You’ve heard mention here of backwardation recently.

It’s a price condition where forwards are offered for less than spot transactions, and that ‘condition’ implies much economically. Today, the Canadian Cannabis Exchange released some of their past data on wholesale price transactions over the past year. And it’s glorious.

The image reveals price differentials of ‘quality’; it reveals some seasonality in late summer; and it reveals there might be some stabilization going forward. Price curves are from the world I’m most familiar with (commodities). <Full disclosure, the CCE has been great to TheCannalysts in interaction, I’ve asked for a few of their reports before. As well, we have spoken with other exchanges concerning instrument design of forward and futures products>

‘High Test’ has come off 25% this year, mid grade off a bit more, with ‘regular’ material (CBD/trim) down the most. It’s insightful, and presents future revenues for industry participants:

The US doesn’t look like this, because the US has many state-level forward price curves. That, are wholly contingent on regulatory activity. You’ve heard us talk about risk in the US being different than Canada……price curves are the way I – or a commodity person approaches risk.

In the absence of a governmental ‘Force Majeure‘ via legislation, each state will present distinct forward markets, and challenges to navigate. Increased activity managing price attracts cost, and poor decision making can keep a bad choice giving for months.

This is primarily for readers interested at looking at cannabis as a commodity. Ultimately, forwards and futures reveal expectation. I’m going to try and hunt down a couple of curves (Colorado and California would be best) and see how regulatory regimes in the States are impacting forwards. GoBlue and I are anticipating a wide array of returns….depending on which State MSO’s are operating in. Price curves are a great measuring stick of expectations around them.

The one presented is settled (not forwards). Yet it’s a good illustration of what’s in front of producers.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative.