The current “green rush” has brought along with it a powerful focus on large-scale marijuana cultivation. Across the United States and round the globe, we routinely hear stories of companies building larger and larger indoor cannabis grow facility design farms. In Arizona, Colorado, California, and Oregon, cannabis is being cultivated 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 within the an incredible number of sq . ft . and building similar-sized facilities in Europe, Australia, and elsewhere.
In the usa, cultivation licenses are frequently viewed as probably the most valuable in the highly competitive application processes that a lot of states use to figure out who may be able to cultivate and dispense in their states. This value is partly produced from the fact many populous states initially only grant a small quantity of cultivation licenses. For instance, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, with a population over 20 million, granted 7; while Ohio, with 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 these limited permits is fierce, and those companies lucky enough to win one see sky-high values connected to these licenses even 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 license sold for $26 million.
Indeed, in states with limited cultivation licenses, those firms that hold them can easily see large returns on the investments inside the near term. With artificially limited competition due to restricted license classes, cultivators in many states can control pricing and then sell their product in large volume. Most 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 that this 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 seeing a trend 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 normal 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, 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 its leaves; those leftover leaves are known as the “trim” and may be used to produce cannabis products) is now selling for as little as $50 per pound, that is reportedly driving some cultivators within the state out of business.
This trend will simply continue if the federal government’s 80-year test out cannabis prohibition finally comes to a stop. Today the cannabis market is based on individual state markets, where no product can duhbob state lines because of laws prohibiting interstate commerce of a federally illegal product. But when prohibition eventually ends, then interstate commerce will open and businesses will be allowed to import their cannabis from your state in the nation. When this occurs, we are able to expect that large-scale outdoor and greenhouse production will dominate the market as cannabis commodifies. Many of the same environmental conditions that make northern California suitable for the production of grapes for wine will also make it perfect for large-scale commercial cannabis production. The biggest greenhouse complex in the nation, estimated at approximately 300 acres (approximately 13 million sq. ft.) of greenhouse space, is situated in Wilcox, Ariz., as the desert conditions allow it to be ideal to regulate humidity in a greenhouse setting, something that adds a huge additional cost to greenhouse operators on the East Coast. The same conditions will affect cannabis.