Cannabis Cultivation Will Be a Race to the Bottom

The current “green rush” has brought with it an intense focus on large-scale cannabis cultivation. Across the United States and around the globe, we routinely hear stories of companies building larger and larger cannabis farms. In Arizona, Colorado, California, and Oregon, cannabis is being cultivated in greenhouses in excess of 250,000 sq. ft. that are capable of yielding more than 50,000 pounds of flower. While large-scale Canadian producers are building greenhouses in the millions of square feet and building similar-sized facilities in Europe, Australia, and elsewhere.

In the United States, cultivation licenses are often viewed as the most valuable in the highly competitive application processes that most states use to determine who is allowed to cultivate and dispense in their states. This value is partly derived from the fact many populous states initially only grant a limited number of cultivation licenses. For 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, 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 fortunate enough to win one see sky-high values attached to these licenses even before they become operational. In Florida, a coveted cultivation/dispensary license sold for $40 million before the company had seen a dime in revenue. Similarly, a pre-revenue New York license sold for $26 million.

– Read the entire article at Forbes.