The current “green rush” has brought by using it an intense focus on large-scale marijuana cultivation. Across the usa and around the globe, we routinely 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 more than 250,000 sq. ft. that are capable of yielding greater 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 the United States, cultivation licenses are frequently thought of as probably the most useful for the highly competitive application processes that many states use to determine who may be permitted to cultivate and dispense within their states. This value is partly based on the actual fact many populous states initially only grant a restricted variety of cultivation licenses. As an example, Pennsylvania, with nearly 13 million people, only granted 13 licenses; Florida, with a population over 20 million, granted 7; while Ohio, with more than 11 million people, granted 12; and New York, 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 a population of just 5.5 million people. Competition for these particular limited permits is fierce, and the ones 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 prior to the company had seen a dime in revenue. Similarly, a pre-revenue Ny license sold for $26 million.
Indeed, in states with limited cultivation licenses, those companies that hold them are able to see large returns on the investments within the near term. With artificially limited competition because of restricted license classes, cultivators in numerous states are able to control pricing and 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 greater than traditional commercial agriculture.
But is it trend sustainable? Or are these companies setting themselves up for very long-term failure? As mentioned within my previous column “Are Canada’s Cannabis Companies Overextended?”, we’re already visiting a trend towards large-scale greenhouse and outdoor production, which is driving prices down in states which do not have strict limits on the quantity of licenses they grant. For example, the typical wholesale expense of cannabis in Colorado has dropped from nearly $3,500 per pound at the start of legalization in 2013 to roughly $1,012 a pound on April 1, in accordance with the Colorado Department of Revenue. In Oregon, in which the state ramped up licensing after early product shortages, wholesale marijuana trim (after harvest, the cannabis is trimmed of its leaves; those leftover leaves are called the “trim” and could be used to produce cannabis products) is currently selling for only $50 per pound, which can be reportedly driving some cultivators within the state from business.
This trend will simply continue if the federal government’s 80-year experiment with cannabis prohibition finally involves a conclusion. Today the cannabis market is defined by 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 likely be permitted to import their cannabis from your state in the nation. When this occurs, we could expect that large-scale outdoor and greenhouse production will dominate the current market as cannabis commodifies. Lots of the same environmental conditions that make northern California perfect for the production of grapes for wine will also allow it to be ideal for large-scale commercial cannabis production. The largest greenhouse complex in the united states, estimated at approximately 300 acres (approximately 13 million sq. ft.) of greenhouse space, is found in Wilcox, Ariz., as the desert conditions allow it to be ideal to control humidity in a greenhouse setting, something which adds a huge additional cost to greenhouse operators on the East Coast. These same conditions will pertain to cannabis.