Weed

Canada May Not Have Enough Legal Weed for a Year

Cannabis is flying off the shelves in some provinces, but there isn't enough supply to meet the high demand.

by Manisha Krishnan
Oct 29 2018, 5:17pm

photo via VICE

Dan Sutton is blunt about why he thinks licensed producers in Canada don’t have enough legal weed to supply demand right now.

“Most of these guys they’ve been wearing pinstripe suits their whole career. They’ve never spent any time on a farm and they don’t know shit about agriculture,” Sutton, founder of BC-based LP Tantalus Labs, told VICE.

While sales following legalization on October 17 were reportedly massive in some provinces—one chain in Alberta claimed it made $1.3 million in five days—weed’s popularity is a bit of a double edged sword due to supply issues. Several stores have already run out of stock and are having difficulty ordering more cannabis; ditto for online sales on various provincial government websites, where many products are labeled “out of stock.” Even on the medical side of things, licensed producers such as industry giant Tilray and CannTrust, are low on flower for patients.

Legalization has been years in the making in Canada, so why don’t we have enough weed?

Sutton told VICE part of the problem is licensed producers are largely run by people who don’t have a background in farming or cannabis.

He believes publicly traded LPs have hyped up their growing ability in the media to sell stocks, and that “analysts, regulators, bankers, everyone started drinking the Kool-Aid.” But he doesn’t think LPs are anywhere close to mastering how to mass produce decent quality cannabis.

“Most licensed producers still have no idea how to cultivate cannabis in a repeatable way,” he said. He noted Tantalus Labs, which operates a 75,000 square-foot-grow, took two years to design its greenhouse and another two to build it. But he says others in the industry have set up facilities within months, which he doesn’t think is enough time to ensure they are running optimally.

Sutton said there are two types of master growers in the industry: those who came over from the black market and have a deep understanding of the cannabis plant but were likely running lots of smaller grows, and master growers who come from an industrial agriculture background not specific to cannabis.

“The cannabis plant presents unique challenges in that it’s very susceptible to crop loss. Tomatoes wouldn’t have the same risk profile,” he said.

Sutton said cannabis is a sensitive plant that’s difficult to control without pesticides—which is what Health Canada requires. Over or under irrigating, misusing nutrients, powdery mildew, root rot, and botrytis (bud rot) are all things that can ruin the crop.

The institutional knowledge needed to reliably grow massive amounts of cannabis simply doesn’t exist, he said, and the industry won’t figure it out for a while.

“We will no see anything close to equitable supply relative to demand in the next 18 months,” he said. “It will result in the collapse of some of these big companies on the stock market.”

Jordan Sinclair, vice-president of communications for Canopy, the largest legal weed producer in the world, told VICE he disagrees with that assessment.

“I don’t think it’s fair at all to say that LPs aren’t set up to do it. Maybe that person’s LP isn’t set up to do it,” he said.

Sinclair told VICE there are a number of factors contributing the the supply issues, including larger than anticipated demand, logistical issues in getting product onto store shelves, and yields that are still a few months away from being harvested. Canopy has more than 4.3 million square feet of growing space.

“The reality is we’ve been expanding over the last year, but some of the expansions will only be mature or producing at full capacity over the next few months,” Sinclair said, noting he thinks things will stabilize in the next month or so.

Rosalie Wyonch, an analyst with C.D. Howe Institute, a non-profit research firm, told VICE Canada’s legal weed supply is only like to meet 30 to 60 percent of demand for at least a year. But Wyonch said a variety of factors are at play, and “no one is completely guilty and no one is completely innocent.”

Wyonch said the federal government via Health Canada may not have approved enough LP licenses in time for legalization. Though they sped up that process more recently, it may have been too little too late, she said.

Based on LP’s inventories and what they’d been selling historically, it was clear there would be a shortage, Wyonch told VICE. However, “if you took the LPs at their word of what their production could be in the future, it’s a massive oversupply.”

Provinces are the wholesalers of weed across Canada, and Wyonch said they are responsible for securing enough weed, which they may not have done. Quebec in particular only secured half of what demand would be, she said. On Friday, Quebec announced its government run stores will only be open four days a week due to a shortage of supply.

But some LPs have also failed to deliver on what they’ve agreed to supply.

Sutton told VICE that issue could explain why LPs are short on medical cannabis.

“If you miss your obligations to your distributor, you’re in big trouble,” he said. “The truth is there’s a huge incentive for LPs to supply distributors before they supply medical patients and as a result these medical patients are getting the short end of the stick.”

Longtime cannabis advocate Tracy Curley told VICE the supply for patients has run dry. As of Wednesday last week, she said Tilray was only offering one strain of flower.

“I took a look at eight LPs. I managed to find five strains of flower,” she said, noting some higher THC strains are being transferred from the medical supply to the rec market.

While LPs can potentially make more money per gram selling to patients, Curley said strict advertising regulations mean LPs need to get their weed into provincial stores in order to gain brand recognition.

Reached by VICE, Tilray, which had a market cap as high as $20 billion in September but has seen its stock drop by about half since its record high, said it expects to have more flower and oil varieties available “soon.”

“We have received an unusually high volume of orders on Tilray medical cannabis products this month. In anticipation of a potential stock-out of whole flower, we proactively informed patients of this temporary supply interruption which resulted in an additional high volume of orders on oil and capsule varieties, as well,” said Tilray spokeswoman Chrissy Roebuck.

CannTrust, which was also out of flower for medical patients as of Friday, told VICE it is “working hard to fix this urgently” and had increased the number of third-party testing labs it works with in order to restock more quickly.

Wyonch told VICE the supply shortage amounts to part of the growing pains of legalization. In the meantime, she said it will take years to eliminate the black market—one of the primary goals the government has cited for legalization cannabis.

“LPs basically need to grow as much weed possible,” and the government shouldn’t stand in their way, she said.

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