Weekly Report -- Published on 2 December 2016
U.S. Cannabis Spot Index down 1.3% to $1,442 per pound.
The simple average (non-volume weighted) price decreased $123 to $1,692 per pound, with 68% of transactions (one standard deviation) in the $1,209 to $2,175 per pound range. The average deal size increased 6.8% to 13.1 pounds this week, from 12.3 pounds last week. In grams, the Spot price was $3.18, and the simple average price was $3.73.
The mix of transactions and the volume traded by grow type remained extremely steady for the third consecutive week. In regard to deals, trades for indoor product increased in relative frequency by about 2% compared to last week, entirely at the expense of transactions for outdoor flower. Similarly, the relative volume of field-grown product traded as a percent of the total shrank by 2% week-over-week, with minimal relative gains made by flower of each of the other grow types.
Indoor flower spanned from $898 to $3,200 per pound; the median price was $1,800.
Greenhouse flower spanned from $1,100 to $2,000 per pound; the median price was $1,650.
Outdoor flower spanned from $500 to $1,600 per pound; the median price was $1,200.
The slight upward trend in pricing observed over the course of the last two weeks was interrupted this week, as the US Spot Index fell marginally to below $1,450 per pound. Rates for product of each individual grow type fell across board, with pricing for warehouse flower dropping the most dramatically, albeit by just over 3%, to fall below the $1,750 per pound threshold for the first time.
New annual low rates were again very rare this week; only the national rate for indoor product established a new year-to-date low at $1,747 per pound. After being observed fairly regularly over the course of September and October, the relative infrequency of observations of new annual low prices indicates that legal cannabis markets may be past their seasonal troughs.
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 designated as recreational / adult-use exceeded that for flower sold through legal medical systems for the second straight week. Last week’s pricing difference of $21 increased to $35 this week. While rates for both adult-use and medical product fell slightly, the decline in pricing for adult-use product was smaller due to modest price recoveries in the recreational markets of Colorado, Washington, and Oregon. California, the nation’s largest medical cannabis market by far, saw a marginal overall decline in prices this week.
Deal sizes for indoor flower ranged from 0.1 to 50 pounds.
Deal sizes for greenhouse flower ranged from 1 to 125 pounds.
Deal sizes for outdoor flower ranged from 1 to 200 pounds.
June 2017 Forward assessed at $1,725 per pound.
As sungrown inventory continues to join the regularly flowing supplies of greenhouse and indoor grown flower, forward market activity remained lighter than we have witnessed during other times of the year; still, forward arrangements represented slightly more than 4% of overall market activity this week, versus about 1% last week.
If last year’s national trends are any indication, cannabis market participants and observers can expect overall pricing to rise throughout this month in the leadup to the end-of-the-year holiday season. Last year at this time, the U.S. Spot Index settled at $1,734 per pound in the week ending December 4th, then rose roughly 15% over the course of the month to settle at $2,001 per pound in the week ending on Christmas Day. It should also be noted that rates actually spiked slightly higher in the week prior to Christmas itself, as the week ending on December 18, 2015, saw the U.S. Spot Index reach $2,041 per pound.
Additionally, the average U.S. spot price for December 2015 was $1,927 per pound, an increase of almost 7% from November 2015’s average of $1,801 per pound. This year, the November spot price averaged $1,415 per pound; if the market were to mimic last year’s trends, then the average nationwide rate for this month would amount to just under $1,515 per pound ($10 per pound less than last week’s December Forward close of $1,525). However, as we saw in the run up to the Thanksgiving holiday and noted in last week’s report, the price rise observed this year was less pronounced than the one documented at the same time last year. It is likely that increased supply across all of the major legal markets could work similarly this month to decrease the relative impact of enhanced holiday-season demand.
At $1,625 per pound, the January 2017 Forward represents a premium of 12.7% relative to the current U.S. Spot Index of $1,442. As reflected in the Forward Curve, early winter historically represents the beginning of a slow and steady upward climb in wholesale cannabis prices that continues through the spring and into the summer. Despite this near-term outlook for increasing prices, the January 2017 Forward is $393 per pound lower, or 19.5%, than the $2,018 per pound that the U.S. Spot Index averaged during January 2016.
The average forward deal this week was 34 pounds. The proportion of forward deals for outdoor, greenhouse and indoor grown flower represented 16%, 37% and 47% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse and indoor grown flower was 48 pounds, 44 pounds and 22 pounds, respectively. The premium or discount to the U.S. Spot Index are illustrated in the table below.
Sample content from this week's Premium Report:
For the fifth consecutive week, prices for greenhouse product in Colorado have exceeded those for indoor. Across the other three major Western markets, rates for flower cultivated under glass or tarp inched closer to those for warehouse-grown product. As has consistently been the case in recent weeks, the spread between prices for indoor and outdoor product is largest in California.
Sample headlines from this week's Premium Report: