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Though wholesale activity on the Cannabase Marketplace had been characterized by stable inventories and steadily dropping prices for much of the year, this trend faded rapidly as summer came to a close.  

Heavy volatility rocked Colorado’s marijuana wholesale market this fall as fluctuating product volumes triggered sudden price swings that often kept buyers and sellers on edge.

This increased instability was driven by a slew of converging factors that placed serious strain on the state’s regulated supply chain. Our analysis will hone in on how these driving forces impacted Colorado’s marijuana wholesale environment this fall, and how much longer they’re expected to persist.

September – October: New Rules Spark Shortage

Though hardly as well publicized as the brief shortage following legalization in early 2014, Colorado’s marijuana wholesale market experienced a significant product dry spell early this fall.

Much of the slowdown was attributed to new microbial testing regulations that went into effect this September; Paired with a shortage of labs suited to perform these tests, untested harvests were forced to remain on the sidelines until backlogs cleared.  Many licensed businesses were caught off-guard by this regulatory bottleneck, which precipitated a rapid tightening of wholesale supplies on the Cannabase Marketplace.  Monthly wholesale flower volume plunged by a massive 87%  in September, and the pace of new listings hitting the Marketplace slowed by two-thirds compared to the month prior.

This sudden drop in supply was accompanied by soaring demand as retailers across Colorado scrambled to keep shelves stocked.  The competitive environment on the Marketplace intensified, as the number of new wholesale requests tripled from the month prior. The rare convergence of sparse supply and  steady demand drove prices to near-record levels by October.  The average asking price for recreational flower rose 36% in September, peaking at $2700/lb.  Asking prices for medical flower rose by 42% in the same period, approaching $2300/lb.

Fall Cannalytics Update

The sense of frenzy in the Colorado wholesale marijuana market  was only heightened by a significant influx of new licensed businesses entering the Cannabase Marketplace. With lab testing backlogs causing widespread delays, and prices reaching levels unseen since early 2014 - both opportunity and necessity drew in over 50 new licensed entities, representing 170+ local cannabis licenses, to the network in a short time.  

November: Supply Rebounds, Prices Lag

After nearly six weeks of keeping wholesalers on their toes, November’s Marketplace activity shows strong signs of a return to normal. Though monthly product volume stands at only 74% of average so far, this marks a significant improvement from the alarmingly tight supply we observed in October. This improvement indicates that the broader recreational supply bottleneck is beginning to clear.

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While a return to more typical wholesale dynamics is finally in sight,  market players appear to remain sensitive to the shifts of recent months. Though asking prices have dropped alongside the increase in the amount of new available wholesale product,  they are dropping at a slower rate (6-8% month-over-month) than they originally rose.  This implies that sellers are substantially less sensitive to downward price pressures, and can be slower to react to changes in the market - an important reminder for buyers engaged in negotiations.  

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Wholesale trim and extract market dynamics typically operate independently from flower, and this month was no exception.  In a break from the wild volume records set late in the summer, monthly extract volume has eased considerably. Nearly 22lbs of extract was posted to the Marketplace since September, and though prices spiked through the peak of the shortage, they have nonetheless remained relatively stable and below historical averages.   

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Market Prospects

Despite the abrupt turnaround in wholesale prices from earlier this year, we fully expect market values to resume their steady decline in the coming months.  As volume continues to pick up,  price competition is expected to intensify to the benefit of buyers.  On the other hand, sellers are predicted to increasingly resist this trend by taking a more active role in shaping the market, much like we’ve seen this month.

Given how rapidly market conditions have proven to shift, sellers appear to be managing listed product more carefully than before.  Curiously, despite tepid volume this month, the pace of new listings hitting the market hit an all-time high in November. By posting smaller amounts of product and updating listings regularly, sellers are better able to adjust asking prices to fluctuations in supply and demand to command top dollar for their listings.

Though the effects of the volatility we’ve observed on the Cannabase Marketplace this fall will  likely fade in the long-term,  it is increasingly clear that short-term factors continue to influence wholesale market dynamics in ways that can greatly impact the bottom line of every licensed business in the state.

With Colorado's marijuana wholesale environment as unpredictable as ever, it's more important than ever to be following up-to-date analytics and information. Be sure to follow the Cannabase Marketplace on Twitter and subscribe to our in-app Cannalytics™ for real-time updates and market insights.

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