Canada Already Setting the Blueprint for Cheaper Cannabis

Although the country just became the second nation to legalize marijuana earlier in 2018, Canada has already began to become an example for the rest of the world. While the United States has been tentative about legalizing marijuana, our neighbors up North have figure out how to do so in an effective manner. The country has learned that it did not need to create completely new facilities to produce cannabis, yet can adjust it’s current infrastructure to do so. Greenhouses that once were used to grow consumer products are now being restructured with air filters and light-blocking shades to create the perfect conditions for cultivating marijuana.

“We haven’t changed the footprint… We’ve just changed the crop.” – Rob Hill, CFO of Emerald Health Therapeutics, 2018

Many tomato and pepper plant growers have already began to replace their crops with cannabis plants. According to USA Today, these new, large scale operations are the future of mass production of marijuana. Obviously the goal of most producers of marijuana is to make money, however, these large-scale operations have real implications on the affect of the black market as well. According to Trevor Hughes, these highly sophisticated operations will drive the price of marijuana so low that black marketeers would have no choice but to give up.

Apart of their legalization of marijuana, Canada requires that cannabis be grown indoors by only licensed providers. Companies such as Emerald Health Therapeutics, that grows marijuana in Delta, Canada, have not looked at the regulation as an obstacle, but an opportunity. The company partnered with a longtime produce operation, Village Farms, in a joint venture of their own. Pure Sunfarms, a product of Emerald Health Therapeutics and Village Farms, is already capable of producing ridiculous amounts of marijuana. According to Trevor Hughes,

“Pure Sunfarms [is] capable of producing a staggering 82 tons of marijuana annually from the 1.1 million square foot greenhouse complex about 30 minutes south of Vancouver.” – Trevor Hughes, USA Today, 2018

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Drone image of the Pure Sunfarms cannabis greenhouse operation. The complex is just 30 minutes from Vancouver.

Countries all over the world are watching Canada very closely after their legalization of marijuana. The financial implications of the new law can be ground breaking for many countries around the world. According to Hughes, Trevor Hughes states that just three years ago, wholesale marijuana was selling for $2,000 per pound. Wholesale marijuana currently sells for $600 a pound on average in a few states that have legalized it in the USA, making it far more financially valuable than any other crop. When analyzing on per-plant profit margin basis, lettuce, tomatoes, potatoes, and even almonds are all usually measured in fractions of a penny.

 

Since its cultivation is widely still illegal in many places in the US, many farming operations have decided to stay away from marijuana, fearing potential prosecution. By Canada making it legal nationwide, they actually combat the problem of marijuana related crime face-to-face. With the ability of many to produce marijuana legally, the country has already driven down the price of cannabis. By driving down the price, experts agree that it will assist the Canadian government in ridding itself of cartels and other black-market dealers. According to BDS Analytics,

“In Colorado, for instance, the price of smokable “flower” has dropped 40 percent since January 2014, from $7 a gram to $4.19 a gram today,” – BDS Analytics, 2018

As laws continue to grow with the industry, it is clear that Canada is just the beginning of what we will see with marijuana growth. Hughes states that indoor growers of legal and black-market marijuana consumed 4.1 million megawatt-hours of electricity in 2017. That number is roughly equal to the total amount of electricity generated by the Hoover Dam, according to New Frontier Data. Yes, the Hoover Dam! Though it may be expensive to grow indoors, those who harvest the plant can cultivate year-round. In an industry with constant demand and a growing consumer base, this is extremely important for those who are not located in warm weather climates.

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Photo of Greenhouses filled with marijuana at Pure Sunfarms in Delta, Canada

Since regulation has begun to flow through the United States and to our neighbors above the border, the price of wholsale marijuana has continued to fall. As we begin to develop proven tactics and effective methods of cultivating the plant, I am sure that the trend will tend to continue. I’m also very curious to see what the ultimate price floor for wholesale marijuana will be. As more and more producers come into the market, prices will be undercut and consumers will have less loyalty. At it’s current price, marijuana is still considered a boutique crop, however, as the market grows it will be interesting to see its value change. The following graph from Cannabis Benchmarks is a great visual of the downward sloping price curve that currently characterizes legal marijuana.

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Information from states that have already legalized marijuana in the USA. Source: Cannabis Benchmarks

Let us know your thoughts on the current state of pricing in the cannabis industry!

Article: Future of Legal Marijuana by USA Today

 

O Canada: The second nation to legalize marijuana

Although Canada neighbors the United States, it is unfair to assume that the country and its constituents share our same values. While 30 states in America have legalized medical marijuana, only 9 of those states (including the District of Columbia) have legalized recreational marijuana. On the opposite side of the border, our Canadian neighbors have adopted a policy that legalizes the use of marijuana everywhere, not by provinces and territories. In June of 2018, Canada became the second country in the world to legalize recreational marijuana use, behind Uruguay who did so in 2013.

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Current map of the states that have legalized recreational marijuana and medical marijuana. 30 states have legalized medical marijuana and 9 have legalized recreational marijuana.

The Cannabis Act, also known as Bill C-45, comes from a campaign pledge from Canada’s Prime Minister, Justin Trudeau, to keep marijuana away from underage users and to reduce the related crime. The Cannabis Act was first introduced on April 13th, 2017 and was passed in the House of Commons in November of the same year. Bani Sapra, a writer for CNN, notes that,

“Although the Canadian government had initially stated its intent to implement by July 2018, provinces and territories, who will be responsible for drafting their own rules for marijuana sales, have advised that they would need eight to 12 weeks after the Senate approval to transition to the new framework.” – Bani Sapra, CNN, 2018

While Donald Trump utilizes Twitter to provoke response or simply to tile up his constituents, it is clear that the prime minister of Canada uses Social Media in a much more positive manner. On July 19th, after the bill’s passing, the prime minister took to Twitter to share his appreciation for the bill and his optimism that it will be the answer that they have been looking for all along.

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Justin Trudeau, Canada’s Prime Minister, tweets his support for the Cannabis Act, also known as C-45

The justice minister, Jody Wilson-Raybould, was also in support of the bill, even stating that it is a, “… historic milestone for progressive policy in Canada”. Trudeau and Wilson-Raybould are consistent in their belief that the bill will help to protect the youth from cannabis risk, while keeping profit out of the reign of one-off criminals and factions of organized crime. Though the country has chosen to legalize marijuana use nationally, there are still rules and regulations on how to do so within the confines of the law. Bani Sapra provides a great list in her article on CNN for those that are interested in consuming marijuana in a legal fashion:

  • Adults can carry AND share up to 30 grams of legal marijuana in public.

  • Adults are allowed to cultivate up to FOUR plants in their household and make products such as edibles for personal use.

  • Consumers are expected to purchase marijuana from retailers regulated by provinces, territories, or federally licensed products.

  • Marijuana WILL NOT be sold in the same location as alcohol or tobacco.

  • Canadian government has also implemented changes to the countries impaired driving laws, to create repercussions for operating a vehicle under the influence of cannabis.

The Cannabis Act set the floor for the minimum age of a consumer to be 18 years old, opposed to the 21 years that the United States uses for both alcohol and cannabis consumption. The production, distribution, or sale of cannabis as a minor will be constituted as an offense. Provinces and territories are free to increase the minimum age of consumption, however, the Canadian government has made it clear that 18 is the desired age that will make C-45 an effective law. Related image

Although the Canadian government has been consistent in voicing it’s praise for the bill in order to decrease cannabis related crime, I am sure that that is not the only desired result. By legalizing marijuana nationwide, I am positive that the Canadian government is aware that they are officially entering a financially rewarding industry. The Cannabis Act, or C-45, is expected to spark a billion-dollar industry in Canada. Sapra notes that total spending on marijuana can surge up to 58%, particularly because consumers will be willing to pay a premium for legal access to the component.

On our side of the border in the United States, it is clear that the marijuana industry is growing, even without nationwide legalization. Sapra states that,

“In the United States, BDS Analytics estimated that the pot industry took in nearly $9 billion in sales in 2017. The revenue from the sales is equivalent to the entire snack bar industry.” – Bani Sapra, CNN, 2018

Our Canadian neighbors have taken advantage of the growing industry early, and many Canadian companies have begun to become the center of United States investment. Canopy Growth Corp., Aphria Inc., and Aurora Cannabis Inc., have begun to lead the early charge in mass production and distribution. Though the United States and Canada differ, one thing is clear: Canada has figured out an effective bill that decriminalizes marijuana, while protecting the youth from cannabis use at too early of an age. Possibly the United States will take a page out of their book, yet it seems that there is a much more uphill battle for legal marijuana here in the United States.

Please comment your suggestions, ideas, or viewpoints on the current state of legal marijuana adoption in America. Why do you think it hasn’t happened?

Article: Canada Becomes Second Nation in the World to Legalize Marijuana