The current “green rush” has brought with it a powerful focus on large-scale cannabis cultivation. Across the usa and around the globe, we routinely hear stories of companies building larger and larger cannabis farms. In Arizona, Colorado, California, and Oregon, cannabis is being cultivated in greenhouses in excess of 250,000 sq. ft. that are designed for yielding more than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses within the an incredible number of sq ft and building similar-sized facilities in Europe, Australia, and elsewhere.
In the United States, cultivation licenses are frequently thought of as by far the most valuable in the highly competitive application processes that most states use to figure out who may be permitted to cultivate and dispense within their states. This value is partly based on the simple fact many populous states initially only grant a small number of marijuana cultivation operations plan. For example, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, having a population over 20 million, granted 7; while Ohio, using more than 11 million people, granted 12; and Ny, using a population of nearly 20 million people, granted only 5 before recently expanding to 10. For context, Colorado has roughly 1,400 licensed cultivators for a population of just 5.5 million people. Competition for these particular limited permits is fierce, and the ones companies lucky enough to win one see sky-high values attached to these licenses just before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million ahead of the company had seen any money in revenue. Similarly, a pre-revenue New York license sold for $26 million.
Indeed, in states with limited cultivation licenses, those businesses that hold them are able to see large returns on their own investments inside the near term. With artificially limited competition because of restricted license classes, cultivators in many states are able to control pricing then sell their product in large volume. A number of these cultivators grow their product in state-of-the-art indoor warehouses with clean-room environments that resemble pharmaceutical production facilities a lot more than traditional commercial agriculture.
But is that this trend sustainable? Or are these firms setting themselves up for long-term failure? As stated within my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already seeing a khhhfj towards large-scale greenhouse and outdoor production, which can be driving prices down in states that do not have strict limits on the number of licenses they grant. As an example, the normal wholesale cost of cannabis in Colorado has dropped from nearly $3,500 per pound at the beginning of legalization in 2013 to roughly $1,012 a pound on April 1, based on the Colorado Department of Revenue. In Oregon, where state ramped up licensing after early product shortages, wholesale marijuana trim (after harvest, the cannabis is trimmed of their leaves; those leftover leaves are known as the “trim” and could be used to produce cannabis products) is currently selling for as little as $50 per pound, that is reportedly driving some cultivators in the state away from business.