cannabis benchmarks weekly report -- published 16 june 2017
U.S. Cannabis Spot Index down 2.9% at $1,543 per pound.
The simple average (non-volume weighted) price decreased $12 to $1,812 per pound, with 68% of transactions (one standard deviation) in the $1,162 to $2,461 per pound range. The average deal size increased 23% to 10.3 pounds from 8.3 pounds last week, driven predominantly by larger outdoor deals in Western markets. In grams, the Spot price was $3.40, and the simple average price was $3.99.
Deals for warehouse flower increased in relative frequency by 8% compared to last week, but the relative volume of such product as a percent of the total contracted a bit, by 3%. After making up less than one-fifth of all documented weight moved last week, outdoor product’s share of the total observed volume traded swelled to slightly more than that proportion. The relative volume of greenhouse flower decreased by 2% week-over-week, as the relative frequency of trades for such product increased by 9%.
Indoor flower spanned from $999 to $6,000 per pound; the median price was $2,080/lb.
Greenhouse flower spanned from $800 to $3,350 per pound; the median price was $1,305/lb.
Outdoor flower spanned from $700 to $1,800 per pound; the median price was $1,000/lb.
The U.S. Spot Index fell this week, with both sun-fueled grow types seeing week-over-week declines in their volume-weighted average rates. An almost 10% decline in pricing for field-grown flower - which brought rates for such product close to the $1,000 per pound threshold - was primarily responsible for the overall decline. Average deal sizes for such product almost doubled week-over-week.
Deal sizes for indoor flower ranged from 0.25 to 200 pounds.
Deal sizes for greenhouse flower ranged from 0.10 to 150 pounds.
Deal sizes for outdoor flower ranged from 0.50 to 250 pounds.
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.
Rates for both medical and adult-use product mimicked the movement of the overall U.S. Spot this week, with all three ticking downward. Volume-weighted average pricing in the nation’s adult-use markets has been steady recently, hovering between $1,300 and $1,400 per pound for the previous six weeks after cresting above the latter threshold in the week after 4/20. Although, recreational rates were actually higher in late March and early April, at around $1,500 per pound.
July Forward remains unchanged at $1,525 per pound.
Forward arrangements represented more than 6% of overall market activity this week. The average forward deal decreased to 31.7 pounds, from 33.8 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 39%, 39%, and 22% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 50 pounds, 18 pounds, and 24 pounds, respectively.
At $1,525, the July Forward represents a discount of 1.2% relative to the current U.S. Spot Index of $1,543. The premium or discount for each forward price, relative to the U.S. Spot Index, is illustrated in the table below.
Early this week, it was revealed that U.S. Attorney General Jeff Sessions wrote a letter to Congressional leadership in May, asking that medical cannabis protections included in the federal appropriations bills since 2014 be removed. Tom Angell, writing for MassRoots, first obtained and reported on the letter. The measure that Sessions hopes will not be included in future spending legislation is known as the Rohrabacher-Farr Amendment, which restricts the U.S. Department of Justice (DOJ) from employing federal funds to interfere with state medical cannabis programs. A federal court last year clarified that the Rohrabacher-Farr Amendment precluded federal enforcement against medical cannabis businesses operating in compliance with state laws.
In the letter, Sessions states, “I write to renew the DOJ’s opposition to the inclusion of language in any appropriations legislation that would prohibit the use of DOJ funds or in any way inhibit its authority to enforce the Controlled Substances Act (CSA).” As our readers are undoubtedly aware, cannabis remains an illegal Schedule I substance under the CSA. If the Rohrabacher-Farr Amendment or an analogous measure is not included in future spending legislation, which will likely be debated later this summer, medical cannabis businesses, as well as adult-use ones, would be open to federal prosecution. In our Annual Review & Outlook: 2016-2017 Edition, we noted the possibility that the Rohrabacher-Farr Amendment may not be renewed in future appropriations legislation. However, the measure has garnered bipartisan support in recent years, and this year more Congressional representatives than ever before hail from states that have legalized medical cannabis, making it unlikely that Sessions’ request will come to fruition.
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Washington State’s progress toward transitioning to a new plant and inventory tracking system took a turn last week, as we acknowledged briefly in our report. A notice from the LCB alerted stakeholders that Franwell and its METRC system, selected originally as the Apparent Successful Vendor (ASV) to succeed BioTrack in Washington, had withdrawn its bid. The LCB notice stated that MJ Freeway is the new ASV.
According to the LCB bulletin, the primary reason for the switch is that Franwell’s METRC supports only a single method for tagging and tracking plants and inventory; namely, physical RFID tags applied to such items. Specifically, the LCB’s notice states, “Our Request for Proposal (RFP) was clear that the marijuana seed-to-sale traceability system must support a variety of tagging methodologies such as bar codes, RFID, etc. The RFP requirements did not allow a vendor to make any assumptions regarding use of a single tagging methodology or allow vendors to include any such costs affecting the state or our licensees in their proposal.”
In our reports for April 14th and 21st, we noted that issues could arise if all the plants being grown in the state were required to be re-tagged physically, in addition to the difficulties of undertaking such a transition around the harvest season. The LCB’s bulletin itself admits that the process “is on a tight timeline,” with the new tracking system required to be in place by the end of October, in the midst of when the fall harvest in Washington is being brought in. Regardless of how smoothly - or not - the transition is executed ultimately, it will undoubtedly mean extra labor costs for the state’s cultivators, as extensive data entry is likely to be involved.
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16 June 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved.