The current “green rush” has brought by using it an intense focus on large-scale cannabis cultivation. Across the United States and round the globe, we repeatedly hear stories of companies building bigger and bigger marijuana grow facility design farms. In Arizona, Colorado, California, and Oregon, cannabis is being cultivated in greenhouses greater 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 in the millions of sq . ft . and building similar-sized facilities in Europe, Australia, and elsewhere.
In the usa, cultivation licenses are often considered the most valuable in the highly competitive application processes that a lot of states use to find out that is permitted to cultivate and dispense in their states. This value is partly based on the simple fact many populous states initially only grant a restricted variety of cultivation licenses. 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 Ny, using 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 limited permits is fierce, and those companies lucky enough to win one see sky-high values mounted on these licenses even before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million ahead of 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 see large returns on the investments inside the near term. With artificially limited competition due to restricted license classes, cultivators in lots of states are able to control pricing and 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 that this trend sustainable? Or are these firms setting themselves up for too long-term failure? As mentioned in my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already going to a trend 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. For instance, the normal wholesale cost 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 their leaves; those leftover leaves are called the “trim” and could be used to produce cannabis products) is now selling for as low as $50 per pound, which can be reportedly driving some cultivators within the state out of business.
This trend will simply continue once the federal government’s 80-year test out cannabis prohibition finally involves an end. Today the cannabis sector is defined by individual state markets, where no product can duhbob state lines because of laws prohibiting interstate commerce of the federally illegal product. But when prohibition eventually ends, then interstate commerce will open and businesses is going to be permitted to import their cannabis from any state in the country. When this happens, we can expect that large-scale outdoor and greenhouse production will dominate the marketplace as cannabis commodifies. Most of the same environmental problems that make northern California suitable for producing grapes for wine may also ensure it is ideal 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., since the desert conditions make it ideal to regulate humidity in a greenhouse setting, something which adds an enormous additional cost to greenhouse operators on the East Coast. The same conditions will apply to cannabis.