The present “green rush” has brought with it an intense 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 more than 250,000 sq. ft. that are capable of yielding more than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses within the millions of sq ft and building similar-sized facilities in Europe, Australia, and elsewhere.
In the United States, cultivation licenses are frequently considered by far the most useful for the highly competitive application processes that most states use to figure out that is 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 quantity of cultivation standard operating procedures. For instance, 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 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 to get a population of just 5.5 million people. Competition for these particular limited permits is fierce, and those companies fortunate enough to win one see sky-high values mounted on these licenses before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million ahead of the company had seen a dime 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 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 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 this trend sustainable? Or are these businesses setting themselves up for very long-term failure? As i have said in 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 which do not have strict limits on the quantity of licenses they grant. As an example, the average wholesale price 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, 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 their leaves; those leftover leaves are called the “trim” and may be used to produce cannabis products) is currently selling for as little as $50 per pound, which can be reportedly driving some cultivators inside the state away from business.