U.S. Cannabis Spot Index — October 18, 2019

U.S. Cannabis Spot Index — Published October 18, 2019

U.S. Cannabis Spot Index up 1.0% to $1,430 per pound.

 

The simple average (non-volume weighted) price decreased $11 to $1,614 per pound, with 68% of transactions (one standard deviation) in the $941 to $2,287 per pound range. The average reported deal size increased to 2.0 pounds. In grams, the Spot price was $3.15 and the simple average price was $3.56.

 

The relative frequency of trades for each grow type was very stable compared to last week, with only a marginal decrease in that for deals for indoor flower discernible in the chart below. Greenhouse product’s share of the total documented weight moved nationally contracted by 2% this week. The relative volumes of warehouse and outdoor product each expanded by 1%.

 

 

The U.S. Spot Index rose by 1% this week to settle at $1,430 per pound. This week’s national composite price represents a new year-to-date high. This is the latest in the year that such a milestone has been established in the history of our reporting, a phenomenon that is especially notable as the autumn harvest has begun to be cut down and make its way to market. 

 

New sales data out of Colorado shows that unprecedented demand in the country’s second largest legal cannabis market persisted through August. Official information and reports from market participants in the West Coast states indicate that similar conditions are occurring in those markets as well. Meanwhile, the sizeable medical-only markets of Arizona and Illinois are also seeing significant year-over-year demand growth and are contributing to upward pressure on national wholesale prices.

 

This week last year was the final one before the U.S. Spot began descending notably as the fall crop came in. In 2018, the national composite price declined by 3.4% from $1,084 per pound in the week ending October 19 to $1,047 per pound in the week ending November 9, the annual trough for last year. However, elevated demand this year, combined with impacts from bans on certain vaping products in Oregon and Washington, which we discuss in more detail in the Spot Index commentary for those states, represent novel sources of upward pressure to wholesale cannabis prices that could disrupt customary seasonal trends.

The national volume-weighted price for flower to be sold to general consumers ticked down slightly as declines in that sector of the market in California, as well as in Nevada, outweighed increases in Colorado and Oregon. The national price for medical flower jumped on increases in that portion of California’s market, in addition to the rises in the medical-only markets of Arizona, Illinois, Maine, New Mexico, Rhode Island, and Vermont.

 

November Forward up $75 to $1,325 per pound.

 

The average reported forward deal size was nominally unchanged at 57 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 53%, 32%, and 15% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 62 pounds, 39 pounds, and 70 pounds, respectively.

 

The entirety of the six-month Implied Forward Curve has been assessed upward this week. As we discuss in this week’s report, there apprehensions about poor weather impacting the harvest in the Pacific Northwest states. Additionally, in Colorado, Marijuana Business Daily reported late this week that an early-season snow storm caused the loss of roughly half the crop of the state’s largest outdoor grower, Los Sueños Farms in Pueblo. The loss could compound market conditions in which unprecedented demand has already been pushing up wholesale prices since the outset of summer. In California, even though growing conditions have reportedly been favorable, strong demand may be sufficient to absorb the production of the state’s licensed cultivators. Finally, adult-use sales in Michigan and Illinois – expected to begin as early as late this year and at the start of next year, respectively –  will add new, expanded demand to markets already seeing supply pressure. 

 

 

At $1,325 per pound, the November Forward represents a discount of 7.4% relative to the current U.S. Spot Price of $1,430 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

  • Growing Conditions Appear Favorable for a Robust Harvest, but Strong Demand Could Absorb Increased Supply
  •  
  • Colorado

    Retail Sales Again Set New Records in August, as Wide-Ranging Product Recall and Reports of Significant Loss by State’s Largest Grower Could Crimp Supply

  • Oregon

  • Market Participants Say Flavored Vape Ban Could Increase Demand for Cannabis Plant Material for Terpene Extraction
  •  
  • Washington

  • Outdoor Flower Prices Rise to New Year-to-Date High but Remain Depressed Relative to Other Major Markets
  •  
  • Arizona

  • Sales to Patients Subside in September After Reaching Record High in August

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

18 October 2019.  Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — October 11, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 11, 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$6.81 per gram this week, down 3.7% from last week’s C$7.07 per gram. This week’s price equates to US$2,323 per pound at the current exchange rate.

 

This week we examine the state of the medical cannabis market since adult-use legalization almost a year ago. According to data from Health Canada, there is a very noticeable downward trend in the purchase of cannabis for medical purposes. We do not necessarily believe that use of cannabis for medical purposes is diminishing. Instead, those that may have previously registered as patients are likely turning to the recreational market for their product for some very apparent reasons.

Source: Cannabis Benchmarks, Health Canada

We have routinely mentioned the three “Ps” – product, price, and proximity; once again, these factors can help explain the downward slide in medical cannabis purchasing shown in the chart above.

 

Product
The products available through recreational channels are cultivated by the same licensed producers (LPs) in the same locations; hence they are a fungible commodity. 

 

Proximity

Patients will continue to change the way they access their cannabis for medical usage as more retail store locations open and make product more accessible. This will be driven by provinces such as Ontario and Quebec, which are currently home to 60% of the total population but have a severe shortage of retail stores. 

 

The last reported figures for June 2019 show these two provinces consumed 50% of medical dry cannabis (780 kg), but only had 38 licensed retailers, or 13% of the total number of Canadian stores at that time. Over the past four months, an additional 12 stores opened in those two provinces, while 253 stores opened in other provinces.

Source: Cannabis Benchmarks

Price

In our view, price is one of the biggest reasons patients are turning to the recreational markets for their cannabis. We reviewed the average net selling prices contained in recent quarterly reports from some of the top producers and found that there is a large discrepancy in the average selling prices of recreational and medical cannabis, despite their being fungible, as we noted above. 

 

Below, on the following page, is a table showing the average net selling prices from Canopy, Organigram, and Aurora over the past three quarters. There is a massive spread between the price per gram of recreational and medical cannabis. Additionally, this gap continues to grow as prices drop in the recreational market. 

Source: Cannabis Benchmarks, Company Quarterly MD&A

With the most recent quarterly reports, the average premium for medical cannabis grew for all three of the LPs we analyzed. Aurora topped the list by commanding a 66% premium for their medical cannabis for their fiscal Q4 2019 ending on May 31.

Over the coming months, we expect medical sales to continue to trend lower as recreational market prices continue to decline on increasing supply and inventory levels, and as more stores and product types become available in the adult-use market. If you would like to access more data like this, including proprietary Cannabis Benchmarks data, please sign up to be a BETA tester of our new fundamentals data platform for the Canadian market. Click the link below to register.

*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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Do you support wholesale market transparency?

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

11 October 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

U.S. Cannabis Spot Index — October 11, 2019

U.S. Cannabis Spot Index — Published October 11, 2019

U.S. Cannabis Spot Index down 0.5% to $1,416 per pound.

 

The simple average (non-volume weighted) price increased $34 to $1,625 per pound, with 68% of transactions (one standard deviation) in the $923 to $2,326 per pound range. The average reported deal size increased to 1.9 pounds. In grams, the Spot price was $3.12 and the simple average price was $3.58.

 

The relative frequency of trades for indoor flower decreased by almost 2% this week. The relative frequencies of deals for greenhouse and outdoor product increased by a bit over 1% and less than 1%, respectively. Outdoor flower’s share of the total documented weight moved nationally expanded by over 7% this week. The relative volumes of warehouse and greenhouse product contracted by about 5% and 3%, respectively.

 

 

The U.S. Spot Index declined by 0.5% this week to settle at $1,416 per pound. Declines in the composite prices of Washington State and Nevada – along with several mid-sized markets – overwhelmed an uptick in Oregon, while the Spot Indices of California and Colorado were essentially stable this week.  

 

Following the institution of a ban on all vape products by Massachusetts officials, the governors of both Oregon and Washington State followed suit with partial bans, which could result in unexpected impacts on wholesale flower prices just as this year’s fall harvest begins to make its way to market. Retail purchasing data reported by other sources at this point shows diverse consumer reactions in certain states in the period immediately after the vape crisis surfaced, but definitive conclusions on how the issue will impact market dynamics long-term remain uncertain as investigations and reactions are still developing.

 

As alluded to, bans on certain vape products in West Coast states could affect the markets for outdoor-grown flower, much of which is sold to processors for extraction and infused product manufacturing. If a significant amount of vape cartridge manufacturers are compelled to cease production due to the new prohibitions on selected products, it is possible that outdoor farmers could lose buyers that they had previously lined up for their autumn crops.

The national volume-weighted price for flower to be sold to general consumers ticked upward this week on rises in that sector of the market in Colorado, as well as in Oregon and Alaska’s adult-use markets. The national price for medical flower declined on decreases in that portion of California’s and Massachusetts’ markets, in addition to the downturns in the medical-only markets of Connecticut, Illinois, Maine, Michigan, New Mexico, Rhode Island, and Vermont.

 

November Forward unchanged at $1,250 per pound. The average reported forward deal size increased to 57 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 57%, 28%, and 15% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 60 pounds, 41 pounds, and 70 pounds, respectively.

 

At $1,250 per pound, the November Forward represents a discount of 11.7% relative to the current U.S. Spot Price of $1,416 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

  • Fall Outdoor Harvest Begins to Come to Market Amidst Planned Power Outages in Northern California, Concerns About Vape Products
  •  
  • Colorado

    Price of Outdoor Flower Jumps in Recent Weeks as Upward Momentum in Rates for Other Grow Types Level Off

  • Oregon & Washington

  • Bans on Flavored Vape Products Could Reduce Demand for Outdoor Flower Used for Extraction and Processing
  •  
  • Illinois

  • Retail Sales Slip Month-Over-Month for First Time Since Early this Year; YTD Revenues Still Up by 92% Compared to the Same Period in 2018

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

Do you support wholesale market transparency?

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

11 October 2019.  Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved