RE: A Marijuana Stock I am Watching
Thanks for a great post! I've been watching on steem for macro economic analysis from someone who actually works in the financial industry. Followed and upvoted.
About the post, here in norcal I notice things about the cannabis industry, and that it seems only the illegal weed is leaving the state. If Aurora is US based, wonder what state and if they've got a means to get it beyond where ever they're from. The local producers here are getting crushed as prices (leading into harvest) are at about $500 per pound. Aka, all govt fees paid, no profits at all. Here its a terrible time to be a producer, and I can't see that change over the next couple years. Unless they can get it out of the state, but I can't see why Kansas or Connecticut would let their industry be flooded by cheap cali outdoor.
One to watch for sure, the extractors seem to be next. There is a barrage of new money landing locally to build all these facilities that seem significantly larger than the entire california consumption. I really expect it to follow the cottonseed boom of the early 1900's in the SE and in five years plan to pick up mas used equipment on the cheap.
$500 per pound is profitable if you are a corporation with machines doing most of the labor... Great comment & valid points... Thats why we invest
$500 per pound cannot pay the bills when there is a $5000 /100 plant up front annual fee, plus taxes of $8? per ounce. It literally all goes to the government and rentier. Only chance is for those who have clear title to the land outright, or another way to pay agricultural bills, like, say, a vineyard.
Lets say you know what your doing and you get 5-10lbs a plant 1 time a year... @ 100 plants that is either 500 or 1,000 lbs a year. Lets say you are in Oregon and its closer to 5. At $500.00 per 500 lbs that is 250,000 and after tax of $5,000 & $8 per oz of $64,000 you still can earn near $200,000 per year. I am guessing it is still more profitable than growing potatoes
If post harvest prices stay around $500, I agree. Broccoli growers would love those margins. Or, artichoke growers in Monterey, who seem to have the perfect climate, and are ready and willing to switch on masse.
Last year's prices in January were closer to $100 (untrimmed), restaurants in Garberville closed up, and the local coin dealer had oodles of precious metals for us to choose. Maybe it will be different this time? I think we're going to need to see a bunch of people get out before the prices stay remotely constant, and I don't think we're there yet. Lots of places for sale in Willits, but the prices haven't really dropped yet. Maybe by this spring? Seems so inevitable somehow.
As with any growing industry, I'm sure we will see periods of lethargic growth. Everyone expecting the Cannabis industry to be a play without long term volatility is mistaken. Afterall, these companies are commodity companies and are at the mercy of the commodity price of cannabis and hemp, and the mercy of governments and taxation. We will most likely see the price of Cannabis suffer as supply floods the market from a mass of suppliers. The governments can prevent this by only handing out a fixed amount of grower licenses.
We'll see how it plays out. If you can stand the volatility, it's a great land grab to be apart of, I believe.
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Having deep pockets going in, the key to surviving the highs and lows. Prices will rebound to where the farmer gets $400 - $450 per pound (after taxes) and boutique production will follow the Napa eco-tourism model. Inevitably there will be a market for the refined blended commercial extracts, but from the street down here, it just seems like MJ corporate stocks follow the greater fool theory before principles of sound money.
Watch the price of real estate in Garberville CA. When that hits a relative low, then I think that is a good time to check out the industry. Although, if Mike Pence has some grand awakening and embraces the medical potential, then being invested one day prior would likely be a major windfall. :)