The U.S. Cannabis Spot Index averaged $1,562 per pound in 2017, a 13 percent decrease from $1,789 per pound in 2016, according to Cannabis Benchmarks Annual Review & Outlook: 2017-2018 Edition.
The Index declined only 6 percent throughout 2017, opening at $1,532 and closing at $1,436, in contrast to the 20% decline seen in 2016.
Wholesale market for the cannabis flower was $5.7 billion in 2017. For reference, the wholesale wheat market was $7.8 billion. Volume grew by 22%, from 3 million pounds in 2016 to 3.7 million pounds in 2017.
Lowest prices for the year were again seen in November, with the national composite price down 11.6% in Q4 from Q3. Favorable weather conditions led to fall bumper crops, and the combination of outdoor and greenhouse flower hitting the market at the same time helped fuel this in 2017.
The lower level of spot price uncertainty led Cannabis Benchmarks to investigate the volatility of other agricultural commodities. They found that cannabis was in line with the others and that only one, wheat, increased. They believe cannabis volatility decreased in part because of fewer “regulatory and economic surprises.” This may also hold true for Colorado, Washington, and Oregon, although foreseen regulatory actions can greatly affect regional prices.
While it doesn’t have a huge impact on the market, greenhouse flower accounted for just under one-third of all volume traded in 2017, staying at the same volume as the second half of 2016. This is significant because it accounted for less than one-fourth of all volume in the first two quarters of 2016.
Warehouse flower contract prices appear to be trending downward. In 2017, 40% of individual transactions involving warehouse flower were greater than $2,000 per pound, down from 45% in 2016. When looking at flower selling for greater than $1,500 per pound, the numbers were even lower, 69% in 2017 as opposed to 80 percent in 2016.
The market also saw more agreements that were not involving product exchange, only financial exchange, such as futures, swaps, and options.
In the first half of the year, wholesale prices increased in California, but the bounteous fall crop proved to be too overwhelming to maintain the increase, and wholesale prices fell. Wildfires in the fall ravaged dozens of grow sites; however, they didn’t have an effect on supply statewide.
Colorado’s average Spot Index for 2017 was almost 30% below 2016’s Spot Index, continuing the downward trend that started in early 2016. The state has such an oversupply of cannabis that quality and other differentiating criteria have ceased to have much significance.
Wholesale prices in Oregon fell dramatically in 2017, less than 18 months after the state legalized sales to adults. A good growing season, lack of production limits and an increase in commercial growing knowledge were all factors in the decrease.
In the last weeks of 2017 and early into 2018, Washington’s wholesale prices were the lowest seen in any state, historically. This trend is being closely watched in 2018.
Cannabis Benchmarks is a division of New Leaf Data Services and provides wholesale price assessments in weekly, mid-year and annual reports. Their Annual Review & Outlook: 2017-2018 Edition offers wholesale market data, overview and analysis, and is available for purchase.