During 2016, the U.S. Spot Index peaked at $2,096 in May, reached a low of $1,386 in November, and averaged $1,789 for the year. In the first quarter of 2017, changing supply-demand fundamentals continued to drive prices lower. Prices averaged $1,613 during Q1, declining $340 per pound, or 17.4%, from the $1,953 per pound average witnessed during the first quarter of 2016.
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Cannabis Benchmarks Weekly Report -- Published 28 April 2017
U.S. Cannabis Spot Index down 0.5% to $1,648 per pound.
The simple average (non-volume weighted) price increased $10 to $1,798 per pound, with 68% of transactions (one standard deviation) in the $1,045 to $2,551 per pound range. The average deal size increased 9.1% to 7.1 pounds this week, from 6.5 pounds last week. In grams, the Spot price was $3.63, and the simple average price was $3.96.
National Transaction Stats were for the most part consistent week-over-week, with some small shifts. Greenhouse flower’s influence on the national composite price waned, as the relative volume of such product shrank by 4% compared to last week, with corresponding gains accruing evenly to both outdoor and indoor flower. The relative frequency of trades for greenhouse product was also down week-over-week, but only by 1%, with field-grown product seeing a corresponding increase in that metric.
Indoor flower spanned from $800 to $6,200 per pound; the median price was $2,000/lb.
Greenhouse flower spanned from $900 to $3,000 per pound; the median price was $1,305/lb.
Outdoor flower spanned from $700 to $2,000 per pound; the median price was $1,200/lb.
The U.S. Spot Index picked up where it left off prior to 4/20, declining slightly to fall below the $1,650 per pound threshold. The overall decline in rates was driven by falling prices for the sun-fueled grow types; volume-weighted average rates for greenhouse flower fell by almost 6% to below $1,500 per pound for the first time in April. Pricing for outdoor product fell even more steeply. The aforementioned decreases overwhelmed an increase in rates for warehouse-grown flower, which crested to its second-highest weekly average observed thus far this 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.
The $414 premium commanded by product in medical cannabis markets observed last week shrank to $339 this week. Observed week-over-week pricing declines in California, Nevada, and Illinois contributed to the overall decline in rates for flower traded in medical markets. On the adult-use side, only Colorado saw an increase in its composite Spot Index, but that movement, along with adult-use pricing in Oregon, was enough to push upward the nationwide price for wholesale product in recreational markets. Rates for adult-use flower have not exceeded those for medical since early December 2016.
May Forward closes down $15 to $1,715 per pound.
Forward arrangements represented 3.8% of overall market activity this week. The average forward deal decreased to 14.4 pounds, from 15 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 36%, 55%, and 9% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 17.5 pounds, 13 pounds, and 12 pounds, respectively.
While near-term supplies helped to drive down the May and June Forwards by $15 and $25 per pound, respectively, these two forward months continue to command a premium relative to the current U.S. Spot Index of $1,648. Despite the decline, market participants are expecting prices to rise as supplies of sungrown flower begin to diminish in California, Oregon, Washington, and Colorado as the next few weeks are anticipated to be the “driest” time of the year before more greenhouse flower reaches the market in early to mid-summer. The premium or discount for each forward price, relative to the U.S. Spot Index, is illustrated in the table below.
Sample content from this week's Premium Report:
In our report for April 7th, we noted that a measure to extend the allowed closing time for medical dispensaries and adult-use retailers in Denver from 7 p.m. to 10 p.m. had been approved by a City Council committee and was moving toward a vote by the full council. This week, a bulletin from the city of Denver alerted stakeholders to the fact that the City Council voted to approve the measure. Beginning Monday, May 1st, storefronts within Denver city limits will be allowed to do business from 8 a.m. to 10 p.m., giving them three additional hours in the evening to make sales. The neighboring jurisdictions of Aurora and Commerce City also allow retailers to stay open until 10 p.m., while Glendale and Edgewater - two very small cities adjacent to Denver that each host a handful of shops - allow their retailers to stay open until midnight, the latest allowed by state law. According to a Denver Post report, cannabis industry groups and businesses had lobbied Denver regulators for the change, arguing that the early closing time imposed by the city caused them to lose business to storefronts in the aforementioned municipalities.
In response to the rule change, Paul Gottshall, Human Resources Administrator for Native Roots, which owns a combined 14 medical and adult-use outlets across Colorado, stated to our analysts this week that the company will be pushing the closing time to the new 10 p.m. limit in all four of their Denver locations as soon as they are allowed. Gottshall also noted that the company is in the process of hiring roughly 20 additional staff members to ensure adequate coverage of their stores during the extended hours. Such actions indicate that Native Roots expects the additional sales to offset the increased labor and other costs that will come with keeping its shops open later. Native Roots likely possesses some unique insight on the matter, as the company already operates a retail storefront in Edgewater, where, as noted above, sales are allowed until midnight.
Due to the fact that much of Colorado’s market is concentrated in Denver - the Post points out that 218 storefronts are operational within city limits - the later closing time has the potential to boost retail sales in the state and drive demand. While it is a fairly safe bet that revenues will increase - which will be able to be verified sometime in July, when tax collection figures for May are likely to be released by the state - time will tell whether the later closing time will swell the profits of medical and adult-use retailers. We will follow up with market participants in the coming weeks as to whether or not this is the case.
Sample headlines from this week's Premium Report:
28 April 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved.