CANNABIS BENCHMARKS WEEKLY REPORT -- PUBLISHED APRIL 13, 2018
U.S. Cannabis Spot Index down 2.6% to $1,331 per pound.
The simple average (non-volume weighted) price decreased by $8 to $1,429 per pound, with 68% of transactions (one standard deviation) in the $659 to $2,198 per pound range. The average deal size decreased 6.9% to 5.9 pounds from 6.3 pounds last week. In grams, the Spot price was $2.93, and the simple average price was $3.15.
The relative frequency of transactions involving indoor flower increased by almost 2% week-over-week, while that for greenhouse product declined by the same proportion. The relative frequency of transactions for outdoor flower was flat compared to last week, but such product’s share of the total reported weight moved increased by 3% relative to the week prior. The relative volume of warehouse-grown flower expanded by just 1%. Greenhouse product’s share of the documented volume traded contracted by 4% week-over-week.
The U.S. Spot Index ticked downward for the third consecutive week. An increase in the relative volume of outdoor-grown flower combined with week-over-week downturns in the average prices of each grow type combined to drive the overall price drop. Average deal sizes continued this year’s trend of contraction for the most part. The average transaction volume for outdoor flower did grow this week, but is still far below those observed earlier this year.
The U.S. Spot Index’s Trailing 4-Week Average showed negative momentum this week for the first time since early February. It was joined in this behavior by trend lines of the Spot Indices of supply-saturated Colorado, Oregon, and Washington State, the latter of which is seeing wholesale prices sink the most dramatically of any major or secondary market at this moment. Meanwhile, the Trailing 4-Week Average prices observed in Nevada and Michigan are displaying upward momentum that market participants in the Western states were accustomed to expecting as recently as last year in some cases. Finally, California’s young regulated market continues to display stability in wholesale pricing, with the trend line of the Golden State’s Spot Index virtually flat this week.
May Forward down $50 to $1,425 per pound.
The average forward deal was 65 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 48%, 32%, and 19% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 66 pounds, 78 pounds, and 43 pounds, respectively.
Since the outset of the year, market participants have anticipated July being the peak of national wholesale prices in 2018, due primarily to the beginning of that month marking the end of California’s Transition Period and the commencement of more stringent testing requirements in the Golden State. However, with almost one-third of the year now behind us, the extent of the oversupply situations in the Western markets is becoming more clear, with supply side rates in Colorado, Oregon, and Washington State trending downward with little relief in sight.
Meanwhile, in California, the number of temporary cultivation licenses issued outnumbers those of adult-use and medical retailers combined by over four to one, as discussed above, in the Spot Index commentary for that state. Even if disruptions at the distribution and testing level do occur in California in July, abundant available product should provide a cushion to any wholesale price swings. Furthermore, the expectation of possible supply chain issues will likely lead retailers to stock up on excess inventory in June, as they did in December 2017, potentially suppressing wholesale demand in July. Finally, nothing on the horizon in the other major Western markets indicates near-term upward pressure on supply side rates. The continuance of depressed wholesale pricing in Colorado, Oregon, and Washington will act as a counterbalance to any potential rise in rates in California.
At $1,425 per pound, the May Forward represents a premium of 7.1% relative to the current U.S. Spot Price of $1,331 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.
Sample headlines from this week's Premium Report:
20 April 2018. Copyright © 2018 New Leaf Data Services, LLC. All rights reserved