cannabis benchmarks weekly report -- published 7 july 2017
U.S. Cannabis Spot Index down 0.8% to $1,622 per pound.
The simple average (non-volume weighted) price decreased $30 to $1,828 per pound, with 68% of transactions (one standard deviation) in the $1,038 to $2,618 per pound range. The average deal size increased 26.4% to 9.9 pounds from 7.8 pounds last week. In grams, the Spot price was $3.58, and the simple average price was $4.03.
Greenhouse flower continued to increase its share of the total observed volume traded as the year’s first round of light-deprivation harvests reach market. The relative volume of such product was up 9% week-over-week, even as the relative frequency of deals for greenhouse flower held largely steady. Warehouse-grown product’s share of the documented weight moved this week contracted by 8% compared to the week prior. Outdoor flower’s influence on the national composite price remained small.
Indoor flower spanned from $900 to $6,100 per pound; the median price was $2,000/lb.
Greenhouse flower spanned from $1,000 to $2,400 per pound; the median price was $1,300/lb.
Outdoor flower spanned from $950 to $1,650 per pound; the median price was $1,250/lb.
After two straight weeks of upward movement, the U.S. Spot Index opened the second half of 2017 by ticking downward slightly. The marginal drop in the national composite price was due almost entirely to a sharp decline in rates for outdoor product, though a small price decrease for greenhouse flower contributed as well. Both sun-fueled grow types saw their average deal size expand significantly this week compared to last week.
Pricing for warehouse-grown flower in the sizeable medical markets of Arizona, Michigan, and Maine all exceeded rates for analogous product in Oregon, where prices remain elevated relative to the other Western states, after dipping to comparable levels in late May and early June.
Nevada’s Spot Index this week spiked to over $1,000 above the national average, placing it in the company of smaller East Coast markets, whereas last week it was roughly $650 in excess of the U.S. Spot.
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 generally parallel movement of national-level medical and adult-use pricing observed last month was interrupted this week, as the former fell and the latter rose, both by about 2%. An over 6% drop in California’s Spot price pushed down rates for product sold in medical markets. We should note that while adult-use sales are underway in Nevada, the manner in which the state’s laws and regulations govern supply-side commerce at the moment means that deals recorded this week and last remain designated as medical. Further explication on the matter can be found below, in the Spot Index commentary for that state in this week's Premium Report.
January 2018 Forward assessed at $1,520 per pound.
Forward arrangements represented just over 5% of overall market activity this week. The average forward deal increased to 38 pounds, from 31 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 38%, 33%, and 29% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 37 pounds, 54 pounds, and 20 pounds, respectively.
At $1,510, the July Forward represents a discount of 6.9% relative to the current U.S. Spot Index of $1,622. While the outdoor harvest is widely anticipated to drive a seasonal low in November, market uncertainty regarding supplier behavior in California in January was observed with roughly 5% fewer forward arrangements extending into January than December. Reports from the field indicate a wide range of possibilities, with some growers indicating that they will seek to liquidate inventories and refrain from taking part in the regulated market due to the infrastructure, administrative, and expense burdens - many of which remain unknown - required to become compliant. Meanwhile, others are strategizing on how to maximize margins during the fall to pay for the incremental costs of achieving regulatory compliance. Overall, market participants anticipate roughly a 4% increase in wholesale prices from December to January. 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:
Last week, the Oregon Department of Agriculture (ODA) issued an order to stop the sale and distribution of two pesticides authorized for use in cannabis production: Azatrol Hydro Botanical Insecticide and Azatrol EC Insecticide. According to the labels of the aforementioned products, the active ingredient is listed as azadirachtin, a chemical derived from the seeds of the neem tree. Neem oil and associated products are commonly used by cannabis growers for insect control. However, an ODA analysis detected the presence of additional chemicals in the products not listed on the labels, namely permithrin, bifenthrin, cypermethrin, cyfluthrin, and chlorpyrifos. In addition to being against state and federal law to omit active ingredients from a pesticide’s label, the unlisted chemicals detected by ODA are not permitted to be used on cannabis.
As a result of the ODA’s order, cannabis cultivators that may have been using the Azatrol products will be forced to cease doing so and find a replacement insecticide to incorporate into their pest management programs, a process that can take some trial and error. Pest issues could also arise for some growers, as the unlisted chemicals in the Azatrol products are quite powerful synthetic insecticides that likely eradicated bugs with more extreme prejudice than many of the legal alternatives available to cannabis cultivators. Indeed, chlorpyrifos has been in the news lately; it was set to be banned completely by the EPA due to studies showing that exposure to the chemical resulted in developmental problems for children and other health issues, though the ban has been delayed until 2022 by Trump-appointed EPA chief Scott Pruitt. Growers who unwittingly used the Azatrol products may also risk failing Oregon’s required pesticide screenings if the residues of the unlisted chemicals exceed the state’s “action levels.” An inquiry to the Oregon Health Authority (OHA), which oversees quality assurance testing for cannabis in the state, as to whether any licensed farmers had failed pesticide testing as a result of the mislabeled product was not returned as of the time of publication.
Legal adult-use sales kicked off in Nevada with characteristic Las Vegas-style flair at just after midnight on Saturday, July 1st. Reports from CNN and the Associated Press recount long lines at dispensaries, with some stating that they served as many as 1,000 patients in the opening days of sales. One dispensary operator quoted by CNN stated that his outlet served seven to eight times the 100-150 medical patients that it is accustomed to seeing daily. A report from the Las Vegas Review-Journal told of relatively high retail prices of $80 per quarter ounce (7 grams), as well as up to $400 per ounce of high quality product. For comparison, Colorado retailers frequently sell ounces for $100, though high quality flower can garner at least twice that amount.
The Las Vegas Sun cited an estimate from the Nevada Dispensary Association that the first four days of adult-use sales in the state generated $3 million in revenue. Our analysis this week shows that wholesale rates in the state jumped by over 15% to settle at $2,635 per pound, with some lots moving for as much as $3,500 per pound. While transactions reported just ahead of and after publication last week, which were unable to be incorporated into the June 30th report, included those executed ahead of July 1st, product specifically for sale for medical patients may still be traded in the absence of distributors, as we explain below in more detail.
Sample headlines from this week's Premium Report:
7 July 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved.