cannabis benchmarks weekly report -- published November 3, 2017
U.S. Cannabis Spot Index up 5.1% to $1,443 per pound.
The simple average (non-volume weighted) price increased $62 to $1,809 per pound, with 68% of transactions (one standard deviation) in the $1,075 to $2,543 per pound range. The average deal size increased 3.5% to 16.1 pounds from 15.5 pounds last week. In grams, the Spot price was $3.18, and the simple average price was $3.99.
Indoor-grown product reasserted its presence in the midst of the harvest season this week. The relative frequency of trades and relative volume of such flower were up by 7% and 9%, respectively, compared to last week. Outdoor product’s share of the total reported weight moved contracted by 6% week-over-week, while the relative frequency of deals involving such flower held steady. Transactions involving greenhouse product made up a quarter of all documented trades, down from 31% last week.
Indoor flower spanned from $700 to $5,800 per pound; the median price was $2,000/lb.
Greenhouse flower spanned from $950 to $3,200 per pound; the median price was $1,300/lb.
Outdoor flower spanned from $500 to $1,900 per pound; the median price was $1,000/lb.
The U.S. Spot Index this week saw its largest proportional and absolute increase of the quarter thus far, rising by over 5%. Even as indoor flower fell to a new year-to-date low price, the increased prevalence of such product worked to push up the nationwide composite rate. Average deal sizes for both warehouse and greenhouse flower saw significant week-over-week increases, while that for outdoor product was on the decline for the second consecutive week.
The national volume-weighted average for indoor product is being pulled downward, as seen in the chart above, due in large part to historically low rates for such flower in Colorado.
As the U.S. Spot recovered from last week’s year-to-date low, several others were established - or reestablished - this week. The national volume-weighted average rate for indoor-grown flower dipped to a new year-to-date low of $1,651 per pound. Colorado’s Spot Index and its volume-weighted average price for warehouse product fell to new annual lows for the second consecutive week, settling at $1,123 and $1,101 per pound, respectively. Michigan also saw its Spot price and the going rate for indoor flower in the state slide to year-to-date lows, of $1,913 and $1,979 per pound, respectively.
In a departure from what has come to be expected at this point in the year, the trend lines of two of the six major markets depicted in the chart below are demonstrating positive momentum. Upward-trending prices in Nevada are not necessarily a huge surprise, given the fact that the nation’s newest adult-use market is still developing. Disruptions in Washington’s plant and inventory tracking routines, discussed below in the Spot Index commentary for that state in the Premium Report, may have contributed to a reversal of the negative momentum of its trailing average price that commenced in mid-September. Due in part to the aforementioned states, the downward movement of the U.S. Spot Index’s trend line leveled off this week.
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.
National volume-weighted average prices for product in both medical and adult-use markets rose this week, with the former seeing a much more significant increase. The jump in the national rate for medical flower was due largely to an increase in California’s Spot price. Meanwhile, the composite rates of Colorado and Washington were fairly steady week-over-week.
May 2018 Forward assessed at $1,625 per pound.
The average forward deal declined to 88 pounds, down from 97 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 42%, 42%, and 17% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 137 pounds, 61 pounds, and 33 pounds, respectively.
At $1,465 per pound, the December Forward represents a premium of 1.5% relative to the current U.S. Spot Index of $1,443 per pound. The May 2018 Forward is assessed at $1,625, and equal to the April 2018 Forward. For context, the U.S. Spot Index averaged $2,059 in May of 2016, an increase of 4.2% from April; whereas the U.S. Spot Index averaged $1,614 in May of 2017, a decrease of 2.8% from April. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.
Sample headlines from this week's Premium Report:
Sample content from this week's Premium Report:
The U.S. Spot Index this week recovered from last week’s year-to-date low, rising by just over 5% to settle at $1,443 per pound. This week’s composite volume-weighted average is actually up year-over-year, by 3.6%, compared to the rate of $1,393 per pound observed in the week ending November 4, 2016. Last year, the national average would continue to decline the following week, reaching 2016’s annual trough of $1,386 per pound in the week ending November 11th. It remains to be seen whether this year’s annual low price is behind us or not, but the possibility is not an outlandish one considering the uncertainty facing cannabis business operators navigating new and under-construction markets in major states such as California, Nevada, and Michigan. On the other hand, wholesale prices in the nation’s most mature market, Colorado, continue their descent into uncharted depths, tempering any upward movement in the U.S. Spot Index.
In Washington, much of the state’s sun-growing activities are located east of the Cascade Mountains, an area that appears to be becoming less hospitable to cannabis cultivation. An extensive report from The Stranger details the course of events in Chelan County, home to a couple dozen licensed cannabis farmers, which has culminated in the approval of zoning rules that growers are calling an effective ban on the supply side of the industry. Cannabis businesses have raised a legal challenge to the local rules, but whether they will be able to continue operating as they have been remains to be seen. The Stranger’s report points out that bans or moratoriums on cannabis cultivation have also been debated or implemented to some degree in several other counties in the eastern portion of the state. Furthermore, in Spokane County, on the eastern edge of Washington, proposed rules regarding odor mitigation would require registration with local officials, new annual fees, and measures to contain or eliminate the aroma of cannabis cultivation and processing, according to The Spokesman-Review.
A map of producer / processor licensees provides an illustration of where cultivation operations are located; in central Washington, dozens occupy the Wenatchee Valley just east of the Cascades, with another large concentration in Spokane County. While a great deal are clustered around Puget Sound, the frequently rainy, overcast climate in the western part of the state means that many of those are warehouse producers. If restrictions on farmers in eastern Washington continue to be put in place successfully, it could over time crimp the voluminous supply generated by those growers, which also tends to be lower-priced than the indoor-grown product raised in the vicinity of Seattle, Olympia, and other areas around Puget Sound.
3 November 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved