US (CA): A looming cannabis shortage?

As incredible as this may sound, California begins the new year short of something that has been in massive oversupply for almost two years: cannabis flower. You may be thinking, “what is Aaron smoking,” but cultivators, both large and small, based in Northern and Southern California are now telling me the same thing: prices are rising for cannabis flower after 18+ months of decline. And they are rising at a time of the year when they shouldn’t be increasing.

Further confirmation of this price trend came from Glass House Farms (OTC: GLASF) when they announced preliminary Q4 numbers and reported that their average sales price was $234 a pound, up from $204 a pound. But this “average” downplays the size of the price bounce because prices started the quarter at around $200 a pound. For prices to end the quarter at $234 implies that prices were closer to $260-$270 a pound by the quarter’s end. That’s a 30% bounce in three months, and this is consistent with what private growers tell me they are seeing.

Why this is remarkable is that prices should be the seasonally weakest right now. Every year, outdoor crops get harvested during the September/October period in a time known affectionately as “Croptober.” Also, with extra sunlight and longer days, the state’s greenhouses have their best production as well. All of that product then hits the market and pressures prices lower from November to sometimes as late as February, at which point there is seasonal strengthening into the summer, and the process repeats itself.


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