The current “green rush” has brought along with it a powerful focus on large-scale cannabis cultivation. Across the usa and round the globe, we routinely hear stories of companies building bigger and bigger cannabis farms. In Arizona, Colorado, California, and Oregon, cannabis is being grown in greenhouses more than 250,000 sq. ft. that are capable of yielding greater than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses in the countless square feet and building similar-sized facilities in Europe, Australia, and elsewhere.
In the usa, cultivation licenses tend to be thought of as the most valuable in the highly competitive application processes that many states use to determine that is able 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 grow plan. For example, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, using a population over 20 million, granted 7; while Ohio, with more than 11 million people, granted 12; and Ny, 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 to get 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 connected to these licenses just before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million before the company had seen any money in revenue. Similarly, a pre-revenue New York City license sold for $26 million.
Indeed, in states with limited cultivation licenses, those companies that hold them can easily see large returns on their own investments inside the near term. With artificially limited competition as a result of restricted license classes, cultivators in lots of states are able to control pricing and sell their product in large volume. Most 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 it trend sustainable? Or are these businesses setting themselves up for very long-term failure? As mentioned within my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already going to a khhhfj towards large-scale greenhouse and outdoor production, which is driving prices down in states that do not have strict limits on the variety of licenses they grant. For example, the typical wholesale price of cannabis in Colorado has dropped from nearly $3,500 per pound at the outset of legalization in 2013 to roughly $1,012 a pound on April 1, based on the Colorado Department of Revenue. In Oregon, where the state ramped up licensing after early product shortages, wholesale marijuana trim (after harvest, the cannabis is trimmed of its leaves; those leftover leaves are referred to as the “trim” and can be used to produce cannabis products) is now selling for only $50 per pound, that is reportedly driving some cultivators within the state from business.