GreenGrowth CPAs has partnered with Cannabis Benchmarks to continue to provide updates on wholesale flower pricing and market conditions in states across the country. Cannabis Benchmarks is an independent Price Reporting Agency that has been providing unbiased wholesale price assessments and analysis of legal cannabis markets since 2015.
Previously, GreenGrowth CPAs featured Cannabis Benchmarks data and analysis of wholesale cannabis prices in Q2 and Q3 2021, a video roundup of trends in various markets in 2021, and how cannabis prices performed in the first quarter of this year.
National Wholesale Cannabis Price Falls to Lowest Level in 3 Years
In our previous update for Q1 2022, we noted that prices and market conditions in numerous states were completely unprecedented, with several large markets seeing record-low prices. After wholesale flower prices saw a brief upswing in March and early April ahead of 4/20, the U.S. Spot Index – the aggregate national price for the 18 legal cannabis markets covered by Cannabis Benchmarks – continued to sink. As of June 10, it fell to $1,114 per pound, the lowest price observed in over three years.
As of early June, the U.S. Spot Index was averaging $1,238 per pound for Q2 2022, down more than 20% year-on-year. For Q1 2022, we pointed to the combination of softening demand and oversupply as the culprits for falling cannabis prices, trends that have largely persisted in Q2.
As of early June, there are five states – California, Colorado, Oregon, Washington, and Oklahoma – where average wholesale cannabis flower prices have fallen below $1,000 per pound, an unprecedented observation in the history of Cannabis Benchmarks price reporting. Below, we provide updates on notable developments in some of those states, as well as highlights from several other legal cannabis markets.
As the chart above shows, Oklahoma is the state that saw the most dramatic drop in its average wholesale flower price this year. It is also the only state in the group that has not legalized adult use cannabis, making its low prices especially notable. Through early June, Oklahoma’s overall volume-weighted flower price was averaging $921 per pound, a 42% year-on-year fall.
Similar to numerous other markets, demand in Oklahoma is down from the record-setting heights it reached in 2020 and 2021. March 2022 sales were only about $67 million, down 25% from a year prior even as the state’s patient count increased by about 4% in the same timeframe.
The state still boasted over 8,000 licensed growers in March, according to official information. While not all are operational, there is significantly more production capacity in Oklahoma than is necessary to supply a medical-only patient base, especially one that is not purchasing at the rates it was in the last two years.
California’s state Spot price has leveled off in Q2, but it is averaging $844 per pound for the quarter as of early June, a whopping 43% drop from Q2 2021. The state Department of Tax and Fee Administration (CDTFA) recently released data for the first quarter of this year, which showed demand continued to decline – sales were down 10% from Q4 2021 to Q1 2022.
CDTFA data provided exclusively to Cannabis Benchmarks also showed that the amount of wholesale flower entering the commercial market in Q1 shrank by 24% or over 40,000 pounds quarter-on-quarter. Given the massive summer and fall harvests reportedly generated by California growers in 2021, the contraction in wholesale flower entering the market indicates distributors and retailers were still full up with inventory in the opening quarter of this year and were not looking to bring in additional product.
The Beaver State’s legal cannabis market is currently seeing the lowest wholesale flower prices in the country, with the overall volume-weighted average price dropping below $700 per pound as of early June. Quarter-to-date in Q2 2022, Oregon’s Spot Index was averaging $750 per pound as of early June, down 39% from Q2 2021.
Demand continued to slip in May, with the state Liquor & Cannabis Commission (OLCC) reporting about $85 million in retail sales, a 6% month-on-month decline and a 15% year-on-year downturn. OLCC data also shows that growers are responding to the severe oversupply and depressed prices by pulling back somewhat on production. Still, May 2022 saw only a 12% year-on-year reduction in harvest volume, from over 325,000 pounds of wet weight in May 2021 to over 285,000 pounds of wet weight this year.
Despite signs that the market is seeking balance, Casey Houlihan, the Executive Director of the Oregon Retailers of Cannabis Association, recently told Cannabis Benchmarks “the next year and a half will be bloody,” as many cultivators and retailers are struggling in the state’s highly competitive market.
In our updates from last year, we noted that higher prices persisted in younger legal cannabis markets even as wholesale flower rates began to plummet in the mature western markets beginning in summer 2021. That began to change near the end of 2021. As displayed in the chart below, the first few months of this year have seen prices in even the country’s most expensive markets deteriorate significantly. Meanwhile, there is a rare example of prices trending upward in New Mexico, one of the country’s newest adult use systems.
Massachusetts & Illinois Markets
Illinois and Massachusetts in particular have been two of the most expensive wholesale cannabis markets in the country, with both state Spot prices reaching recent peaks in the first week of October 2021 – Illinois at almost $4,150 per pound and Massachusetts at about $3,625 per pound. Since then, Illinois’ average wholesale flower price has slid 18% to a bit over $3,400 per pound, while Massachusetts’ overall average price has dived 41% to roughly $2,150 per pound as of early June.
In Massachusetts, the adult use market started off slowly but the number of cultivators has grown and more have begun producing at larger scale, including some outdoor growers who harvested in 2021. This has led to larger, lower-priced transactions being reported. Even almost a year ago, in August 2021, a Cannabis Benchmarks analysis showed that the amount of canopy licensed at the time was more than sufficient to meet current and projected demand for flower, even assuming conservative yields. More cultivation capacity has come online since that point and led to a price erosion event on the scale of those being seen in more mature western markets.
In Illinois, expansions of canopy by existing cultivators seems to have resulted in enough production to begin to meet the state’s strong adult use demand. That demand has leveled off recently – adult use sales from March to May have been steady at around $130 million monthly, off from the high of $137 million in December 2021 – which has helped the market become more balanced. Still, no new cultivators have entered the adult use market in Illinois since it opened at the start of 2020. The lack of competition and additional cultivation capacity has resulted in a smaller price decline compared to other states.
New Mexico Market
New Mexico spot prices have been rising since fall 2021, when the state announced sales of adult use cannabis would begin in April 2022. Indoor spot price peaked at $3,024 per pound in January 2022 as adult use entrepreneurs chased supply to be ready for the spring opening of retail stores. State officials just released May sales data, with combined adult use and medical sales coming in at $38.5 million, down a bit from about $39.5 million in April, the first month of adult use sales.
More recently, beginning in April, overall New Mexico wholesale flower prices have been sliding. Meanwhile, Cannabis Benchmarks Spot Indices for indoor and greenhouse flower show a convergence of prices, with greenhouse flower prices being bid up toward indoor prices. Small retailers reportedly shed away from expensive indoor flower and sought out more affordable wholesale greenhouse product, but pushed prices for the latter upward due to increased demand. The indoor / greenhouse spread is currently at $50, down 92% from the first week in April 2022 when the spread was $700. Prices of both grow types are maintaining the tight spread, suggesting demand for greenhouse product is stronger than that of indoor product, a view expressed by a Cannabis Benchmarks contact in early April 2022.
Q3 is usually the strongest quarter of any given year for cannabis sales. In some years in the past, strong demand has helped push wholesale prices upward ahead of the annual autumn outdoor harvest. However, given current market conditions – with large oversupplies from last year persisting in states in the West, increased production and competition in newer markets, and declining sales as consumers continue to be hammered by inflation – it appears unlikely that we will see a major uptick in price before the outdoor crop is brought in later this year.