With legalization around the corner, Canada needs more weed

By the time stores across Canada can sell legal weed, there’s a good chance there won’t be enough of it to meet the demand.

Despite most major cannabis producers charting increased inventory of dried flower over the last six months, industry analysts predict that there simply won’t be enough legal weed to go around in the first few months of legalization.

“There will be an initial burst of demand from excited consumers wanting to experience the novelty of it all, but looking at the numbers now, you’re just not going to have enough cannabis available for purchase,” Alan Brochstein, a cannabis financial analyst and founder of online website New Cannabis Ventures, told VICE News.

“This lack of supply scenario basically happened in Nevada and Colorado. People were lining up outside stores, and there was just not enough weed to sell,” Brochstein said.

Nevada’s legal market kicked off last July in a chaotic manner — there were no distributors licensed to move weed from growers to dispensaries, causing long lineups, but no product to sell. When Colorado opened its recreational market in January 2014, the state hadn’t granted enough growing licenses to meet the overwhelming for weed.

Canada’s largest legal weed companies such as Canopy Growth have spent the last two years rapidly expanding their production facilities in order to speed up growth in time for legalization. Canopy’s December 2017 harvest, for instance, yielded 6,444 kilograms of cannabis compared to 5,355 kilograms that March. Medreleaf, too, saw its inventory rise, according to its most recent quarterly financial statements. The company, like many others, only reports its inventory in dollar figures and not grams, making it much harder to gauge just how much cannabis is actually being cultivated.

Health Canada data shows that at the end of 2017, there were 38,927 kg of dried bud and close to 11,000 kg of cannabis oils in inventories of all licensed producers in the country.

“To put that in perspective, assuming 0.3 grams per joint, this would effectively amount to about four joints per Canadian per year,” Brochstein explained.

“With the exception of Canopy Growth, most [licensed producers] have very limited inventory, and recent levels of production suggest that inventories are likely to not grow substantially over the next few months.”

But producers are going to have to simultaneously meet current demand for medical cannabis and the additional demand for non-medical. And patient registrations have been steadily increasing over the past few years. As of last December, there were 269,054 registered medical cannabis patients, a sharp rise from just 174,503 patients in April 2017. The average amount of cannabis authorized for consumption per patient, per day stands at 2.4 grams, which essentially means that roughly 645 kg of medical cannabis is consumed daily in Canada.

Legal recreational demand still remains a mystery, but a recent report from Deloitte predicted that the average adult would spend nearly $800 annually on weed, once it becomes legal. The price of a gram is expected to hover between $8 and $10, although because of the variation in tax rates, prices will differ between provinces.

There are also rumblings, according to Brochstein, that certain licensed producers who have signed exclusive supply agreements with provinces will struggle to deliver product on time. Quebec has supply agreements with six cannabis companies including The Hydropothecary Corp. and Canopy Growth. The province is expecting to receive 62,000 kg of cannabis in the first year of legalization.

“The only thing I can say positively is that it is going to be a slow six months to a year,” says Brochstein. “No one expects that the legal market will be able to fully replace the black market on Day 1.”

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Cover Image: Anthony Tuccitto for VICE News.