Marijuana Business Factbook 2019

186 Marijuana Business Factbook 2019 Chapter 3 | Financial & Operational Data: Wholesale Cultivators © Copyright 2020, Marijuana Business Daily , a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call (720) 213-5992, ext. 1. CHART 3.05: Weekly Wholesale Cannabis U.S. Spot Index: January 2016 Through December 2018 Overproduction has resulted in a downward trend in wholesale cannabis prices, with those prices bottoming out each year in the weeks following the October outdoor harvest. Between the fourth quarter of 2016 and the fourth quarter of 2018, U.S. wholesale spot prices decreased by 26% from $1,486 to $1,094. As with the previous chart showing Oregon’s THC surplus, the situation worsened between 2017 and 2018. The wholesale market has yet to reach its floor, so price declines could continue as marijuana trends toward commodity pricing. Razor-thin margins, heavy competition and plummeting wholesale prices force cultivators to adjust their operations in several ways. Operators may: • Exit the market. • Seek out new markets for existing products. • Look for efficiencies to cut cost of production. As this pricing trend continues, cultivators will have to put effort into reducing costs of production. Energy-intensive ― and, therefore, expensive ― indoor cultivation is increasingly financially inefficient in the face of declining prices and competition to produce high-quality flower. HVAC systems and lighting systems are two of the highest costs for indoor production and are directly tied to one another. While high-pressure sodium (HPS) lights come with a lower up-front cost, they require more energy to run and give off more heat than light-emitting diodes (LEDs), increasing the need for HVAC systems to maintain ideal temperatures and potentially requiring a grow area with taller ceilings to prevent plants from reaching hot lights. However, some growers prefer the light spectrum from HPS lights, while others believe plants respond positively to lights that generate some heat. Cost-conscious cultivators can complete a cost-benefit analysis of replacing HPS lights with LEDs.