cannabis benchmarks weekly report -- published 28 july 2017
U.S. Cannabis Spot Index up 2.8% to $1,626 per pound.
The simple average (non-volume weighted) price increased $65 to $1,886 per pound, with 68% of transactions (one standard deviation) in the $1,040 to $2,732 per pound range. The average deal size increased 2.1% to 8.1 pounds from 7.9 pounds last week. In grams, the Spot price was $3.59, and the simple average price was $4.16.
The influence of greenhouse product on the nation’s overall volume-weighted average subsided further this week. After the relative volume of such flower contracted by 6% last week, it did so again by the same proportion this week. The majority of the corresponding gain accrued to outdoor-grown product, despite the relative frequency of transactions for that grow type decreasing slightly. Overall, though, the relative frequency of deals for each grow type was mostly unchanged from last week.
Indoor flower spanned from $999 to $6,400 per pound; the median price was $2,000/lb.
Greenhouse flower spanned from $1,000 to $2,700 per pound; the median price was $1,305/lb.
Outdoor flower spanned from $600 to $1,500 per pound; the median price was $1,175/lb.
The U.S. Spot Index recovered this week, rising by just under 3% to virtually match the rate documented two weeks ago. The overall uptick in the national composite rate was underpinned by rising volume-weighted average prices for each individual grow type. Field-grown flower saw the largest relative increase, while the average deal size of trades for such product also increased substantially.
Nevada’s state Spot Index jumped by almost $175 week-over-week as the nation’s newest adult-use market continues to gain momentum.
No new year-to-date low or high prices were observed this week. While last year at this time national-level rates were dropping precipitously due to large volumes of freshly-harvested greenhouse flower and last year’s outdoor product being sold off, those phenomena have been observed only in isolated instances so far this year and not in the sustained, widespread manner that they were in July 2016.
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.
Wholesale rates for flower in both medical and adult-use markets ticked upward this week, but much more so in the latter, bringing them within $100 of each other. The overall jump in rates for adult-use product was due almost entirely to a significant increase in pricing in the brand-new market of Nevada. Modestly-rising supply side rates in the large medical cannabis markets of California, Arizona, and Michigan drove the small national-level increase in that sector.
August Forward closes up 2.3% at $1,575 per pound.
Forward arrangements represented more than 5% of overall market activity this week. Additionally, several long-term contracts were reported, mostly with six-month durations. The average forward deal decreased to 45 pounds, from 49 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 35%, 50%, and 15% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 32 pounds, 60 pounds, and 26 pounds, respectively.
Across many larger markets, demand continues to grow, while prices are remaining stable or experiencing increases. As we have recently reported, sub-optimal weather conditions in the west delayed the planting of initial crops for many growers, creating supply uncertainty that will not be clarified for weeks to come. This uncertainty is driving near-term increases in the Forward Curve. Nevertheless, growers in California are reporting first harvests from light deprived greenhouse operations, with expectations for many more in the next few months.
At $1,575, the August Forward represents a discount of 3.1% relative to the current U.S. Spot Index of $1,626. 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:
After increasing its influence on the overall composite price last week, greenhouse flower maintained its over two-thirds share of the total observed volume traded this week, even as the relative frequency of trades for such product declined slightly. The overall average deal size in Washington State shrank this week to 13.3 pounds, from 15.3 last week. Average deal sizes for each grow type documented this week in Washington’s market were on the decline as well; that for greenhouse flower was down by just over 2 pounds compared to last week, while the average deal size for indoor product contracted by 1.5 pounds.
Like Colorado, the only other state with an established, regulated commercial market for cannabis that is open to the general public, Washington State has added producers and plant canopy continually since the outset of adult-use sales. However, it has done so in a drastically different manner, which likely goes a long way toward explaining the much smaller year-over-year drop in rates in the two markets. As noted, Washington State has seen more producers come online in each of the three years that the adult-use market has been open; however, they were all licensed in the first application period prior to the commencement of sales in July 2014, with no new licenses issued since then. By contrast, Colorado granted licenses initially to medical cannabis operations in good standing, and continues to issue cultivation licenses with no state-level restrictions to this day. Furthermore, Washington State licensees are limited to 30,000 square feet of canopy at most, while Colorado growers can continually increase their plant count, assuming that they can demonstrate to the licensing authority that they are selling all of their production legally and expansion is required. Overall, Washington regulators have taken a more command-and-control approach to their state’s market, relative to the fairly open licensing policies of Colorado.
Sample headlines from this week's Premium Report:
28 July 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved