It’s no secret that the recreational marijuana industry is continuing to legitimize as more states look into legalizing adult use of its many variants. And a Stamford company is doing its part by treating marijuana as any other commodity – one that requires comprehensive wholesale spot and forward price assessments.
Launched in 2015, Cannabis Benchmarks seeks to bring transparency and efficiency to cultivators, dispensaries, investors, traders and other cannabis market participants through validated production cost data and standardized wholesale price benchmarks.
One might think the firm, headquartered at 1177 High Ridge Road, began as the pipe dream of a bunch of scruffy college students with too much time on their hands. But that is hardly the case as CEO Jonathan Rubin’s background includes five years at S&P Global Platts, the provider of energy and commodities information and a source of benchmark price assessments in the physical energy markets, and another five-plus years as founder and principal of Rubin Energy Advisory, providing consulting services on an array of energy industry issues.
CFO and general counsel Ian Laird – co-founder with Rubin of Benchmarks parent New Leaf Data Services – was a co-founder and partner at merchant banking firm American Working Capital, while several of the company’s other employees also have backgrounds in the commodity data space.
Adam Koh, Benchmarks’ editorial director, does have a cannabis background – he was cultivation manager at Denver-area medical marijuana dispensary Good Meds and has served as an independent cannabis industry consultant – but like the others it falls more on the “business” side of the sector.
“We all feel that it’s important to provide a nuts-and-bolts service that is essential as the industry grows, develops and matures,” Koh said. “It can be very, very difficult to agree on prices when you’re trying to transact with other businesses. You hear all kinds of idiosyncratic stories about how people go about evaluating and paying for product.”
Although he was not available for comment, Rubin made similar remarks when Benchmarks launched its Weekly Report, which includes an assessment of the national wholesale spot price for one pound of cannabis and a six-month forward curve.
“Transparency is essential for markets to function efficiently, and we are proud to be the first price reporting agency to publish national cannabis wholesale spot and forward prices,” he said. “As the availability of legal cannabis pricing data grows and becomes more stable, we will publish differentials for varying potencies, strains, locations and other quantitative and qualitative factors that influence wholesale prices.”
Benchmarks collects public and private transaction and bid-ask data from legal cannabis markets across the country and then applies a proprietary assessment methodology to derive the wholesale spot price. The forward curve is then shaped with forecasts of supply and demand fundamentals, which incorporate multiple participant viewpoints, Koh explained.
Recreational marijuana is legal in 10 states and Washington, D.C. Medical marijuana is legal in 31, including D.C., with CBD oil allowed in four others. Koh said Benchmarks collects data from 17 states – including Connecticut, where legislative efforts to legalize recreational marijuana will apparently fall short this year – as well as from Canada, which fully legalized the commodity last October.
“When we started there were not a lot of people accustomed to sharing this kind of data,” Koh noted. “Now they’re coming to realize the benefits of price transparency industrywide.”
While Connecticut continues to struggle with the issue – a constitutional amendment may show up on next year’s ballot – Benchmarks is maintaining contacts with medical dispensaries and cultivators, and has the machinery in place here and in other states to move forward once such bills are passed, Koh said.
The size of the marijuana market in the U.S. is impossible to pinpoint, Koh noted. “The black market is estimated to be somewhere around $40 billion to $50 billion in the U.S.,” he said.
According to Beau Whitney, vice president and senior economist at cannabis market research and data analysis firm New Frontier Data, the legal marijuana industry grew to $10.4 billion in the U.S. in 2018, compared with $5 billion in 2015, and employed over 250,000 people. Whitney estimated that the combined legitimate North American market could top $16 billion this year.