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Knowledge & Insights

Cannabis Wholesale Prices: Key States Analysis


Our recent series of articles and videos educating cannabis operators on the basics and uses of Cannabis Price Risk Management, powered by independent cannabis and hemp Price Reporting Agency Cannabis Benchmarks, could not have come at a better time. Recent developments in wholesale cannabis flower prices in several key state markets have illustrated the necessity for businesses to have a plan to mitigate the risk of price volatility. 

Specifically, wholesale cannabis flower prices in California and Oregon have dropped precipitously in the current quarter due to a combination of factors discussed in more detail below. Off the West Coast, Oklahoma’s medical cannabis market has exhibited significant price volatility this year. All this is taking place against the backdrop of the continuing Covid-19 pandemic, which unexpectedly disrupted historical sales trends last year, adding even more uncertainty for businesses. 

Recent cannabis wholesale price trends

As reported by Cannabis Benchmarks throughout 2020, legal cannabis sales in nearly every state surged to record levels during the late spring and summer, as the coronavirus arrived in the U.S. and dramatically altered daily life. In response to the unexpected and significantly elevated demand, wholesale cannabis flower prices climbed as well. Indeed, by October 2020 Cannabis Benchmarks’ U.S. Spot Index – the aggregated national price for a pound of cannabis flower based on assessments from 18 state markets – ascended to heights not seen in several years. 

Prices then softened after 2020’s autumn outdoor harvest, as they typically do each year, but returned to a gradual uptrend in Q2 2021. Through the first half of this year, prices were relatively stable, while exhibiting a slow but steady rise. However, after the state Spot prices of California and Oregon reached year-to-date peaks in June and July, respectively, the bottoms began to fall out of each state’s wholesale market.  

Disruption hits California’s cannabis wholesale market

Beginning in earnest in August, northern California growers noted a large inventory overhang, with price pressure most marked on outdoor-grown flower. Reports from market participants told of outdoor product fetching as low as $200 per pound, while trim was seen trading down at $50 per pound. The issue is that significant amounts of inventory from 2020’s outdoor harvest remains unsold. Meanwhile, large amounts of new product are becoming available from light-deprivation growers in various parts of the state as more cultivation operations come online, including larger-scale grows in central and southern California. 

Indeed, earlier in September, some members of the Cannabis Benchmarks Price Contributor Network in California reported major price declines for greenhouse and outdoor-grown flower. Prices are apparently so unfavorable to sellers that some are choosing to store their crops after not being able to find buyers at an acceptable price point for several weeks. September’s average California Spot price is down 14% from June’s monthly average. While a 14% drop in revenue for a grower making the same sales would be tough enough, the situation just described illustrates a harsh reality of commodity price volatility: oversupply and depressed prices can result in a loss of nearly all revenue if not enough demand exists to support production.

Wholesale flower prices in California are already dipping below those documented by Cannabis Benchmarks after 2020’s crop was brought in, with this year’s full-term plants yet to be cut down. This suggests that wholesale flower rates in the state could slide significantly lower. 

Cannabis Wholesale Price in CA   

Wholesale cannabis prices in Oregon take a plunge

Similar to California, Oregon’s outdoor growers brought in a robust harvest in the fall of 2020. Overall, state data shows that the wet weight harvested by licensed cultivators in the state increased by almost 40% year-over-year in 2020. Meanwhile, Cannabis Benchmarks estimates that the volume of flower purchased by consumers in Oregon increased by about 20% year-over-year in 2020, or only half the proportional expansion in production. The expansion of production has continued, with monthly harvest volumes in 2021 uniformly up compared to the year prior.

While Cannabis Benchmarks observed Oregon’s Spot price for wholesale flower rise into July, it then experienced an even sharper drop than that seen in California. The state’s monthly average Spot price for September was down by 15% compared to July’s. 

Reports from industry insiders in the state suggest that further price uncertainty may be on the horizon. The only relief for oversupply is interstate commerce, according to Casey Houlihan, Executive Director of the Oregon Retailers of Cannabis Association, an industry advocacy group. He told Cannabis Benchmarks recently that he expects the market to remain oversupplied and for growers to continue to overproduce even in the face of falling prices. Houlihan does not see prices increasing from a holiday sales surge and in fact notes, “harvest may create a race to the bottom” this year as growers seek to reduce inventory overhang.

Cannabis oversupply issues loom in Oklahoma

Even in states where outdoor cultivation and the large seasonal price swings that can come with it are not a factor, significant price volatility has been observed. Similar to most other states with legal cannabis, Oklahoma’s medical market saw demand boom with the onset of Covid in 2020. Monthly sales climbed from under $50 million in March 2020, when the pandemic first arrived in the U.S., to reach almost $80 million in June. Since then, however, sales have leveled off, tracking between roughly $75 and $80 million in any given month. 

Sales have been steady even as new patients and businesses continue to enter the market. As of early August, the number of registered patients was up 14% year-over-year, according to data from the Oklahoma Medical Marijuana Authority. The number of actively licensed dispensaries increased by 12% in the same span. Meanwhile, the number of licensed growers jumped by a whopping 48% from August 2020 to August 2021. 

While not all licensees are operational, the disproportionate increase in cultivators indicates that production is outpacing sales, which have plateaued in the last year, as we pointed out above. Oklahoma’s medical cannabis program is somewhat unique as there is no state-level license cap and barriers to enter the market are quite low compared to other states, allowing for a flood of industry participants.

Cannabis Benchmarks’ price assessments for Oklahoma point to an oversupply. From Q1 to Q2 of this year, the quarterly average Spot price for wholesale flower in the state sank by 17%. It has since recovered somewhat, increasing by 5% in Q3. However, the average price for a pound of flower in Q3 2021 was still down by over $400 per pound compared to Q4 2020.  

Final thoughts for cannabis operators

As shown above, wholesale price volatility can occur due to several factors – including seasonal production trends and the characteristics of a market’s regulatory scheme, not to mention the unexpected sales trends that developed during the Covid-19 pandemic – and no market is immune.  

The current situation appears reminiscent of events documented by Cannabis Benchmarks beginning in the summer of 2016. At that time, cultivation operations that were established in the wake of legalization in Colorado and Washington hit their stride, while California and Oregon growers were typically prolific. The overbuilding of production capacity was compounded by large summer and fall harvests in 2017 and the U.S. Spot experienced a prolonged and dramatic decline from mid-2016 through nearly all of 2018, with prices falling across all the aforementioned states. 

Historical price data and observations of market dynamics compiled by Cannabis Benchmarks from 2015 to today can provide insight and context for current market trends. However, legal cannabis markets remain relatively young overall and new markets are particularly vulnerable to boom-bust cycles. 

Finally, the current situation illustrates a trading truism: the downside is fast and the upside is slow, meaning falling markets are more volatile than rising markets. It took roughly the first six months of 2021 for the U.S. Spot to gain about $140 per pound, but in the next three months it lost over $160 per pound, illustrating the need to hedge downside exposure. As historical data demonstrates, cannabis prices have an element of seasonality that market participants will be able to hedge against, thus locking in price at their chosen level.

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