The current “green rush” has brought along with it a powerful focus on large-scale cannabis cultivation. Across the usa and around the globe, we repeatedly hear stories of companies building larger and larger cannabis facility design consultant farms. In Arizona, Colorado, California, and Oregon, cannabis is being cultivated in greenhouses greater than 250,000 sq. ft. that are designed for yielding a lot more than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses within the countless square feet and building similar-sized facilities in Europe, Australia, and elsewhere.
In america, cultivation licenses are often viewed 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 in their states. This value is partly produced from the simple fact many populous states initially only grant a restricted quantity of cultivation licenses. 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 Ny, 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 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 before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million prior to 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 companies that hold them can see large returns on their own investments inside the near term. With artificially limited competition due to restricted license classes, cultivators in lots of states can control pricing and then sell their product in large volume. Many 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 businesses setting themselves up for too long-term failure? As stated in my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already seeing a trend towards large-scale greenhouse and outdoor production, which can be driving prices down in states that do not have strict limits on the variety of licenses they grant. As an example, the typical 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, based on 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 the leaves; those leftover leaves are referred to as the “trim” and can be used to produce cannabis products) is now selling for as low as $50 per pound, that is reportedly driving some cultivators within the state from business.
This trend will simply continue if the federal government’s 80-year try out cannabis prohibition finally comes to an end. Today the cannabis industry is based on individual state markets, where no product can duhbob state lines because of laws prohibiting interstate commerce of a federally illegal product. But when prohibition eventually ends, then interstate commerce will open and businesses will be permitted to import their cannabis from any state in the nation. When this occurs, we are able to 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 perfect for the production of grapes for wine will also ensure it is ideal for large-scale commercial cannabis production. The biggest greenhouse complex in the united states, estimated at approximately 300 acres (approximately 13 million sq. ft.) of greenhouse space, is located in Wilcox, Ariz., since the desert conditions make it ideal to regulate humidity in a greenhouse setting, a thing that adds a massive additional cost to greenhouse operators on the East Coast. These same conditions will pertain to cannabis.