Weekly Report -- Published on 23 September 2016
U.S. Cannabis Spot Index down 1.3% to $1,612 per pound.
The simple average (non-volume weighted) price decreased $15 to $1,926 per pound, with 68% of transactions (one standard deviation) in the $1,392 to $2,461 per pound range. The average deal size increased 9.6% to 9.0 pounds this week, from 8.3 pounds last week. In grams, the Spot price was $3.55, and the simple average price was $4.25.
This week’s Transaction Stats are broadly in line with those of last week, with some minor shifts. Outdoor product continues to be relatively scarce in both frequency and volume of observed deals. The number of deals for greenhouse flower as a percent of the total observed transactions fell 6% compared to last week. However, the proportion of the total observed volume traded constituted by greenhouse product remained largely steady, falling by only 2%. The volume of indoor production as a percentage of the total observed weight rose by 3%, pushing it over the 50% threshold to account for more than half of the observed volume traded.
Indoor flower spanned from $1,100 to $3,200 per pound; the median price was $1,950.
Greenhouse flower spanned from $1,300 to $2,600 per pound; the median price was $1,400.
Outdoor flower spanned from $900 to $1,900 per pound; the median price was $1,400.
Deal sizes for indoor flower ranged from 0.25 to 30 pounds.
Deal sizes for greenhouse flower ranged from 1 to 120 pounds.
Deal sizes for outdoor flower ranged from 1 to 100 pounds.
The US Spot price for indoor grown flower hit a year-to-date low of $1,851 per pound, matching the previous year-to-date low set two weeks ago. The US composite Spot Index approached and nearly matched August 5th’s year-to-date low of $1,610 per pound.
At $1,851 per pound, the price for indoor grown flower is down 8% in the two months since July 29th, when the volume-weighted average for such product settled at $2,002 per pound.
The US Spot Index declined marginally again this week, continuing a two month period that has been characterized by relative steadiness, but also fairly consistent, if small, week-over-week price drops. This week’s decline brought the US Spot within $2 of the current year-to-date low of $1,610 per pound, observed on August 5th.
Despite the fact that substantial fall harvest supplies have not yet come to market, rates for outdoor-grown flower are falling more quickly than those of other grow types. At the moment, declines in pricing for outdoor product are being driven primarily by low rates observed in California. Contrastingly, observations from Oregon, discussed in more detail in the Premium report section for that state, are bucking the overall national trend. Prices for Oregon-grown outdoor flower jumped up this week to settle at rates comparable to what was being observed nationally in mid-June and early July, prior to this summer’s steep, across-the-board price decline.
The establishment of a new year-to-date low for warehouse-grown product this week suggests that such flower is not retaining its value in the face of large volumes of supply of other grow types, as it has generally in the past. Typically, the national volume-weighted average for indoor product is propped up by the higher rates observed in more tightly regulated states with only medical markets. Additionally, until July of this year, prices for such product in Colorado generally settled near or above $1,900 per pound. However, rates for warehouse flower in that state continue to fall and hit a new year-to-date low again this week, helping to continue to push the national volume-weighted average for such product downward.
Forward Curve stable ahead of outdoor harvest.
At $1,525 per pound, the October Forward represents a discount of 5.4% relative to the U.S. Spot Index.
This week’s distribution of forwards was 2% outdoor, 29% greenhouse and 69% indoor. The average forward deal was 15 pounds.
Forward arrangements for weekly and bi-weekly deliveries ranged from 0.25 to 30 pounds and averaged 6.2 pounds. Monthly deliveries ranged from 4 to 100 pounds and averaged 24.2 pounds.
Buyers and sellers reported forward deals in California, Oregon, Washington, Colorado, Arizona, Michigan, D.C. and Maine. The premium or discount to the U.S. Spot Index are illustrated in the table below.
Accounts from the field indicate that some suppliers have fully liquidated their sungrown flower from last year, with at least one sizable multi-month forward in California terminating this month with a final 100-pound delivery priced at $900 per pound. Another California grower with multiple forward deals for 10, 15 and 20 pound lots of indoor grown flower, averaging $1,450 per pound, expressed concern about his ability to maintain prices above $1,400 per pound. In Oregon, a buyer reported 3 forward deals consisting of monthly deliveries of 18, 25 and 30 pounds for indoor grown flower at $1,700 per pound with prices decreasing to $1,600 from mid-October until January. Price declines in Colorado are taking a toll on indoor growers, with one recreational seller attempting to forestall bankruptcy by securing a prepayment of $1,500 per pound for deliveries of 25 pounds per month for the next 3 months. Meanwhile, as most seek to liquidate remaining inventory ahead of the fall harvest, a cultivator of greenhouse grown flower in Michigan - currently delivering 10 pounds per month at $2,200 per pound - is placing more than half of his supply into inventory with the hope of rising prices at the end of the year.
As we have noted previously, the US Spot Index peaked last year in the week ending September 11th at $2,133 per pound. After that, September 2015 saw a steep decline, closing the month with a national Spot of $1,849 per pound in the week ending on the 25th, a fall of 15%. This year, prices in September peaked in the week ending the 9th at $1,653 per pound (though the year-to-date high for the US Spot remains the week ending May 27th), then fell gradually after that, settling this week at $1,612, a decline of only 2.5%.
Looking to the month ahead, last year saw the nationwide Spot Index hold relatively steady in October, opening the month with a price of $1,884 per pound in the week ending the 2nd and closing on the 30th at $1,839 per pound. Interestingly, the behavior of the US Spot in October 2015 aligns closely with our observations thus far over the course of September 2016. Of course, though, supply dynamics are drastically different this year compared to last. As such, it remains to be seen if the steep decline in the national Spot Price that took place this summer as a result of large amounts of greenhouse product coming to market will result in a less pronounced decline due to the outdoor harvest season. However, despite the possibility of unfavorable weather conditions come November for growers in southern Oregon and northern California, discussed below in the Premium section for Oregon in more detail, it appears that supply will be characteristically robust in the harvest season, especially in California, Colorado, and Washington. Oregon remains a wild card in terms of supply, and not only due to weather conditions. It appears that beginning next month, only a handful of testing labs will be online to approve large volumes of product for sale.
Sample headlines from this week's Premium Report: