cannabis benchmarks weekly report -- published september 15, 2017
U.S. Cannabis Spot Index up 0.7% to $1,669 per pound.
The simple average (non-volume weighted) price increased $44 to $1,894 per pound, with 68% of transactions (one standard deviation) in the $1,168 to $2,619 per pound range. The average deal size decreased 1.7% to 10.6 pounds from 10.8 pounds last week. In grams, the Spot price was $3.68, and the simple average price was $4.17.
This week saw indoor-grown flower increase somewhat its influence on the overall composite price. The relative volume of such product grew by 2% week-over-week, with the corresponding decline split evenly between the two sun-fueled grow types. The relative frequency of deals for warehouse flower also increased by the same proportion and made up almost three-quarters of all documented transactions this week.
Indoor flower spanned from $999 to $6,200 per pound; the median price was $2,000/lb.
Greenhouse flower spanned from $800 to $3,200 per pound; the median price was $1,400/lb.
Outdoor flower spanned from $700 to $1,650 per pound; the median price was $1,250/lb.
The U.S. Spot Index rose for the fourth consecutive week, inching upward by less than 1% to settle at $1,669 per pound. The overall increase in the national composite price was due entirely to outdoor flower, which jumped by over 12% to recover from last week’s year-to-date low price. Volume-weighted average rates for indoor and greenhouse flower continued the relative stability that has characterized their behavior recently, but prices for both slipped marginally this week.
Alaska’s Spot Index is back above the $5,000 per pound threshold for the first time since mid-July. Due to the relatively small volumes traded in the state, Alaska’s high rates have a marginal effect on the U.S. Spot.
No new pricing extremes were observed this week, as the volume-weighted average rates across the country continued for the most part to avoid dramatic week-over-week shifts. It should be noted, however, that this week’s U.S. Spot Index is the third-highest observed so far this year, matching that of the week ending March 24th, which immediately preceded this year’s current annual high of $1,682 per pound.
The table below illustrates the U.S. Spot Index, along with the volume weighted averages for all transactions accompanied by a medical or recreational / adult-use designation.
National-level pricing for flower traded in adult-use markets was on the upswing this week, closing slightly the gap between it and its medical counterpart, which saw a negligible week-over-week decline. After product in Colorado’s medical market commanded a nearly $50 premium over that dealt in its recreational sector last week, the tables were turned this week, with adult-use flower garnering slightly higher rates. Prices in Oregon’s recreational market exceeded those in the state’s medical realm, as has been the case for much of the year.
Forward curve unchanged as sun-growers monitor conditions ahead of the harvest.
With the start of the outdoor fall harvest about a week away, weather conditions remain a critical factor that could impact yields on more than a local level. Recent market prices are following a pattern closer to that experienced in 2015 than 2016. The U.S. Spot index averaged $2,014 in September 2015, before declining 9% to an average of $1,834 in October 2015. Thus far, the average wholesale price for September has been $1,651, implying an 11% decline to reach the October Forward price of $1,470. While a few dozen fires are ongoing in California and the Pacific northwest, growers experienced more struggles with fires and drought in 2015 than they are now, suggesting that yields could be higher this October than at that time.
Forward arrangements exceeded 8% of overall market activity this week. The average forward deal decreased to 31 pounds, from 34 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 13%, 67%, and 21% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 40 pounds, 35 pounds, and 10 pounds, respectively. The premium or discount for each forward price, relative to the current U.S. Spot Index of $1,669, is illustrated in the table below.
Sample content from this week's Premium Report:
In our report for August 25th, we discussed a proposal by a member of Michigan’s Medical Marijuana Licensing Board (MMLB) that dispensaries be forced to shut down by this week or be disqualified from state licensing that is to commence in mid-December. That announcement caused significant apprehension in Michigan’s informal medical cannabis market, with its tangible effects on commerce examined below in greater detail. Our previous coverage also noted that the state department of Licensing and Regulatory Affairs (LARA) was to offer a recommendation on how to deal with currently existing medical cannabis storefronts, which are technically illegal according to certain interpretations of state law.
Earlier this week, LARA released its recommendations, which stated, “The department’s intent for the emergency rules is to consider any operation of a facility as a potential impediment to licensure if continued after December 15, 2017.” LARA’s announcement continued, saying that the approach will allow current operators to wind down their businesses, while also allowing registered patients in the state to connect with caregivers.
Some market participants and observers in Michigan are taking LARA’s position to mean that commercial operations will have to cease in mid-December, with a report from Marijuana Business Daily quoting a state official as stating that they expect to issue state licenses beginning in late March or early April next year. However, the report also pointed out that LARA’s announcement does not state definitively that licensing will be denied to those that continue to operate after December 15th, only that such actions would be an impediment to receiving state approval in the future. Additionally, some operators are doing business under the auspices of their local government, as in Detroit, which has issued permits for a handful of dispensaries and is in the process of considering dozens more. It is currently unknown how the state will view those who are operating with a local license.
Regardless, the prospect of an industry shutdown first raised in late August materially affected trading on the ground in Michigan. One caregiver in the state reported to our analysts that, prior to LARA’s announcement, orders for his product that had been agreed to previously, constituting over a dozen pounds, had been cancelled by buyers, as dispensary operators were fearful of having significant inventory on hand that they could not liquidate on short notice. Consequently, the seller in question reported that he was moving smaller quantities, mostly quarter-pound increments. With the current extension allowing shops to continue running through mid-December, normal trading has resumed for the time being. Further potential implications, as well as a significant local development, are discussed below, in the Forward Curve commentary.
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15 September 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved