The present “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 grown in greenhouses in excess of 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 an incredible number of square feet and building similar-sized facilities in Europe, Australia, and elsewhere.
In the usa, cultivation licenses are often viewed as the most useful for the highly competitive application processes that many states use to determine who is able to cultivate and dispense inside their states. This value is partly derived from the fact many populous states initially only grant a limited number of cannabis cultivation procedures. For instance, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, using a population over 20 million, granted 7; while Ohio, using more than 11 million people, granted 12; and New York City, 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 connected to these licenses just before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million prior to the company had seen any money in revenue. Similarly, a pre-revenue Ny license sold for $26 million.
Indeed, in states with limited cultivation licenses, those companies that hold them can easily see large returns on the investments inside the near term. With artificially limited competition as a result of restricted license classes, cultivators in many states can control pricing and then 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 greater than traditional commercial agriculture.
But is it trend sustainable? Or are these companies 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 is driving prices down in states that do not have strict limits on the variety of licenses they grant. For instance, the average wholesale cost 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, according to the Colorado Department of Revenue. In Oregon, in which the state ramped up licensing after early product shortages, wholesale marijuana trim (after harvest, the cannabis is trimmed of their 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, which is reportedly driving some cultivators inside the state away from business.