The current “green rush” has brought with it a powerful focus on large-scale cannabis cultivation. Across the usa 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 cultivated 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 within the millions of sq ft and building similar-sized facilities in Europe, Australia, and elsewhere.
In america, cultivation licenses are frequently thought of as probably the most valuable in the highly competitive application processes that a lot of states use to find out who may be permitted to cultivate and dispense inside their states. This value is partly derived from the fact many populous states initially only grant a small variety of cultivation standard operating procedures. For example, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, using 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 for a population of just 5.5 million people. Competition for such limited permits is fierce, and people 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 a dime in revenue. Similarly, a pre-revenue New York license sold for $26 million.
Indeed, in states with limited cultivation licenses, those businesses that hold them can see large returns on their own investments in the near term. With artificially limited competition due to restricted license classes, cultivators in lots of states can control pricing and sell their product in large volume. A number of these cultivators grow 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 companies setting themselves up for very long-term failure? As mentioned in my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already visiting a khhhfj towards large-scale greenhouse and outdoor production, that is driving prices down in states that do not have strict limits on the number of licenses they grant. For example, the average wholesale cost 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, 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 currently selling for only $50 per pound, that is reportedly driving some cultivators inside the state from business.