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Producers are stockpiling weed ahead of legalization — but it probably won’t be enough

Canadian licensed producers have barely enough cannabis to meet two weeks of demand and shortages are expected.

by Martin Patriquin
Apr 16 2018, 8:02pm

Canadian Press

Licensed weed producers in Canada are hoarding massive amounts of medical marijuana in their inventories in anticipation of selling it on the recreational market. But even these stockpiles won’t likely come close to meeting expected demand once weed becomes legal later this year.

Between April and December 2017, stockpiles of dried marijuana held by Canada’s licensed producers nearly doubled, to about 39,000 kilograms, according to Health Canada statistics. Producers have stashed away just over 11,000 kilograms of Cannabis oil in the same time period—more than double the inventory from eight months earlier.

They are doing so to ensure Canadians have plenty to puff, vape and otherwise consume as of “Day Zero”—the day, as yet undetermined, when doing so for shits and giggles becomes legal in the country for the first time in nearly a century.

The recreational market is massive. A 2016 Parliamentary Budget Office (PBO) report said Canadians will consume as much as 1,017 metric tons of the stuff a year. A Deloitte report from the same year said the market value of cannabis - including taxes and tourism-related revenue - could reach $22.6 billion annually.

Fulfilling the demand will be a challenge, however. If the PBO numbers are correct, the current weed stockpile, which sits in vacuumed-packed bliss under lock and key amongst Canada’s 97 licensed producers, would last less than two weeks. “The market is about to explode,” said Jordan Sinclair of Canopy Growth, the largest marijuana producer in the country. The company recently sent 100,000 clones to British Columbia to help meet the demand in that province.

While stocks are unlikely to run completely dry , the relatively low reserves of cannabis will likely lead to shortages of some of the more popular strains in the initial days and weeks of legalization. “Depending on the province, the coverage is going to be spotty. There won’t be enough strains and depth to go around,” says David Hyde, an Ontario-based consultant who advises cannabis growing companies.

Another issue, at least as far as the government is concerned, is sizing up the demand. The size of recreational weed market, having been illegal since 1923, is hard to measure . Government estimates vary wildly as a result, from 400,000 kilograms more than a million kilograms every year. In short, Health Canada doesn’t really know how much legal weed Canadians will consume.

At least one American expert thinks Canada’s supply issues have been greatly exaggerated. In an interview with VICE Money late last year, Miles Light, co-founder of the Denver-based Marijuana Policy Group (MPG), which provides cannabis-specific policy advice to the private sector and governments, estimated Canadian producers would have 500,000 kilograms of “flower-equivalent” ready to supply the recreational market before the end of 2018. (By “flower-equivalent”, Light means not just the “bud”, but every part of the cannabis plant that can be used in consumption.)

Supply problems, should they prove real, are part mother nature, part logistical and part bureaucracy. It takes up to 18 weeks to grow, harvest and cure a marijuana crop from scratch; building up supply isn’t just a matter of adding more production, but of waiting for the stuff to grow.

Meanwhile, there are only so many proficient greenhouse builders and advisors who can properly set up a reliable cannabis growing operation—and most of them are booked solid through the end of the year and beyond, says Hyde.

Then there is the matter of securing a license to legally grow and sell weed. Up until recently, securing the paperwork has taken upwards of three years in some cases. Aware of the problem, Health Canada has since streamlined the licensing process to get more producers up and running and added more staff to process license applications. The ministry has also shortened the application review stage and allowed licensed producers to store as much marijuana as their vaults will hold. (Until recently, growers were limited to a maximum yield.)

The number of Licensed Producers has skyrocketed, from 37 in October 2016 to more than 100 today. And the federal government says it may relax the stipulation requiring its licensees have no criminal record. This would be an important step, as many of the most experienced growers in the country have had brushes with the law.

“Marijuana charges aren’t a complete barrier to a license. If you’re talking about simple possession, we know that half a million people have been charged with this offence,” said federal Member of Parliament Bill Blair, who leads the country’s legalization task force, in a July 2017 interview.

Ensuring a steady and voluminous supply of marijuana isn’t just about good customer service. For provincial and federal governments, it’s a matter of keeping would-be legal weed users from returning to the black market. Already relatively cheap and ubiquitous, the black market will continue to thrive if legal weed is either too expensive or difficult to obtain.