Weekly Report -- Published on 24 February 2017
Over 65 pages of detailed commentary and analysis including:
2016 U.S. Wholesale Cannabis Market Highlights
Monthly Price Data for the Largest Wholesale Markets
Trends That Defined 2016
What To Watch For In 2017
Price Volatility And Emerging Markets
Commodity Price Correlation
U.S. Cannabis Spot Index down 1.9% to $1,618 per pound.
The simple average (non-volume weighted) price decreased $104 to $1,783 per pound, with 68% of transactions (one standard deviation) in the $1,128 to $2,438 per pound range. The average deal size decreased 25.2% to 7.3 pounds this week, from 9.7 pounds last week. In grams, the Spot price was $3.57, and the simple average price was $3.93.
The relative volume of indoor flower as a percent of the total traded swelled by 7% week-over-week to account for over half of all observed weight moved. The increase came at the expense of the relative volume of greenhouse product, which last week accounted for over a third of all observed volume traded. Outdoor flower’s share of the total observed volume traded grew slightly this week, by 3%. The relative frequency of transactions for each individual grow type held largely steady compared to last week, with marginal increases in the proportion of deals for indoor and outdoor product.
Indoor flower spanned from $899 to $5,200 per pound; the median price was $1,700.
Greenhouse flower spanned from $1,100 to $3,200 per pound; the median price was $1,600.
Outdoor flower spanned from $700 to $2,000 per pound; the median price was $1,500.
The U.S. Spot Index this week saw a small decline of less than 2%, causing it to fall to under $1,625 per pound. The overall reduction in the composite rate was underpinned by fairly modest declines in the volume-weighted average pricing of each individual grow type, with none falling by more than 5%. Overall, the first eight weeks of 2017 have revealed relative steadiness in pricing when viewing the nation’s disparate state-legal wholesale cannabis markets in aggregate.
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.
Pricing for product in both adult-use and medical cannabis markets fell this week, with rates for the former dipping more steeply. Composite pricing in Colorado, Washington, and Oregon all saw small declines, driving the over 3% drop in national-level wholesale rates for adult-use product. On the medical side, a nearly 5% decline in California’s state Spot Index was largely responsible for the less than 2% fall in pricing for medical product nationwide. Most of the nation’s other medical cannabis markets also saw marginal declines, with a $63 week-over-week rise in Arizona’s state Spot Index being the notable exception.
Deal sizes for indoor flower ranged from 0.1 to 50 pounds.
Deal sizes for greenhouse flower ranged from 0.5 to 75 pounds.
Deal sizes for outdoor flower ranged from 0.5 to 100 pounds.
March Forward closes unchanged at $1,650 per pound.
Forward arrangements declined to just under 3% of overall market activity this week, down from nearly 4% last week. The average forward deal declined 8 pounds to 19 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor grown flower represented 56%, 22%, and 22% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor grown flower was 20 pounds, 15 pounds, and 20 pounds, respectively.
At $1,650 per pound, the March Forward represents a premium of 2% relative to the current U.S. Spot Index of $1,618. The premium or discount for each forward price, relative to the U.S. Spot Index, is illustrated in the table below.
On Thursday March 23rd, White House Press Secretary Sean Spicer was asked a question during his daily media briefing concerning the conflict between state and federal law in regard to cannabis legalization. Spicer’s reply amounted to the most definitive policy statement on cannabis thus far from the new administration. In response to the question, Spicer stated, “There is still a federal law that we need to abide by when it comes to recreational marijuana and other drugs of that nature.” Spicer also asserted that there is a “big difference” between medical and recreational cannabis, emphasizing again later that the two were “very different subjects.”
Subsequent to the initial cannabis question, another journalist asked whether the federal government was going to take some sort of action on recreational cannabis in states that have legalized for adult use. Spicer responded, “I think that’s a question for the Department of Justice (DOJ). I do believe that you’ll see greater enforcement of it.” Spicer went on to explain that the administration’s view is that Congress made clear its position on medical cannabis and how the DOJ should - or should not - act upon it via the Rohrabacher-Farr Amendment, an appropriations rider that prevents the DOJ from deploying its resources to inhibit states from implementing medical cannabis programs. Recreational cannabis is in a different situation, as it was tolerated under the Obama administration through non-binding DOJ guidance memos, but is not protected by any concrete Congressional action.
Spicer’s statement is indeed ominous to those involved in state-legal adult-use cannabis markets. However, White House staff in key positions have been forced to retract and walk back on statements in recent weeks, most notably when Kellyanne Conway stated that former National Security Advisor Michael Flynn had the full confidence of the president just a few hours before Flynn resigned over his improper communications with Russia. As such, it is possible that subsequent clarifications or modifications to Spicer’s statement will emerge, although they do appear to jive with the anti-cannabis views of Attorney General Jeff Sessions. In the meantime, most cannabis businesses will continue to operate as usual while waiting to see whether or not tangible enforcement materializes.
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Washington D.C. - Spot Market Summary
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