Ron Strider
Well-Known Member
Cannabis Benchmarks has released a new Mid-2017 Wholesale Market report on the spot prices for cannabis in legal markets. Cannabis Benchmarks is a division of New Leaf Data Services and gathers its pricing information from in-the-field reporters who contact cultivators and dispensaries, transaction data from market participants and data from vendors and associations.
For the first half of 2017, prices for cannabis were down significantly from 2016, but the market hasn't experienced the big swings that characterized the 2016 market. Prices have been mostly stable, but California markets could become destabilized as growers shift to a regulated landscape and the black market fights back with cheaper prices.
According to the report, the U.S. Spot Index opened this year at $1,532 per pound, which was a nice recovery from 2016's low price of $1,386 per pound. Prices peaked at $1,682 per pound in the last week of March as buyers sought to build up inventory for the 420 holiday. However, this is still lower than 2016's peak price of $2,096 per pound. The big difference can be attributed to 2017's marked level of stability. There has only been a spread of $150 between the half year's lows and highs. The first half of 2016 experienced a spread of $296 between the highs and lows.
That consistency and stability are a welcome change to the industry buyers even though the prices are down 18.6% year over year for the first half. Last year, prices plunged in the summer when an oversupply from greenhouse growers flooded the market. This year it seems growers are selling in a fairly consistent manner and managing their inventory and cash flow more effectively. The buyers are also able to make purchases more consistently and a trend of smaller average deal sizes seems to have taken place.
The report said, "Last year, through the first six months of 2016, the average deal sizes of outdoor, greenhouse and indoor-grown flower were observed to be 29, 21, and 7 pounds, respectively. In 2017, individual transactions for outdoor, greenhouse and indoor product averaged volumes of 21, 11, and 6 pounds, respectively, between January and June." Cannabis Benchmarks also believes that even though market outsiders believe there are lots of marijuana millionaires, the reality is that few operators are willing or able to do big deals since they mostly continue to operate in cash. Unfortunately, they end up paying higher prices since they can't buy in bigger bulk. The Cannabis Benchmarks report found that buyers on average got a 24.8% discount when buying 25 pounds and a 30.1% discount for 50 pounds.
Colorado's prices have fallen the least of any of the states as drastic increases in production capacity caused average prices to fall 33.5% for the first quarter as compared to last year. Washington state's prices are down 15.4% for the same period. California, on the other hand, saw its spot index trend upwards through the first six months of the year. Prices opened at $1,413 per pound and hit a six-month high of $1,724. Outdoor grown marijuana though has slipped in price from an average of $1,542 per pound in the first six months of 2016 to $1,133 for 2017. "This trend is troubling for existing outdoor farmers hoping to enter California's imminent licensed system. Such operations can require significant capital to come into compliance with the state's extensive water and environmental quality regulations," said Jonathan Rubin, Chief Executive Officer of Cannabis Benchmarks.
The report suggested that as the year draws to a close price will begin to fluctuate the country's largest market moves from 20 years of no oversight to rules and regulations. The report said, "The historical lack of stringent tracking and reporting in California's medical cannabis program has allowed the black market and legal market to essentially maintain an equilibrium, with supply and demand shifting between the two to maximize revenue for sellers and minimize price for buyers." The question is whether buyers stop buying a cheaper product from the black market.
Looking ahead, Cannabis Benchmarks believes that prices will bottom out in November, although not as poorly as in 2016. "Since California constitutes a significant portion of the nation's legal wholesale cannabis trading, uncertainty about the future situation in the Golden State will weigh heavily on the U.S. Spot Index," said Rubin. Colorado and Washington don't expect to experience any shakeups. Oregon could face problems with the fall harvest as lab testing issues are looming and the southern portion of the state has seen quite a few wildfires. The state is home to a large amount of outdoor growing facilities.
Fears of a crackdown from the Department of Justice has seemed to have waned as each passing day comes without any new action. So, it's business as usual. There also seems to be more interest from buyers in developing ways to smooth prices that are akin to more traditional commodity markets. Rubin said, "Looking ahead to 2018, we expect to see the first cannabis forward trades executed that employ validated price benchmarks published by an independent Price Reporting Agency for settlement."
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Cannabis Wholesale Prices Have Dropped, But Markets Are More Stable
Author: Debra Borchardt
Contact: Contact Information
Photo Credit: Luke Sharrett
Website: {{meta.title}}
For the first half of 2017, prices for cannabis were down significantly from 2016, but the market hasn't experienced the big swings that characterized the 2016 market. Prices have been mostly stable, but California markets could become destabilized as growers shift to a regulated landscape and the black market fights back with cheaper prices.
According to the report, the U.S. Spot Index opened this year at $1,532 per pound, which was a nice recovery from 2016's low price of $1,386 per pound. Prices peaked at $1,682 per pound in the last week of March as buyers sought to build up inventory for the 420 holiday. However, this is still lower than 2016's peak price of $2,096 per pound. The big difference can be attributed to 2017's marked level of stability. There has only been a spread of $150 between the half year's lows and highs. The first half of 2016 experienced a spread of $296 between the highs and lows.
That consistency and stability are a welcome change to the industry buyers even though the prices are down 18.6% year over year for the first half. Last year, prices plunged in the summer when an oversupply from greenhouse growers flooded the market. This year it seems growers are selling in a fairly consistent manner and managing their inventory and cash flow more effectively. The buyers are also able to make purchases more consistently and a trend of smaller average deal sizes seems to have taken place.
The report said, "Last year, through the first six months of 2016, the average deal sizes of outdoor, greenhouse and indoor-grown flower were observed to be 29, 21, and 7 pounds, respectively. In 2017, individual transactions for outdoor, greenhouse and indoor product averaged volumes of 21, 11, and 6 pounds, respectively, between January and June." Cannabis Benchmarks also believes that even though market outsiders believe there are lots of marijuana millionaires, the reality is that few operators are willing or able to do big deals since they mostly continue to operate in cash. Unfortunately, they end up paying higher prices since they can't buy in bigger bulk. The Cannabis Benchmarks report found that buyers on average got a 24.8% discount when buying 25 pounds and a 30.1% discount for 50 pounds.
Colorado's prices have fallen the least of any of the states as drastic increases in production capacity caused average prices to fall 33.5% for the first quarter as compared to last year. Washington state's prices are down 15.4% for the same period. California, on the other hand, saw its spot index trend upwards through the first six months of the year. Prices opened at $1,413 per pound and hit a six-month high of $1,724. Outdoor grown marijuana though has slipped in price from an average of $1,542 per pound in the first six months of 2016 to $1,133 for 2017. "This trend is troubling for existing outdoor farmers hoping to enter California's imminent licensed system. Such operations can require significant capital to come into compliance with the state's extensive water and environmental quality regulations," said Jonathan Rubin, Chief Executive Officer of Cannabis Benchmarks.
The report suggested that as the year draws to a close price will begin to fluctuate the country's largest market moves from 20 years of no oversight to rules and regulations. The report said, "The historical lack of stringent tracking and reporting in California's medical cannabis program has allowed the black market and legal market to essentially maintain an equilibrium, with supply and demand shifting between the two to maximize revenue for sellers and minimize price for buyers." The question is whether buyers stop buying a cheaper product from the black market.
Looking ahead, Cannabis Benchmarks believes that prices will bottom out in November, although not as poorly as in 2016. "Since California constitutes a significant portion of the nation's legal wholesale cannabis trading, uncertainty about the future situation in the Golden State will weigh heavily on the U.S. Spot Index," said Rubin. Colorado and Washington don't expect to experience any shakeups. Oregon could face problems with the fall harvest as lab testing issues are looming and the southern portion of the state has seen quite a few wildfires. The state is home to a large amount of outdoor growing facilities.
Fears of a crackdown from the Department of Justice has seemed to have waned as each passing day comes without any new action. So, it's business as usual. There also seems to be more interest from buyers in developing ways to smooth prices that are akin to more traditional commodity markets. Rubin said, "Looking ahead to 2018, we expect to see the first cannabis forward trades executed that employ validated price benchmarks published by an independent Price Reporting Agency for settlement."
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Cannabis Wholesale Prices Have Dropped, But Markets Are More Stable
Author: Debra Borchardt
Contact: Contact Information
Photo Credit: Luke Sharrett
Website: {{meta.title}}