The current “green rush” has brought along with it a powerful focus on large-scale cannabis cultivation. Across america 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 cultivated in greenhouses greater than 250,000 sq. ft. that are designed for 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 thought of as probably the most useful for the highly competitive application processes that many states use to figure out who may be able to cultivate and dispense inside their states. This value is partly produced from the actual fact many populous states initially only grant a restricted 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 City, 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 such limited permits is fierce, and those companies lucky 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 a dime in revenue. Similarly, a pre-revenue New York City license sold for $26 million.
Indeed, in states with limited cultivation licenses, those companies that hold them can see large returns on the investments in the near term. With artificially limited competition due to restricted license classes, cultivators in numerous states can control pricing 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 this trend sustainable? Or are these firms setting themselves up for long-term failure? As mentioned in 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 that do not have strict limits on the variety of licenses they grant. For example, the normal 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 the state ramped up licensing after early product shortages, wholesale marijuana trim (after harvest, the cannabis is trimmed of the leaves; those leftover leaves are known as the “trim” and could be used to produce cannabis products) is now selling for only $50 per pound, which can be reportedly driving some cultivators in the state away from business.