2017 Mid-Year wholesale market report
Cannabis benchmarks weekly report -- published september 29, 2017
U.S. Cannabis Spot Index down 1.5% to $1,541 per pound.
The simple average (non-volume weighted) price decreased $31 to $1,787 per pound, with 68% of transactions (one standard deviation) in the $1,148 to $2,426 per pound range. The average deal size increased 1.4% to 13.5 pounds from 13.3 pounds last week. In grams, the Spot price was $3.40, and the simple average price was $3.94.
Transaction Stats this week began to show the increased presence of outdoor-grown product in the national supply mix. The relative volume of field-grown flower nearly doubled week-over-week, from 5% last week. The corresponding decrease was absorbed primarily by indoor product, despite an increase in the relative frequency of trades for such flower, which rose by 4% compared to last week. Greenhouse product this week saw a 1% decline in its share of the total observed volume traded.
Indoor flower spanned from $800 to $6,000 per pound; the median price was $1,900/lb.
Greenhouse flower spanned from $730 to $2,800 per pound; the median price was $1,305/lb.
Outdoor flower spanned from $500 to $1,800 per pound; the median price was $1,100/lb.
The U.S. Spot Index fell for the second consecutive week, declining by less than 2% to settle at $1,541 per pound. The composite average deal size swelled slightly week-over-week due to a substantial increase in the average deal size for outdoor flower, which approached 30 pounds. The volume-weighted average rate for such product was up week-over-week, likely due to freshly-harvested supplies, rather than months-old product, being on offer.
The only pricing extreme observed this week was for greenhouse product in Colorado, which fell to a new year-to-date low for the second consecutive week, at $1,138 per pound. Colorado’s Spot Index settled just $3 above its current annual trough, which was established in late June. Finally, after settling within $35 of its current year-to-date low last week, the U.S. Spot Index slid further this week, settling just $10 above the annual low rate of $1,531 per pound established in August.
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 rates for flower traded in adult-use markets declined by a greater proportion than those for product in medical markets for the second consecutive week. The premium commanded by the latter expanded by nearly $50 week-over-week, to $241 this week. The decline in national-level pricing for flower in adult-use markets was driven by falling rates in Colorado, as Oregon’s adult-use sector actually saw a marginal week-over-week uptick in its composite rate.
October Forward closes at $1,495.
The average forward deal increased to 44 pounds, from 43 pounds last week. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 16%, 64%, and 20% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 63 pounds, 47 pounds, and 20 pounds, respectively. The premium or discount for each forward price, relative to the current U.S. Spot Index of $1,541, is illustrated in the table below.
Sample content from this week's Premium Report:
With the final quarter of this year upon us, California officials are putting in place the figurative paving stones that they hope will form a smooth pathway to a regulated market in the state beginning next year. A recent notice from the newly-dubbed Bureau of Cannabis Control (BCC; previously the Bureau of Medical Cannabis Regulation and, before that, the Bureau of Medical Marijuana Regulation) alerted stakeholders to the Bureau’s intention to begin issuing temporary licenses upon the new year, with applications for the provisional permits available prior to 2018, though specific timelines remain absent. The temporary licenses will allow an existing operator to engage in commercial cannabis activity for 120 days, during which time state officials will evaluate the entity’s application for a state permit. A report from Canna Law Blog on the matter states that operators can apply for extensions to their temporary permits if a state license is unable to be gained in the 120 period through no fault of their own.
Perhaps the most important aspect of the BCC’s announcement on temporary licenses is that the Bureau can only issue one to businesses that have a “valid license, permit, or other authorization issued by the local jurisdiction.” On its face, this means that all market participants currently operating in municipalities without affirmative permitting for commercial cannabis activity could be shut out of the regulated market when it opens next year. Additionally, as we discuss in our 2017 Mid-Year Wholesale Market Report, many of California’s largest cities are placing fairly strict caps on the number of licenses to be issued in their jurisdictions, if they are even allowing commercial cannabis activity at all, limiting the number of businesses that will be able to take part in the licensed system come January, and possibly beyond as well. However, Marijuana Business Daily (MBD) quotes BCC chief Lori Ajax in stating that the Bureau will be flexible in regard to the local permit requirement, presumably meaning that businesses that are awaiting approval for a local license may be eligible to receive a temporary one from the state in the meantime.
Finally in regard to the matter of temporary licenses, MBD’s report also confirms a potentially significant sticking point to wholesale cannabis trading in California that we have raised repeatedly. Namely, that once a business gains a temporary state license, it will only be able to deal with other operations within the licensed system. As we state in our 2017 Mid-Year Wholesale Market Report, “fractured supply chains and fewer options for trading could work to lift wholesale rates in the legal realm.” Of course, the extent and timing of the effect of California’s temporary permitting scheme on supply side rates in the state will depend on how many businesses gain their temporary licenses, as well as when they do so.
Sample headlines from this week's Premium Report:
29 September 2017. Copyright © 2017 New Leaf Data Services, LLC. All rights reserved