Canadian wholesale cannabis prices have started to settle after a 41% drop in 2022, according to the Canadian Cannabis Exchange’s annual Bulk Wholesale Cannabis Pricing Report.
“What we saw throughout 2022 was steady price compression, particularly in Q3 and Q4,” says Erin Butler, VP Corporate Development at the Canadian Cannabis Exchange (CCX). Butler says this was driven by producers needing to get capital at the end of the year and willing to sell out at their vaults at low pricing, leading to the collapse we saw in Q4.
In Canada, the average price per gram for bulk wholesale flower in 2022 was $1.06 per gram on the CCX, representing a decrease of 41% compared to 2021, which saw an average price of $1.80 per gram.
Pricing has since gone back up. The average settled price in January and February 2023 was $1.30 and $1.22 per gram respectively, compared to $0.55 in December and $0.85 in November 2022. Butler says they are forecasting a price of $1.30 per gram in March.
“We’re starting to see trends of unfortunately, some producers leaving the market due to a variety of things, and consolidation in the market,” she says. “Based on that, we’re seeing supply tighten, pushing pricing back up. The demand from international markets is achieving significantly better pricing than we’re seeing domestically.”
Retailers also impact pricing. “Retailers are lowering retail prices, squeezing margins at that level,” says Butler. “This trickles down into the wholesale market, compressing prices.” Higher taxes also squeeze wholesale prices.
Increased efficiency also has an impact. “Four years ago, producers were using a larger space per gram to grow,” she says. “Now those growers are more efficient, working better, getting better yields, and understanding which strains perform best for them.”
Going into the rest of 2023, Butler expects to see a tightening of supply in Q2, and likely prices increase. She thinks we’ll see more forward contracts and businesses committing to longer terms: “A lot of buyers realize they need to commit to prices producers can actually operate at.”
Butler acknowledges that 2022 was a very challenging time. “We’re hoping to see some of the international expansion help bring some injection of higher prices into the sector, albeit it is still a pretty small piece when compared to the domestic market. But we’re optimistic that 2023 will have slightly better pricing than 2022.”