In the United States, cultivation licenses are often thought of as by far the most valuable in the highly competitive application processes that a lot of states use to figure out who is able to cultivate and dispense within their states. This value is partly produced from the fact many populous states initially only grant a small number of cultivation licenses. For example, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, having a population over 20 million, granted 7; while Ohio, with over 11 million people, granted 12; and New York, with 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 such limited permits is fierce, and those companies fortunate 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 City license sold for $26 million.
Indeed, in states with check it out, those companies that hold them are able to see large returns on their own investments within the near term. With artificially limited competition due to restricted license classes, cultivators in numerous states are able to control pricing and then sell their product in large volume. Many 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.
The current green rush has taken along with it an intense concentrate on large-scale cannabis cultivation. Across america and around the globe, we routinely hear stories of companies building larger and larger cannabis farms. In Arizona, Colorado, California, and Oregon, cannabis has been cultivated in greenhouses in excess of 250,000 sq. ft. that are designed for yielding a lot more than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses inside the an incredible number of sq . ft . and building similar-sized facilities in Europe, Australia, and elsewhere.
But is it trend sustainable? Or are these firms setting themselves up for very long-term failure? As stated inside my previous column Are Canada’s Cannabis Companies Overextended?, were already seeing a trend towards large-scale greenhouse and outdoor production, which can be driving prices down in states which do not have strict limits on the variety of licenses they grant. For example, the normal wholesale price of cannabis in Colorado has dropped from nearly $3,500 per pound at the start of legalization in 2013 to roughly $1,012 a pound on April 1, according to 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 its leaves; those leftover leaves are known as the trim and could be used to produce cannabis products) is now selling for as little as $50 per pound, which can be reportedly driving some cultivators inside the state out of business.
This trend is only going to continue when the federal government`s 80-year experiment with cannabis prohibition finally involves a conclusion. Today the cannabis industry is based on individual state markets, where no product can cross state lines because of laws prohibiting interstate commerce of any federally illegal product. However when prohibition eventually ends, then interstate commerce will open and businesses will likely be allowed to import their cannabis from the state in the country. At this point, we can expect aprknj large-scale outdoor and greenhouse production will dominate the market as cannabis commodifies. Many of the same environmental problems that make northern California suitable for the production of grapes for wine will also ensure it is perfect for large-scale commercial cannabis production. The biggest greenhouse complex in the country, estimated at approximately 300 acres (approximately 13 million sq. ft.) of greenhouse space, is found in Wilcox, Ariz., as the desert conditions make it ideal to manage humidity in a greenhouse setting, something that adds a huge additional cost to greenhouse operators on the East Coast. The same conditions will apply to cannabis.