What’s the inventory story? Hard to say, but let’s try anyway.

Retail Volume

Data from WSLCB document released to CASP on January 27, 2015

Harvest volume per month

Data from WSLCB harvest document released to CASP on January 27, 2015

Warning: this post contains calculations from data provided by the WSLCB, without contextual explanation for the December 2014 anomalous sales data; and without a clear definition for retail gram volumes given how difficult that is to include concentrates and edibles. The WSLCB has recently tightened their information provision services and informs me that I should have answers from them in a month or two.

by Dominic Corva, Executive Director

The seasonal glut deriving from fall harvest has a lot of I 502 producer/processors worried about how and when to sell built-up inventory. This post uses WSLCB spreadsheets released to CASP on January 27 to estimate current total market inventory, on the one hand, and retail sales data for projecting inventory clearance on the other. Since national media has decided to throw unsubstantiated, alarming numbers around, I have decided that it is necessary to provide the best educated guess I can based on actual data received from the WSLCB.

The graphs above depict the following information gathered in table form below. Let’s take them one at a time.

Retail Volume per lb Cumulative Total Monthly
July 174.52 174.52
August 517.62 343.10
September 1030.77 513.15
October 1737.89 707.12
November 2584.54 1553.77
December 2845.35 260.81

 

The retail volume data is clearly problematic. The first five months show healthy, even logarithmic growth in the volume of cannabis sold per month. November’s sales more than double October’s, with 1553.77 lbs sold. December’s data, on the other hand, return us to a volume sold that is less than the second month of I 502 retail volume. What should we make of this? On the one hand, we could guess that the way retail volume is calculated changed in December, casting the first five month’s data in doubt. On the other, we could guess that December’s data is off for some other reason. A third option would be to doubt all of the numbers provided.

If we select Option 1, however, we would be forced to project an totally unrealistic logarithmic jump in retail volume of unknown dimensions. Surely, December could not have been a 3,000 lb month. On the other hand, we could project more realistic growth or even at least volume maintenance, and we could pick a number for December that is anywhere from 1500 to 2000 lbs.

If we select Option 2, we might be able to say with a grain of confidence that at least 250 lbs per month had been sold prior to December and we could expect at least that much for January. If this were so, we would have started seeing major inventory build-up in October, but that doesn’t match what we qualitatively know about the market.

If we select Option 3, we have no leg to stand on and no further analysis is possible.

Realistically, Option 1 seems like the safest bet, with a possible accounting date flexibility that put a lot of December’s sales in November, which actually could be more anomalous than December given its huge jump. Let’s split the difference and suggest that if 1800 lbs were disposed of between the two months, and there is growth rather than stagnation, we could have had about 850 sold in November and 950 in December. At that rate, we expect about 1100 lbs to go in January, bringing cumulative sales to date at about 4000 lbs. That’s probably the best we can do right now, so for this post we’ll go with that number.

How much is that out of everything that has been produced?

Harvest Volume in lbs Cumulative Total Monthly
May 0.19 0.19
June 94.82 94.64
July 446.46 351.63
August 1475.72 1029.26
September 3431.60 1955.88
October 10936.10 7504.50
November 25295.07 14358.97

 

This data lacks December, which is a big problem especially since it’s uncertain how much of the fall harvest was recorded by November 11, and how much of it will be recorded for December 11. A liberal approach might take September’s harvest as a baseline for indoor production, although my guess would be less given the light dep crops contributed to the September number. This is where we get into almost SWAG (Scientific Wild-Ass Guess) territory, so please feel free to assign different numbers than the ones I pick, which is 2000 lbs for December and 1000 lbs for January. That would give us approximately 28,000 lbs harvested to date — about 4000 of which have been sold.

The Bottom Line

If the above calculations are in the ballpark, that leaves 24,000 lbs of inventory.  That’s a lot! But, it’s important to understand that at least half of all the cannabis harvested should have been trim and shake, and thus don’t really count the same in terms of inventory. Half that — 12,000 lbs — should count as flower and thus reflect farmgate flower prices. The other half should count as raw material for processing. That includes pre-rolled joints, which are usually not derived from bud. The rest of it is processed into concentrates which are then either further processed into edibles, or sold as concentrates. Right now, it appears that edibles and pre-rolled joints are where most of it is going.

One problem that this poses is, what is the comparison between pre-rolled joints and flowers, in terms of wholesale price per weight? It is entirely possible that pre-rolled joints are being sold at a price per gram that is a little too close to the price per gram of bud flowers, even taking into account the value added by rolling and packaging. It is also entirely possible that this is pure conjecture with so little available information.

But let’s think about that 12,000 lb number. If inventory is around 12,000 lbs, and the retail volume trajectory has us at around 1100 lbs per month right now, with expected growth at about 300 lbs per month, that’s still a serious problem that won’t necessarily clear up this summer as I have previously suggested — especially given the possibility that 1100 lbs per month is about our indoor production volume.

The bottom line is this: we need more processors and retailers to come on line, and fast. I hope the WSLCB understands this, because if we don’t achieve solid growth in those areas of the market then we will not get the summer farmgate price rise that we have been projecting and a whole lot of people will be put out of business. I also hope the legislature understands this, because something needs to be done pronto about bans and moratoria that represent firm ceilings on how many retail stores can open, on the one hand, and how punitive tax structures render the I 502 system unable to capture “recreational” consumers.

It is a bad sign, however, that the WSLCB cannot provide up to date information. This data should be at their fingertips so they can optimize their decision-making capacity. I am afraid that perhaps it is not.

 

 

2 thoughts on “What’s the inventory story? Hard to say, but let’s try anyway.

  1. Just wanted to point out that the 11 November noted in your spreadsheets that you received from the LCB were not labeled as such because it was only describing data through November 11th, 2014. It appearsthat the LCB labeled this column with both the month’s number and the month’s name.

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