CANNABIS BENCHMARKS WEEKLY REPORT -- PUBLISHED DECEMBER 15, 2017
U.S. Cannabis Spot Index down 2.7% to $1,403 per pound.
The simple average (non-volume weighted) price increased $2 to $1,602 per pound, with 68% of transactions (one standard deviation) in the $878 to $2,325 per pound range. The average deal size increased 10% to 11 pounds from 10 pounds last week. In grams, the Spot price was $3.09, and the simple average price was $3.53.
The relative frequency of trades for indoor product increased by about 3% week-over-week, with the corresponding decline split relatively evenly between the other two grow types. The share of the total reported weight moved constituted by warehouse product also increased to more than half the observed volume traded, up roughly 6% compared to last week. The relative volumes of greenhouse and outdoor-grown flower consequently decreased by about 2% and 5%, respectively.
Indoor flower spanned from $452 to $5,800 per pound; the median price was $1,600/lb.
Greenhouse flower spanned from $700 to $3,100 per pound; the median price was $1,104/lb.
Outdoor flower spanned from $500 to $2,000 per pound; the median price was $900/lb.
The national volume-weighted average rate for greenhouse flower has been on the decline for over a month, while the other two grow types have for the most part seen increasing prices.
As the U.S. Spot Index slipped this week, average deal sizes were for the most part on the rise. The national composite average deal size recovered nearly all of the losses observed last week, as the average volume of trades for both indoor and greenhouse flower grew, the former for the second consecutive week. The average deal size for outdoor product continued to contract, falling to 16.5 pounds after settling at almost 46 pounds in the week ending November 24th.
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.
After exhibiting divergent behavior last week, the national volume-weighted average prices for product traded in medical and adult-use markets both declined by similar proportions this week. The premium commanded by the former shrank only slightly, to $156 per pound this week, from $161 last week.
January 2018 Forward unchanged at $1,575 per pound.
The average forward deal declined 1 pound to 82 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 52%, 30%, and 18% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 108 pounds, 58 pounds, and 48 pounds, respectively.
As we have reported on extensively over the past few months, 2018 is likely to bring declining prices in some markets and increasing prices in others. Nationally, market participants expect the underlying drivers of price movement in bounded markets to offset each other to some degree. In general, excluding California, reports from the field indicate expectations for relatively stable, perhaps slightly declining, wholesale prices in the larger mature markets during the next six months. However, the impact on national prices resulting from the restructuring of the California and Michigan markets remains uncertain. While there is wide agreement that operational and compliance costs will increase, the question that remains is the timing for these expenses to start being passed onto wholesale and retail buyers in 2018.
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Further contributing to an apparent buyer’s market, cultivators hoping to enter the licensed system next year have several incentives to move product in the coming weeks, prior to 2018. Selling off one’s harvest now means that farmers will be able to avoid the state’s cultivation tax of $9.25 per ounce of flowers, $2.75 per ounce of trim, and $1.29 per ounce of fresh plant that will go into effect on January 1st. It will also enable growers to avoid some testing requirements that are scheduled to be enforced with the new year, though the actual mechanics around initial testing requirements in the first part of 2018 are less cut and dry for California. Finally, cultivators in need of cash to meet compliance costs will likely be willing to accept lower rates typical to this time of year.
The fact that California’s composite price is not down year-over-year by the margins seen in the other major Western markets is likely due to similar pressure on wholesale buyers hoping to enter the regulated system early in 2018. Many are undoubtedly facing tight cash flow conditions as they deal with their own steep licensing and compliance costs. As we have reported in regard to Oregon in recent weeks, it is also possible that dispensary inventories are well-stocked due to the availability of relatively inexpensive flower in the wake of the fall harvest, causing wholesale buyers to refrain from obtaining additional product, instead devoting funds to meet the requirements of new state and local rules.
15 December 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved