CANADA CANNABIS SPOT INDEX — August 16, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 16, 2019

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.86 per gram this week, down 1.7% from last week’s C$7.98 per gram. This week’s price equates to US$2,345 per pound at current exchange rates.

 

This week we turn our attention to the growing interest in cannabidiol (CBD) in Canada. Taking into account the popularity of CBD products in the U.S. and the fact that American lawmakers were working toward legalizing industrial hemp, from which CBD can be derived, the Canadian government included the regulation of CBD as part of the Cannabis Act, the country’s legalization measure that went into effect in October 2018. Under Canadian law, unlike in the U.S., both CBD derived from industrial hemp and CBD derived from cannabis plants with greater than 0.3% tetrahydrocannabinol (THC) are treated identically.

 

 

Let’s start with some background. Cannabis and hemp plants contain hundreds of chemical substances, some of which are known as cannabinoids. CBD, like all cannabinoids, interacts with the human Endocannabinoid System. Endocannabinoids are molecules produced by the human body that are chemically similar to those found in cannabis plants. Unlike THC, however, CBD is non-psychoactive.

CBD Molecular Structure

Source: Wikipedia

CBD and other cannabinoids are found in the trichomes of cannabis and hemp plants. Trichomes are tiny, glandular outgrowths that emerge on the flowers and leaves of cannabis and hemp plants as they mature. The greatest concentrations of trichomes are typically found on the flowers. CBD extracted from cannabis or hemp plants can take the form of an oil or a crystalline powder, which can be consumed directly in capsule or tincture form; oils can also be vaporized for inhalation. The recent popularity of CBD among consumers has led to such raw forms of the extracted molecule being incorporated into products such as topical creams, cosmetics, beverages, and foods.

 

CBD is still classified as a controlled substance under United Nations drug control conventions; hence CBD is regulated in Canada and must abide by the rules and requirements that apply to cannabis under the Cannabis Act. 

 

Regulation of the CBD Supply Chain in Canada 

 

Cultivation: A federal license under the Cannabis Act is required. This license could be a cannabis cultivation license under the country’s cannabis regulations or an industrial hemp license under the industrial hemp regulations.

 

Processing: A processing license is required to manufacture products containing CBD for sale.

 

Distribution: CBD and associated products can be sold by provincially authorized cannabis retailers (provincial online marketplaces or private storefronts) for recreational use and, for medical purposes, by federally-licensed sellers of cannabis.

Import and Export: As with cannabis, the international transportation of CBD is illegal under three United Nations drug conventions. CBD products may therefore only be transported across international lines if the importing/exporting party is a holder of a license issued under the Cannabis Regulations; as with the domestic production, distribution, and sale of CBD, a permit from Health Canada is required in order to engage in international trading. See our report from August 2, 2019 for additional details on import and export.

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

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

16 August 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

U.S. Cannabis Spot Index — August 16, 2019

U.S. Cannabis Spot Index — Published August 16, 2019

U.S. Cannabis Spot Index down 0.7% to $1,328 per pound.

 

The simple average (non-volume weighted) price decreased $1 to $1,493 per pound, with 68% of transactions (one standard deviation) in the $777 to $2,208 per pound range. The average reported deal size increased to 2.3 pounds from 2.0 pounds last week. In grams, the Spot price was $2.93 and the simple average price was $3.29.

 

The relative frequency of trades for indoor flower increased by 1% week-over-week. The relative frequency of transactions involving outdoor product decreased by the same proportion, while that for deals for greenhouse flower was unchanged. Greenhouse flower’s share of the total documented weight moved nationally contracted by 3% this week. The relative volume of outdoor product expanded by the same magnitude, while that for warehouse flower was stable.  

The U.S. Spot Index declined by 0.7% this week to settle at $1,328 per pound. The small decline in the national composite price was due to an increase in the relative volume of lower-priced outdoor flower, as well as slight downturns in the national volume-weighted rates of the other two grow types. 

 

The overall expansion of the relative volume of outdoor flower nationally was driven primarily by observations out of California’s market. A significant uptick in the average deal size for such product in the Golden State, along with a small increase in its volume-weighted price, indicates that summer light-deprivation crops are coming to market. 

 

Meanwhile, prices in the other major Western markets continued to trend upward this week. As we detail below, record-setting demand has persisted in Colorado and Oregon. However, signs of increasing seasonal production in the latter state could be setting the stage for a reversal of the positive momentum that has characterized prices in the Beaver State since April. 

The national volume-weighted price for flower to be sold to general consumers increased this week as rises in that sector of the market in Colorado, as well as in Oregon and Washington State, outweighed declines in California and Nevada. 

 

Prices for medical flower sank this week. Rates for product designated for registered patients saw downturns in Michigan, Illinois, Massachusetts, Maine, and Rhode Island, as well as some smaller markets.

 

September Forward unchanged at $1,240 per pound.

 

The average reported forward deal size was nominally unchanged at 48 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower remained at 55%, 29%, and 16% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 41 pounds, 50 pounds, and 64 pounds, respectively.

 

At $1,240 per pound, the September Forward represents a discount of 6.6% relative to the current U.S. Spot Price of $1,328 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines From This Week’s Premium Report:

  • California

  • Prices for Flower in State’s Adult-Use Sector Have Seen Significant Volatility So Far This Summer
  •  
  • Colorado

    Total Monthly Cannabis Sales Reach New Record in June, Topping $150 Million for the First Time as State Spot Index Climbs

  • Oregon

  • Overall Retail Demand and Sales Volume of Flower Ascend to Unprecedented Heights in July; Harvest Volume Also Expanded Significantly, Signalling Seasonal Uptick in Supply
  •  
  • Washington

  • State Regulators Consider Big Changes to Traceability & Product Testing, but Actual Implementation Still a Long Way Off
  •  
  • Massachusetts

  • Adult-Use Sales Reached Over $45 Million in July, but Growth Slowing as Pace of Licensing Continues to be Sluggish
  •  
  • Illinois

  • Demand Still Booming Through July as Both Dispensary and Cultivator Sales Again Set New Records; Monthly Retail Revenue Double That of July 2018

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

16 August 2019.  Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — August 9, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published August 9, 2019

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.98 per gram this week, down 4.3% from last week’s C$7.29 per gram. This week’s price equates to US$2,400 per pound at current exchange rates.

 

Last month, Ontario’s government announced it will hold another lottery to award 50 new cannabis retail licences, significantly expanding legal cannabis sales in the country’s most densely populated province. However, the first lottery for 25 retail locations held in January was perceived by many industry professionals as unfair, as the application process did little to vet an applicant’s product expertise or retail experience. 

 

The second lottery, which is currently underway, is expected to have fewer applicants due to a stricter vetting process. To avoid the perception of unfair practices, the Alcohol and Gaming Commission of Ontario (AGCO) has hired accounting experts KPMG to monitor the application process and lottery.

Of the 50 licenses to be issued, 42 of the new licences will be for private-sector retailers who successfully pre-qualify to be part of the new lottery system, while the remaining eight licences will be allocated to First Nations communities.

 

Current timeline for new stores:
Aug 7 to 9: Interested parties submit their applications to the AGCO. Each application must include a letter of secured retail space, a certified bank letter confirming access to C$250,000, and another letter confirming the ability to obtain a C$50,000 letter of credit. 

 

Aug 10 to 19: AGCO will review and vet applicants.

 

Aug 20: The lottery will be conducted to choose the 42 new licence holders, with the winners to be notified within 24 hours.

 

Oct 17: New license holders must be prepared to open their doors.

Ontario sales forecast:

Since the Ontario private stores opened in April, daily cannabis sales in the province have jumped by 259% to an average of C$696,850 per day, according to Statistics Canada. Cannabis Benchmarks estimates that each storefront currently generates average revenue of C$22,183 per day. The new physical locations have surely helped to capture some of the demand being served previously by the illicit industry. The addition of the new retail locations will further improve the ability of consumers to access the legal market.

 

Source: Health Canada, AGCO, Cannabis Benchmarks

Ultimately, Cannabis Benchmarks projects online sales to remain stable, with all new sales growth in the remainder of this year generated by the 42 new storefronts that are to be opened starting mid-October. Assuming that the new locations will generate the same daily sales estimates stated above, total daily cannabis sales in Ontario could reach C$1.73M by year’s end, roughly two-and-a-half times current levels.

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

Are you a licensed market participant in the U.S. or Canada? 

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

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

9 August 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved