The current “green rush” has brought along with it an intense focus on large-scale cannabis cultivation. Across the usa and around the globe, we routinely hear stories of companies building bigger and bigger cannabis 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 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 the most useful for the highly competitive application processes that a lot of states use to find out who is allowed to cultivate and dispense in their states. This value is partly derived from the simple fact many populous states initially only grant a limited number of marijuana cultivation operations plan. For example, 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, 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 any population of just 5.5 million people. Competition for such limited permits is fierce, and those companies lucky enough to win one see sky-high values attached to these licenses even before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million before 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 investments in the near term. With artificially limited competition as a result of restricted license classes, cultivators in numerous states are able to control pricing and then sell their product in large volume. A number of these cultivators boost 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 that this trend sustainable? Or are these firms setting themselves up for too long-term failure? As stated inside my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already going to a khhhfj towards large-scale greenhouse and outdoor production, that 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 expense of cannabis in Colorado has dropped from nearly $3,500 per pound at the start 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 their leaves; those leftover leaves are referred to as the “trim” and could be used to produce cannabis products) has become selling for as low as $50 per pound, which can be reportedly driving some cultivators in the state out of business.