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Published 21 August 2015

 

U.S. Cannabis Spot Index up 14% to $1,942.  The standard deviation of the non-volume weighted prices was $353, with 68% of transactions falling in the $1,681 to $2,387 per pound range.  Transactions were as low as $1,300 per pound in California, and as high as $3,200 per pound in Midwest black markets.  Across all observations, the majority of transactions were recorded at $1,800 per pound.  The volume weighted average price was higher week-on-week for each of the 13 states (including D.C.) observed.

California

The volume weighted average price in California was $1,819 per pound, up nearly 8% from $1,687 last week.  The trading range was wide, spanning $1,100 per pound, depending upon location and quality.  The lowest-priced transactions included the liquidation of greenhouse product left over from last year.

While small wildfires continue to burn throughout California, the Rocky and Jerusalem Fires, which combined last week to burn roughly 95,000 acres in Lake and Napa Counties, have been essentially contained. Evacuations are being lifted and residents are returning to their homes. 

San Diego’s second legal dispensary – the first within city limits – opened on Saturday. Point Loma Patient Cooperative appears as if it will be the only dispensary operating legally in the city for at least a month, as the next one is not slated to open until October. The first legal dispensary in San Diego county is located in Otay Mesa, near the Mexican border. San Diego and other California municipalities are looking to get ahead of what many view as the imminent legalization of recreational cannabis in November 2016 by implementing regulatory structures in the near term. While this may mean higher prices through legal outlets—thus turning many to the plethora of unregulated sources from which one can obtain cannabis in California—the hope is that it will ease the transition into a fully legal, regulated market, assuming that comes to fruition in 2016. 

Colorado

The volume weighted average transaction price in Colorado was $1,784, up 10% from $1,616 per pound last week, with the largest deals settling in a narrow range from $1,700 to $1,750 per pound.  Smaller deal sizes of higher quality supplies transacted at $2,500 per pound.

June sales figures for Colorado’s cannabis markets were released last week: Recreational market sales totaled $50.1 million, the first time that the $50 million figure has been exceeded, while the medical market saw sales of $35.2 million, the highest monthly sales figures this year. Observers are attributing the recreational sales figures at least in part to tourism, as spikes were also observed this past winter, during ski season. Medical demand remains strong, likely in part because Colorado’s regulations – particularly the allowance for “severe pain” – make obtaining a medical cannabis card fairly easy.

In southern Colorado, water officials in the San Luis Valley are reporting that unlicensed cannabis growers are taking water illegally, sometimes from wells on private land. We have in the past reported on the expansion of legal cannabis cultivation in the Pueblo area; these reports testify to the continuing expansion of illegal cultivation activities to meet the ever-growing demand illustrated by June’s record sales figures, which do not even capture the state’s still-thriving black market or unregulated product that is being diverted outside the state. 

Oregon

The volume weighted average transaction price in Oregon was $1,865 per pound, up 11% from $1,681 per pound last week.  Nearly all observed transactions settled in a narrow $300 per pound range.  Bulk transactions of lower quality product remaining from last year occupied the lower end of the price range.

Wildfires are present in southern Oregon, near Crater Lake, but not nearly to the magnitude of those that impacted northern California in past weeks. Temperatures this summer have consistently topped 90 degrees, and surpassed 100 on multiple occasions. However, with no current water restrictions in the area, the state’s plentiful outdoor growers should be able to keep their plants irrigated sufficiently, thereby avoiding significant crop damage. 

Washington

The volume weighted average transaction price in Washington was $1,712 per pound, up slightly from $1,700 per pound last week.

Washington cultivators east of the Cascades are not so lucky. Drought conditions in the Yakima Valley are leading to water theft, just as in California and southern Colorado, although one observer characterized the problem as an inconvenience or expense for growers in the area, rather than a catastrophe. Additionally, a group of wildfires now dubbed the Chelan Complex in central Washington is forcing the evacuation of thousands. In addition to evacuations, about 9,000 businesses and residences were without power beginning Saturday due to damage to infrastructure, though most had their service restored by early in the week. About ten licensed cultivators operate in the area of the fires, according to state data.  

Meanwhile, Seattle dispensary owners are reported to be struggling as prices have fallen to as low as $11 per gram, down from about $25 in September of the previous year. Despite this trend, new entrants to the market have not been dissuaded, as the state continues to issue new licenses to businesses under its new recreational framework. These new dispensaries are likely banking on the fact that numerous Washington cities and municipalities are moving to shut down their competition, unlicensed medical dispensaries, which is discussed in the Forward Curve commentary. 

Rhode Island

Despite an increase in patients from 4,241 in 2011 to 11,620 currently, Rhode Island’s tax revenues predictions have been adjusted downward to about half of what was projected when dispensaries opened in 2011. A dispensary spokesperson attributes this at least in part to the proliferation of untaxed caregivers in the state, calling them, “a competitive force that’s real.” Colorado and Washington face a similar issue in that significant production volume in both states remains unregulated. In response, those states have attempted to reign in their caregiver and collective garden allowances in recent months, essentially attempting to maximize tax revenue by steering commerce through the more heavily taxed recreational markets. 

Southwest

The volume weighted average transaction price in Nevada was $2,434 per pound, a week-on-week increase of 20%.  In Arizona, prices averaged $2,200 per pound.

Midwest

The average price in Michigan increased more than 7% to $2,152 per pound; while the average price in Minnesota was $2,400 per pound.  Black market prices in Wisconsin nudged up to $2,627 per pound.

Other States

The volume weighted average price in Washington, D.C. was $2,333 per pound.  The average price in Montana was $2,238 per pound.  Transactions in Alaska were completed at or around $2,500 per pound.  In New York, black market prices averaged $2,750 per pound, a week-on-week increase of 8%.

Published 14 August 2015 at 10am MDT.

U.S. Cannabis Spot Index up fractionally to $1,709.  The standard deviation of the non-volume weighted prices was $317, with 68% of transactions falling in the $1,493 to $2,127 per pound range.  Transactions were as low as $1,400 per pound in both California and Colorado, and as high as $2,700 per pound on the east coast and $2,800 in the Midwest.

California

The volume weighted average price in California was $1,687 per pound, up nearly 5% from $1,613 last week.  The trading range was wide, spanning $1,000 per pound from $1,400 to $2,400, depending upon location and quality.  While most deals were sized from 5 to 10 pounds, several 50- and 100-pound deals transacted at $1,500 per pound.

As wildfires continue to burn in northern California, lawmakers in the state are continuing their attempts to limit the environmental impact of unregulated cannabis growers. 

A representative from Harborside Health Center in Oakland, one of the oldest and largest medical cannabis dispensaries in the country, stated that he expects the Rocky Fire to cause a supply shortage and subsequent price increase in the Bay Area. Numerous growers who supply Bay area dispensaries are located near Clear Lake, which is in the area of the still-burning fire that now encompasses over 70,000 acres, but has been mostly contained. Another wildfire, dubbed the Jerusalem Fire, has sprung up in the same vicinity, consumed over 12,000 acres, and is close to merging with the Rocky Fire. Numerous smaller fires are burning in the area as well.  

Last week, Governor Jerry Brown signed a bill into law that puts in place hefty fines for cannabis farmers that inflict environmental damage. In nearly 250 raids last year, state officials found over 135 dams or diversions of streams or rivers that siphoned off nearly 5 million gallons to illegal grow sites. Stream diversion is already subject to fines, but the new law includes fines of up to $40,000 for dumping hazardous materials, such as pesticides and fertilizers into bodies of water. 

While last year’s raids also resulted in the destruction of over 600,000 plants, California authorities have recognized that production, both legal and illicit, is expanding continually and are taking measures to curtail its environmental impact. Expansion of production in and around heavily populated areas such as San Francisco, Los Angeles, and Denver has led to markets being flooded with low to mid quality product that is selling for as low as $20 per eighth of an ounce. 

Colorado

The volume weighted average transaction price in Colorado was $1,616 per pound, down 2% from $1,649 per pound last week, with the largest deals settling in a narrow range from $1,650 to $1,700 per pound.

RLI Corporation, among numerous other companies, is pulling out of the cannabis bonding industry by cancelling all bonds mid-term due to the threat of being named in RICO lawsuits being brought by the Safe Streets Alliance. A Frisco dispensary was already forced to close from this legal pressure and an additional lawsuit is pending against another Colorado cannabis operation and its business associates. In Colorado, surety bonds are required of licensed cannabis businesses. According to reports, Hudson Insurance Group is one of the few, if not the only, group currently writing these bonds. Such bonds are now difficult to obtain and prices for them are rising drastically, as they are considered high risk due to the RICO suits. 

Previous August forecasts that predicted cooler temperatures have not borne themselves out in Denver and Pueblo. Both areas have experienced high temperatures that have consistently reached into the 90s this month, putting pressure on indoor, outdoor, and greenhouse operators alike. Forecasts now call for relief to arrive in the final week of August in the form of highs in the 80s. Wholesale medical cannabis is currently in high demand, per industry sources, as many previously medical producers have turned their efforts to supplying the recreational market. 

Oregon

The volume weighted average transaction price in Oregon was $1,681 per pound.

Oregon cultivators received a letter from the Oregon Department of Agriculture advising them that pesticide use on cannabis is technically illegal and to stick to products that the EPA has identified as tolerance exempt, meaning registration of the pesticide is not required due to low toxicity. Oregon lawmakers are attempting to formulate guidelines for pesticide use and enforcement ahead of the state’s full rollout of its recreational program next year. An investigative report published earlier this summer by the Oregonian found pesticide residues on a majority of products, even though they had purportedly passed the screenings currently required by the state. 

In the absence of effective regulation and enforcement to ensure consumer safety, organizations such as the Clean Green certification in California and the Organic Cannabis Association in Colorado have or are in the process of developing third-party pesticide-free certifications that hold growers to organic standards, allowing good operators to distinguish themselves and possibly command higher prices for their certified product.

Washington

The volume weighted average transaction price in Washington was $1,700 per pound.

Sales increased substantially in July, the first month under the new tax structure. Over $57 million worth of cannabis was sold through Washington recreational dispensaries, up from just under $46 million in June. While production has outpaced sales in that state through July, it appears that demand is keeping pace, as the average sales volume per day, in dollars, has increased steadily since September of last year. However, early figures from August show sales of usable cannabis in pounds is thus far greater than the amount of produced, a promising trend as the fall harvest approaches. 

Other States

The volume weighted average transaction price was $2,033 per pound in Nevada, and $2,000 per pound in Michigan.  Black market prices in New York averaged $2,550 per pound

 

U.S. Cannabis Spot Index starts August 7, 2015

U.S. Cannabis Spot Index starts August at $1,705.  The standard deviation was $253, with 68% of transactions falling in the $1,452 to $1,958 per pound range.  The five lowest transactions averaged $1,440 per pound, and the five highest transactions averaged $2,410 per pound.

California
The volume weighted average price in California was $1,613 per pound, down 9% from $1,770 last week.  The week-on-week drop is at least partly attributable to the clearing out of last year’s inventory ahead of this year’s harvest, with sizable deals in the $1,300 per pound range for outdoor grown product.  The highest observed transactions were $2,000 per pound, with several deals, including a 100-pound transaction, at $1,600 per pound.

Numerous wildfires have been scorching California this week, including what has been dubbed the Rocky Fire. The Rocky Fire has, as of Thursday, sprawled to consist of over 69,000 acres in Lake County, just southeast of the Mendocino National Forest. Various parts of Humboldt and Trinity Counties have been evacuated and the Trinity County Fair has been called off by its organizers. Additional fires have cropped up, but were contained, in Modoc County, an area in the northeastern corner of the state where the Alturas and Pit River Tribes were recently raided for illegal cannabis cultivation.

Wildfires do not have to incinerate cannabis crops for losses to occur. Outdoor, greenhouse, and even indoor crops could be affected adversely by smoke, particulate matter, and carbon monoxide that result from the burning of dry grass, leaves, and wood, as those emissions interfere with the normal gas exchange that is a critical part of every plant’s metabolic processes. Additionally, growers may be forced to evacuate their cultivation sites, leaving plants neglected even if the fires do not actually reach them.

Colorado
The volume weighted average transaction price in Colorado was $1,649 per pound, down $70 from $1,719 per pound last week, with multiple deals of 50 pounds or more in the $1,550 to $1,725 per pound range.

Colorado cannabis operations will have to continue their all-cash dealings after the Federal Reserve in Kansas City denied an application for a master account from the Fourth Corner Credit Union. The FCCU was founded in late 2014; it holds a state charter to operate and received support from Colorado Governor John Hickenlooper, though it cannot commence business without a master account. A master account with the Fed would have allowed members to take credit and debit card payments and transfer money electronically. The National Credit Union Administration also denied deposit insurance to the FCCU. While possible solutions to the industry’s banking problems are being explored in California and Nevada, this incident has led observers to believe that, barring specific banking legislation passed at the federal level or a change cannabis’ status as a Schedule 1 controlled substance, cannabis companies will continue to be denied access to banking. Lack of banking increases operational costs by necessitating expensive security measures and labor hours devoted to accounting and transactions that would be performed electronically by any other business.

Oregon
The volume weighted average transaction price in Oregon was $1,681 per pound, with nearly all deals closing in the $1,500 to $1,800 per pound range.

Jackson County in southeastern Oregon is already seeing groups vie for permits to operate medical cannabis dispensaries in the face of Governor Kate Brown’s signing of a bill to allow early recreational sales through existing medical shops. One dispensary, called Pharm to Table, even knowingly opened illegally in June, before the county began accepting applications, and has been paying fines incurred for operating without a permit. Applicants camped out on the courthouse steps in the hopes of filing their applications first.

In Portland, the Cannabis Café opened on July 31st to a packed house of cannabis enthusiasts. The café operates as a private social club in which members must bring their own product; no sales take place within. Such establishments are allowed under Oregon’s Measure 91, which legalized recreational cannabis in the state, and will likely spawn an ancillary industry that would be illegal in Washington or Colorado under those states’ current regulations.

Washington
The volume weighted average transaction price in Washington was $1,706 per pound, with most transactions in the $1,400 to $1,850 per pound range.

Dan Satterberg, prosecutor for King County, in which Seattle is located, gave notice this week that 15 unlicensed medical dispensaries operating in the county will be served with lawsuits aimed at forcing them to shut down. Under Washington state law, recreational dispensaries licensed under Initiative 502 are the only legal entities allowed to sell cannabis. Many medical dispensaries have been operating without business licenses or paying taxes, a situation the state intends to end by closing medical shops or forcing them to obtain licenses through the new legal channels. This is the first official action toward achieving that goal, which will be a boon to licensed recreational dispensaries in Washington, and likely to the black market as well, as patients who patronized certain dispensaries will have to find new outlets from which they can purchase cannabis.

Other States
After numerous delays, Nevada’s first dispensary, Silver State Relief, opened in Sparks on July 31st. Per an allowance in state law, Silver State Relief sourced plants from home growers with registered medical cannabis cards. It is unclear whether the product sold was subjected to pesticide residue testing, which has been cited as one of the major reasons for delays to the commencement of the state’s legal cannabis market. In any case, Silver State Relief had on hand roughly 14 pounds of cannabis and limited customers to purchases of half an ounce for $195, according to reports. By contrast, a full ounce of low-quality recreational cannabis can retail for as low as $100 in Colorado.  The volume weighted average transaction price in Nevada was $2,067 per pound.

Minnesota Medical Solutions, one of the two companies licensed to operate in the state, raised prices on their products by 15-20% across the board, in addition to reducing the size of a discount given to low-income patients. A company representative attributed the price increase to low patient numbers (only about 250 are registered in Minnesota), an unexpected number of low-income patients, and the generally high cost of running a cannabis operation. According to reports, the bulk of costs come from processing raw plant material into oils and other products. Cannabis flower cannot be sold in Minnesota dispensaries, only processed and extracted cannabis products are available to patients. Other states, most notably New York, have emulated this model, though Minnesota is the first to put such a system into practice.  Transaction volume in Minnesota was light, with deals closing at or about $2,000 per pound.

 

U.S. Cannabis Spot Index closes July at $1,791

 

6611287_orig

U.S. Cannabis Spot Index closes July at $1,791. The standard deviation was $241, with 68% of transactions falling in the $1,550 to $2,032 per pound range.  Transactions were as low as $1,500 per pound in both California and Oregon, and as high as $2,500 per pound in Alaska and the Midwest.

California
The volume weighted average price in California was $1,770 per pound, up 6% from $1,667 last week.

In San Diego, eight recently approved legal dispensaries are slated to open later this summer and early fall. These openings come on the heels of largely successful efforts by city authorities in the last year to shut down unlicensed dispensaries. A year ago, estimates put the number of illegal dispensaries in the city at around 70; currently, the city believes that there are about 15-20 illegal shops remaining. However, many of the shuttered operations have been opening in adjacent municipalities just outside the city’s borders, while delivery services with no fixed addresses have also been proliferating in San Diego, and California generally. Legal dispensaries maintain a higher price point for cannabis due to taxes and licensing fees.

Colorado
The volume weighted average transaction price in Colorado was $1,719 per pound, up $56 from $1,663 per pound last week.

Jefferson County, a significant area of Colorado’s Front Range that extends from northwest of Denver nearly to Colorado Springs, looks as if it will uphold its moratorium on recreational cannabis cultivation facilities and dispensaries, though the county is planning to draft ordinances to allow for cannabis testing facilities. Colorado’s Amendment 64, which legalized cannabis for adult use, also allowed counties and municipalities to opt out and self-regulate, an option taken by numerous localities. However, many moratoriums put in place at Amendment 64’s inception are now being lifted or put to a vote; for example, Huerfano County, south of Pueblo, lifted its moratorium on cannabis cultivation operations earlier this month, likely to take advantage of the surge of outdoor and greenhouse production establishing itself in the area. The city of Pueblo itself has banned recreational cannabis dispensaries since 2013, though that issue will be put in front of voters this coming November.

Oregon
The volume weighted average transaction price in Oregon was $1,640 per pound.

Oregon’s Governor Kate Brown signed into law Senate Bill 460, allowing early sales of recreational cannabis to begin through existing medical dispensaries on October 1st of this year. Individuals over the age of 21 will be allowed to purchase up to a quarter of an ounce of cannabis flower, as well as seeds and up to four clones. Allowing recreational sales through existing medical dispensaries is intended partially to serve as a lifeline to an extremely saturated market, in which the overabundance of dispensaries has led to very few actually being profitable. However, the long-awaited confirmation of this bill will likely accelerate the pace of applications to open new medical dispensaries, which have been on the rise since the early sales idea gained serious traction in the last few weeks.

Washington
The volume weighted average transaction price in Washington was $1,567 per pound.

Washington last week approved PTSD as a qualifying condition for medical cannabis. At the same time, restrictions were tightened in other areas of the medical cannabis program, which the state plans to roll into its recreational oversight structure by July of 2016. Beginning July 24th, qualifying conditions are more strictly defined, doctors must report to the state Department of Health if making more than 30 medical cannabis recommendations a month, and doctors cannot have a practice consisting primarily of medical cannabis recommendations, among other regulations. Additionally, employing butane to make hash oil is now illegal for medical cannabis processors. Only individuals licensed by Washington’s Liquor and Cannabis Control Board may now perform butane extraction.

New England
Rhode Island’s medical cannabis market is booming, boasting over 11,000 patients and 3,000 caregivers, but only 3 licensed dispensaries. Caregivers can legally grow plants for up to 5 patients, while patients themselves can also grow their own. No tracking system or detailed oversight exists, leading state Attorney General Peter Kilmartin to warn that the numerous loopholes and lax regulatory structure has increased the black market in the state. Colorado and Washington earlier this year made attempts to limit and regulate their caregiver and collective garden allowances more strictly, as these untracked growers can be a significant source of the cannabis that continues to make its way into the black market.

Conversely, in Vermont, patients are increasingly turning to licensed dispensaries to purchase cannabis. Patient numbers have risen to over 1,600, a six-fold increase from 2013, the year Vermont’s first dispensary opened. Reports state that only 14% of registered patients in the state obtain their cannabis from sources other than dispensaries – likely the state’s legal caregiver system. Contrastingly, 73% of patients reported obtaining their cannabis from sources other than dispensaries in 2013.

 

7/24/2015

5663563_orig

U.S. Cannabis Spot Index up 3% to $1,736.  The standard deviation increased to $309, with 68% of transactions falling in the $1,427 to $2,045 per pound range.  Transactions were as low as $1,400 per pound in both California and Colorado, and as high as $2,700 per pound in Michigan.

California
The volume weighted average price in California was $1,667 per pound, up nearly 9% from $1,532 last week.

Operation Yurok, named for the largest federally recognized tribe in California, resulted in the eradication of over 30,000 plants from roughly 20 grow sites last week, a potential yield of roughly 75,000 pounds based on growing methods in the region. The operation is a collaboration between tribal, state, and federal agencies and was initiated after the tribe reached out to Governor Jerry Brown for assistance after observing a plethora of illegal grows on and around tribal land. The Yurok are concerned about the negative environmental impact and illegal water use by cannabis growers; they estimate that millions of gallons were diverted from the tribe’s community water systems, which were already strained to their limits.

“It’s marijuana eradication season,” quipped a Humboldt County Sheriff’s lieutenant. Despite the consistent efforts of law enforcement in various areas of Northern California, such operations fail to make a significant dent in the total amount of unregulated production taking place in the state, though they do affect prices locally for short periods of time.

Colorado
The volume weighted average transaction price in Colorado was $1,663 per pound, down $51 from $1,714 per pound last week.  Deals closed in a $700 range, from $1,400 to $2,100 per pound.

Last week the Colorado Board of Health voted against recognizing PTSD as a qualifying condition for medical cannabis. While approval of this condition would not have affected the market significantly, this incident speaks to the country’s changing conversations, perspectives, and standards for medical cannabis. Research is still scant, but as medical cannabis moves into the limelight, regulators, lawmakers, and physicians are increasingly requiring definitive scientific evidence to confirm bona fide medical uses for the plant. Colorado’s medical industry continues to thrive even as the adult-use market expands. However, new states with legal medical cannabis – such as Minnesota – serve as demonstrations of changing conceptions, as well as the willingness of some regulators to sacrifice market volume for more stringent patient screening and production standards.

Oregon
The volume weighted average transaction price in Oregon was $1,611 per pound, skewing lower than last week due to larger transactions in the $1,500 to $1,600 per pound range.

Senate Bill 460, which would allow early sales of adult-use cannabis through existing medical dispensaries, still awaits the governor’s signature. Meanwhile, some cannabis businesses hoping to get their names out to the public will likely see their advertising efforts stymied. A committee will be appointed imminently by the Oregon Liquor Control Commission to draft rules on advertising. Television ads scheduled to run on Denver’s ABC affiliate have been placed on indefinite hold due to concerns about the federal illegality of the drug. Colorado and Washington currently regulate cannabis advertising, prompting dispensaries and other operations to find creative, non-traditional, and effective outlets to reach customers.

Washington
Prices ranged from $1,450 per pound to $1,780 per pound.

The bill overhauling Washington’s tax structure that was passed recently also banned private cannabis clubs, nipping in the bud a potential ancillary industry. Such regulations will have the effect of dissuading tourists and some casual, infrequent users that may have otherwise sampled the product, as they simply will not have a place to consume. In contrast, Colorado cannabis advocates are pushing for legal allowances to consume cannabis in bars and other select public spaces; certain hotels in the state are also cannabis friendly in order to capitalize on tourist revenue.

Michigan
The volume weighted average price was $2,136 per pound.

Multiple dispensaries in the Detroit area were closed down by local authorities last week. Dispensaries are technically illegal in Michigan – though over 100 are operating openly across the state – and enforcement has been highly variable and subjective. The absence of a regulated sales and distribution system, combined with uneven and unpredictable enforcement, leads to increased risk of law enforcement intervention and uncertainty regarding the security of future operations. As a result, prices are propped up higher than national averages, while consumers are also more likely to be driven to obtain cannabis from black market sources.

Other States
Black market prices in Nevada and New York averaged $2,088 and $2,334 per pound, respectively.

 

7/17/2015

7528922_orig
U.S. Cannabis Spot Index closes week at $1,686. The standard deviation increased to $296, with 68% of transactions falling in the $1,390 to $1,982 per pound range. Transactions were as low as $1,300 per pound in California, and as high as $2,500 per pound in the Midwest. Not taking into account the size of the transaction, 50% of the sampled transactions fell in the $1,666 to $2,000 per pound range.

This week, a number of events illustrated the continuing difficulties of cannabis businesses in coping with the federal illegality of the product.

The Ninth US Circuit Court of Appeals ruled in favor of the 280E portion of the Federal Tax Code, which was challenged by a California cannabis club called The Vapor Room. 280E states that no deduction or credit may be claimed by any business that consists of trafficking in controlled substances that are prohibited by Federal law, a category in which cannabis remains for the time being. Essentially, 280E prevents cannabis businesses from making deductions for normal business expenses that could be claimed by any other enterprise. The inability to deduct expenses is one of many challenges legal participants face in competing with black market sellers in California.

Northern CA weather remains favorable – very mild, even slightly cool (60s-70s F). The volume weighted average price in California was $1,532 per pound. Some deals closed at $2,500 per pound; however, surplus low quality product left over from last year was sold off in bulk deals ranging from 50 to 100 pounds, and priced from $1,300 to $1,500 per pound, bringing the average price down.

Also in California, Federal agents raided two large-scale cultivation facilities on Native American lands. The Alturas and Pit River Tribes had constructed greenhouse compounds with a combined capability of growing in excess of 60,000 plants, though only 12,000 plants and 100 pounds of processed cannabis were seized. Authorities believe that cannabis produced at these sites was intended for distribution off of tribal land, a violation of one of the eight priorities set out in the Cole Memorandum. Native American tribes have the right to cultivate and distribute cannabis on their sovereign lands provided that they observe the Cole Memo’s stipulations.

Federal racketeering laws are being employed by an anti-cannabis group called Safe Streets Alliance to bring RICO suits against cannabis businesses. A Colorado dispensary in Frisco was forced to close as their business associates named in the suit – including Bank of the West and a bonding company employed by the dispensary – ceased providing services. A similar lawsuit is pending against another Colorado operation, Alternative Holistic Healing, which is fighting the suit and even moving ahead with planned expansion. While not of notable consequence to price at this juncture, this case captured the attention of most Colorado buyers and sellers.

Expansion of production at existing sites has been an industry-wide trend in Colorado. According to Xcel Energy, Denver’s cultivation facilities used 200 million kilowatt-hours of electricity in 2014. 354 grow facilities used 121 million kilowatt-hours in 2013, while roughly the same number of facilities used 86 million kilowatt-hours in 2012. Continually increasing demand has kept prices relatively steady through the first half of 2015, though that will likely change come fall. As noted last week, unregulated caregivers and small-scale black market producers have expanded operations similarly to take advantage of in-state and out-of-state demand.

The Front Range has been generally pretty hot (high 80s-90s F) but with some relief in the form of overcast and rainy days each week (not typical for the summer). While hot, temperatures are not scorching to the point where operations should be affected, as they were earlier in the summer. The volume weighted average transaction price in Colorado was $1,714 per pound.

In Oregon, concern regarding market saturation continues as the pace of applications submitted for dispensaries hastened. The number of applications filed in the last two weeks is 12% of what had been filed over the past 8 months. Southern Oregon is still hot and in the 90s, though this is lower than the last few weeks, which consistently exceeded 100 degrees F. The volume weighted average transaction price in Oregon was $1,819 per pound.

In Washington State, prices ranged from $1,450 to $1,775 per pound. The volume weighted average price was $1,593 per pound.

In Michigan and Minnesota the average price was $1,971 and $1,929 per pound, respectively. Prices were higher to the East, averaging $2,150 and $2,300 per pound in Washington DC and Vermont, respectively.

Dispensaries in Nevada are facing another hurdle to opening their doors, this time due to state agencies working to formulate pesticide guidelines. As cannabis is not a federally recognized crop, the EPA cannot authorize any pesticides for use on the plant. However, certain products have usage guidelines broad enough that their employment on cannabis would not be a violation of federal pesticide regulations. Earlier this month, Nevada’s agriculture department released a list of such pesticides, though the delay stems from the fact that the Department of Public and Behavioral Health must now announce tolerance levels for the allowed products. Once those levels are set, then labs will be able to test and approve product for sale. It should be noted, however, that due to the lack of research, any tolerance levels set for pesticide residues on cannabis are currently well-intentioned guesswork. Black market prices in Nevada averaged $1,960 per pound.

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