CANNABIS BENCHMARKS WEEKLY REPORT — JULY 20, 2018

CANNABIS BENCHMARKS WEEKLY REPORT — PUBLISHED JULY 20, 2018

U.S. Cannabis Spot Index down 1.0% to $1,146 per pound.

The simple average (non-volume weighted) price increased by $8 to $1,327 per pound, with 68% of transactions (one standard deviation) in the $573 to $2,082 per pound range. The average deal size decreased 3.4% to 5.4 pounds from 5.6 pounds. In grams, the Spot price was $2.53, and the simple average price was $2.93.

The relative frequency of trades for indoor-grown flower increased modestly this week, by less than 2%, with transactions for greenhouse product experiencing a decline of the same proportion. Warehouse flower’s share of the total reported weight moved expanded by 1%, with the corresponding contraction drawn from the relative volume of outdoor-grown product. To this point, an increase in the relative volumes of greenhouse and outdoor flower from summer light-deprivation harvests has not been evident in national Transaction Stats.     

The U.S. Spot Index has declined by 11% since the week ending May 25th, just prior to Memorial Day weekend, a slide driven primarily by falling prices for indoor flower.

Both the U.S. Spot Index and the volume-weighted price for indoor flower fell to historic lows this week, of $1,146 and $1,429 per pound, respectively. Similar to last week, the composite prices of both Colorado and Nevada slid to all-time lows for those markets, of $896 and $1,680 per pound, respectively. Despite Washington State’s Spot Index seeing a marginal uptick, the volume-weighted rates for all three grow types traded in the state sank to historic lows for any market, a phenomenon that has occurred numerous times in recent weeks.   

The chart below illustrates the price erosion witnessed in the largest and most mature markets from Q1 2016 through Q2 2018. As we have reported on regularly, Washington State and Colorado began to experience dramatic wholesale price declines about 18 to 24 months after the launch of their recreational programs, with the former and latter declining 56% and 50%, respectively, for the period analyzed. In contrast, Oregon’s legal cannabis system experienced a steep drop off in wholesale prices just over a year after the first licensed adult-use storefronts opened their doors in Q4 2016.

August Forward assessed down $100 to $1,200 per pound.

The average forward deal increased 3 pounds to 64 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower represented 43%, 41%, and 16% of forward arrangements, respectively. The average forward deal size for monthly delivery for outdoor, greenhouse, and indoor-grown flower was 78 pounds, 56 pounds, and 48 pounds, respectively.


Monthly Forward prices for the period covered by the current Implied Forward Curve were uniformly assessed down this week. At the moment, potential sources of upward price pressure reported by market participants are few and far between, with the two most consequential for the U.S. Spot identified as the implementation of plant and inventory tracking in California, as well as the beginning of required pesticide testing in Colorado. 

The timing and manner of California’s introduction of compulsory statewide tracking is uncertain, and any wholesale price increases that might be brought about by either of the aforementioned regulatory changes will have to contend with an injection of new supply from summer light-deprivation harvests and the full-term autumn crop. Meanwhile, historically low wholesale prices are persisting in Oregon and Washington State, with little on the horizon in those markets that would suggest notable increases for the remainder of the year. 

Finally, expanding production – including more lower-priced greenhouse cultivation – in Nevada’s adult-use market appears to be more than sufficient to meet current demand. The state’s Spot Index has fallen rapidly in recent weeks. Rules governing the adult-use system allow for a greater number of cultivation licenses to be issued later this year, compared to relatively few opportunities for new retailers to enter the market.     

At $1,200 per pound, the August Forward represents a premium of 4.7% relative to the current U.S. Spot Price of $1,146 per pound. 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:

California

  • Recent Stability of State Spot Index May Belie Upward Pressure on Wholesale Prices from New Compliance Requirements


Colorado

  • Industry Group Director Expects Shortage of Wholesale Plant Material After Required Pesticide Testing Begins in August

Oregon

  • Demand from Adult-Use Consumers Increased in June, But Current Statewide Inventory of Flower and Trim is 60X Greater than Recent Monthly Sales Volume

Washington

  • Volume-Weighted Price for Indoor Flower Slips Below $800 Per Pound, Reaching Historic Low for the Product Type in Any Market

Arizona

  • June Marked Fourth Consecutive Month of Elevated Demand, Causing State Spot Index to Level Off After Declining from January through May

Illinois

  • Wholesale Revenues Spike Almost 20% Month-Over-Month in June as Sales to Patients Reach Record High, Pushing Spot Index Up to Nearly $3,100 Per Pound

Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

20 July 2018.  Copyright © 2018 New Leaf Data Services, LLC.  All rights reserved

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