400 tonnes of marijuana piled up at Canadian hemp companies’ warehouses
According to the Canadian government, about 400 tons of marijuana have accumulated in hemp enterprises’ warehouses. Due to the overabundance of products on the market, cannabis prices are declining.
Supply significantly exceeded demand for hemp
Marijuana producers overestimated the demand for hemp and underestimated the potential of the black market, which accounts for approximately 55% of the total cannabis trade. A mistake in the marketing strategy led to two consequences:
- current marijuana reserves last for 2.5 years;
- from September 27 to November 22, the average price of one gram of marijuana fell by 10.7% – from 7.20 to 6.43 Canadian dollars (from 345 to 308 rubles).
To sell surplus products and lure customers of illegal dealers, HEXO began selling 1 ounce of marijuana (28.35 grams) for $ 95.18, so a gram can be bought for $ 3.36 (214 rubles). However, the cheapest marijuana is sold by the Cronos Group: the company offers to buy a gram for 3.58 Canadian dollars (172 rubles).
Farmers grow too much cannabis
In the third quarter of 2019, Canopy Growth produced marijuana by 40.57 tons. Aurora Cannabis, the company’s main competitor, produced 41.44 tons. According to Cannabis Benchmarks, in the first year since the legalization of hemp (from October 17, 2018, to October 17, 2019), only 105 tons of cannabis were sold.
Analysts from ArcView and BDS Analytics predict a three-fold increase in the recreational hemp market until 2024. Over the past year, licensed sellers have earned $ 1.9 billion in marijuana and $ 2.3 billion in shadow dealers. The legal market lags behind black due to the difference in the price of products and insufficiently developed infrastructure. Ontario, the most populous province, has 24 stores serving 14.5 million people, so far from all residents of the region have access to retail outlets.
The cannabis industry is pinning its hopes on the Cannabis 2.0 program, which seeks to lift the ban on food and beauty products with cannabinoids. Cannabis Benchmarks employee Jonathan Rubin noted that a large amount of plant material is used in the production of hemp concentrates, and this will cause a decrease in stocks of marijuana in warehouses. However, new cannabis-based products will not appear on store shelves until mid-December.