Weekly Report -- Published on 20 January 2017
U.S. Cannabis Spot Index up 1.7% to $1,595 per pound.
The simple average (non-volume weighted) price increased $58 to $1,790 per pound, with 68% of transactions (one standard deviation) in the $1,187 to $2,394 per pound range. The average deal size decreased 11.5% to 6.3 pounds this week, from 7.1 pounds last week. In grams, the Spot price was $3.52, and the simple average price was $3.95.
For the most part, national level transaction stats held fairly steady week-over-week. The relative frequency of transactions for indoor product as a percent of the total observed increased by 1% at the expense of trades for greenhouse flower. Despite slightly fewer observed deals for greenhouse product, the relative volume of such flower experienced the largest change of any grow type, swelling by 6% compared to last week. The relative volume of warehouse-grown product shrank by 4% and accounted for slightly less than half of the total observed volume traded.
Indoor flower spanned from $893 to $3,400 per pound; the median price was $2,000.
Greenhouse flower spanned from $1,100 to $3,000 per pound; the median price was $1,475.
Outdoor flower spanned from $500 to $1,600 per pound; the median price was $1,100.
The U.S. Spot Index inched upward for the second consecutive week, rising almost 2% to approach $1,600 per pound. Increased observed rates for indoor product led the overall rally, climbing almost 10% to just under $2,000 per pound, a threshold not exceeded since July 29th of last year. On the other hand, prices for outdoor flower plummeted by almost 15% to just over $1,000 per pound, an over 40% decline from the $1,696 rate recorded at this time last year.
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 wholesale cannabis flower in medical markets diverged sharply from that sold in adult-use ones this week, with the former rising by just under 9% to the latter’s 3% decrease. The premium commanded by product designated as medical almost doubled week-over-week, to just under $400 from $208 last week. This despite a significant drop in overall pricing in California, the nation’s largest medical cannabis market by far, though the sizeable medical programs of Arizona, Nevada, and New Mexico all saw week-over-week price rises. Falling rates in the adult-use markets of Oregon and Washington were tempered somewhat by increased composite pricing in Colorado.
Deal sizes for indoor flower ranged from 0.25 to 22 pounds.
Deal sizes for greenhouse flower ranged from 1 to 130 pounds.
Deal sizes for outdoor flower ranged from 1 to 100 pounds.
Forward Curve unchanged as market participants anticipate near-term stability.
Forward prices remained unchanged as buyers and sellers expect the slow upward price creep through winter and into spring typical of this period of the year. Forward arrangements represented 4% of overall market activity this week. The average forward deal was 22 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor grown flower represented 29%, 41%, and 29% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor grown flower was 36 pounds, 22 pounds, and 8 pounds, respectively.
The February Forward represents a premium of 1.9% relative to the current U.S. Spot Index of $1,595. The premium or discount to the U.S. Spot Index are illustrated in the table below.
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New Mexico - Forward Price Commentary
New Mexico’s fast-growing medical cannabis program could see significant changes affecting both production and patient demand in the coming year, in addition to legislature-driven measures to legalize cannabis for adult-use.
Last week, we documented a price rise of nearly 20% in the state’s legal medical market, from $2,286 per pound to $2,699. This week saw additional significant upward movement in rates, to the tune of a 10% increase that sent the state’s Spot Index to $2,969 per pound, the second-highest recorded in the country this week after that of Washington, D.C. The jump in wholesale rates reflects dramatic patient growth outstripping supply over the course of the past year. The Santa Fe New Mexican reports that the medical cannabis program, as of November 2016, had seen an over 75% increase in registered patients in the prior 12 months, from about 18,600 to 33,000. The rise in the patient count has strained the supplies of licensed producers in the state, according to the report, of which there are currently 23 operational, who are allowed to grow up to 450 plants each. 12 new licenses were issued in October of last year, and the New Mexican’s report states that they are still in the process of getting up and running.
The New Mexican’s report also states that a bill was filed earlier this month in the state Senate that would, among other provisions, increase the plant count restriction on licensed producers from 450 to 1,000, while also capping the license fee for such operators at $90,000, the level where it resides currently. The bill would also increase the amount of product that patients could possess to five ounces for a 30-day period, up from eight ounces in a 90-day timeframe (or just over two and a half ounces every 30 days, essentially). The bill also includes provisions intended to quicken the process of obtaining a medical cannabis card; patients in recent months have been subjected to long wait times as a result of the significant uptick in applications.
Democrats control both the state Senate and House in New Mexico, perhaps making the above-discussed bill more likely to pass than if the legislature was split or Republican-dominated. However, the New Mexican report notes that it is not clear whether Republican Governor Susana Martinez, a former prosecutor, would support the expansion of medical cannabis production in the state.
The governor’s support for two adult-use legalization measures is even less likely, though one would essentially bypass the necessity of executive approval by putting a vote directly to the people of New Mexico. The Albuquerque Journal reports that two proposals to legalize cannabis for adults in the state were introduced last week. In the House, a measure would legalize cannabis this year, beginning July 1st, and tax sales at a rate of 15%. Even if passed, though, it will likely receive a veto from the governor. On the other hand, a proposal put forward in the Senate call for an amendment to the state constitution, which would not be able to be vetoed. Instead, if approved by the legislature, it would be put up for a direct vote in the election to be held in November 2018, at the earliest.
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