What do you do with five hundred tons of excess weed? Cannabis growers have an oversupply problem

When Canada became the second country in the world, after Uruguay, to legalize cannabis, cannabis companies were considered pioneers of the "green frontier". Their stocks and fortunes skyrocketed. They suddenly became rock stars.

Not enough weed for everyone

With legalization, the long lines to buy legal cannabis have grown longer. Eager to dispel media stories about product shortages, Health Canada adjusted its approval processes and pushed back those with existing assets to the top tier.

But at the end of 2019, the market went into surplus, and that's where it is today.

Major growers began growing more cannabis, outperforming competitors, reducing production costs, and flooding the market with cannabis products.

Then the inevitable happened

Between January and December 2021, Licensed Producers were forced to destroy huge amounts of unsold product: up to a quarter of all dried cannabis produced.

Although 2021 was a record high, Canadian growers continued to destroy huge amounts of cannabis every year, an MJBizDaily analysis found.

Last year, they destroyed a record 425 million grams (or 468 tonnes) of unsold, unpackaged dried cannabis, according to Health Canada data provided to MJBizDaily.< /p> Why does this happen?

One ​​of MJBiz's Matt Lamers theories is that the biggest cannabis producers funded and built far more capacity than the industry needed after the 2018 legalization in Canada.

The most poignant sign of failure, according to The Walrus, may be sitting in warehouses across the country. At its peak in October 2020, there were approximately 1.1 billion grams of cannabis harvested or processed into inventory. 95% of inventory had not been purchased by retailers or wholesalers, and much of it was "expected to be largely unsaleable," Lamers said, whether due to spoilage or excess supply.

Mass destruction

"Most of the largest greenhouse transactions have resulted in direct real estate losses worth millions of dollars and "balance sheet adjustments" worth billions of dollars in inventory and other asset impairments, according to previous MJBizDaily reports," Lamers noted. "In fact, cannabis producers in Canada sold less than 20% of their production between legalization in 2018 and the end of 2020. .

Was it preventable?

Tim Barnhart, president of the National Indigenous Medical Cannabis Association, says many well-funded companies have used their influence to influence regulations in self-serving ways. He cited the example of Bruce Linton, former CEO of Canopy Growth CGC, who lobbied Canadian lawmakers against outdoor cultivation, using a bizarre theory that teenagers could trash a licensed grower via drones.

"If you had medical producers there and indigenous Canadians, I think you would have had a good set of hybrid regulations, but what you have today is is the financialization of [cannabis], and it doesn't work for anyone, not even LPs," Barnhart said. "Done the right way, it can be a lucrative industry. But Canada didn't get it."

Photo: Krakenimages.com and Svetlana Klementyeva by Shutterstock

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