The current “green rush” has brought along with it an intense focus on large-scale cannabis cultivation. Across the United States and round 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 more 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 United States, cultivation licenses tend to be thought of as probably the most valuable in the highly competitive application processes that many states use to figure out that is permitted to cultivate and dispense inside their states. This value is partly based on the fact many populous states initially only grant a small variety of marijuana cultivation operations plan. For instance, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, with a population over 20 million, granted 7; while Ohio, using more than 11 million people, granted 12; and New York, having 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 any population of just 5.5 million people. Competition for these limited permits is fierce, and people companies fortunate enough to win one see sky-high values connected to these licenses 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 New York City license sold for $26 million.
Indeed, in states with limited cultivation licenses, those firms that hold them are able to see large returns on the investments inside the near term. With artificially limited competition due to restricted license classes, cultivators in lots of states can control pricing then sell their product in large volume. Many of these cultivators boost their product in state-of-the-art indoor warehouses with clean-room environments that resemble pharmaceutical production facilities more than traditional commercial agriculture.
But is it trend sustainable? Or are these businesses setting themselves up for too long-term failure? As i have said 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 which do not have strict limits on the variety of licenses they grant. For 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, in accordance with 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 referred to as the “trim” and may be used to produce cannabis products) has become selling for only $50 per pound, which is reportedly driving some cultivators inside the state from business.