxes in 2021 Signed into Law by Governor

Colorado

New Data Shows Growth in Flower Sales Volume Significantly Outpaced Small Increase in Production in H1 2020

Washington

July Sales Up Over 40% YoY

Arizona

August Sales Volume Down Slightly from Record Levels Recorded in July

 

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25 September 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved