If Canada’s licensed cannabis producers continue ramping up production at their current exponential pace, there will be more than enough pot to meet the government’s projected demand by the end of 2019, predicts one cannabis researcher who conducted an analysis of the government’s most recent data. While some have suggested shortages in the sector could last for years, Brock University professor Michael Armstrong argues that barring any unforeseen circumstances that supply concerns will be resolved much more quickly than that. Total legal production of cannabis began drastically increasing about six months before legalization, Armstrong notes, as evidenced by how quickly cannabis inventories were growing.

Business failures and consolidation failed to stop Canada’s stockpile of unsold cannabis from reaching a new high in the final quarter of 2022, the latest sign that shrinking prices and margins could continue to squeeze companies. Packaged and unpackaged inventory of dried cannabis jumped to an all-time high of 1.47 billion grams (3.2 million pounds) as of December 2022, according to the latest data from Health Canada, which tracks overall unsold stockpiles of licensed producers, wholesalers and retailers. That’s an increase from 1.3 billion grams in December 2021. Last year, Aurora Cannabis closed its flagship Aurora Sky facility in Edmonton, Alberta – one of the biggest in Canada.

An industry group representing Canada’s biggest cannabis companies is appealing to Prime Minister Justin Trudeau to help address some of the industry’s most persistent challenges. In a letter sent to the prime minister the Cannabis Council of Canada highlighted a number of areas in need of improvement, including a tax on medical cannabis and banking issues that are stymieing legal businesses. The Council asked the incoming ministers of public safety, finance, border security and organized crime reduction to discourage the proliferation of illegal online cannabis dispensaries. “We recommend that the government prioritize the closure and removal of both illegal brick and mortar stores, and actively seek out and shut down illegal online cannabis dispensaries,” the letter reads.

Cannabis producers in Canada have sold less than 20% of their production since the country launched adult-use sales in October 2018, according to an MJBizDaily analysis.The newest data – which runs through 2020 – implies that most of the cannabis produced from 2018 through last year was either stored in inventory or destroyed, and less than one-fifth ended up in retail stores. That disconnect likely helps explain how the largest Canadian cannabis producers, which account for most of the industry’s production, together have lostmore than 11 billion Canadian dollars ($8.8 billion) cumulatively. Some industry experts blame poor-quality cannabis for the sales shortfall.

Cannabis entrepreneurs in Canada are increasingly turning to smaller micro-cultivation facilities to manage costs and produce higher-quality marijuana at a time when the industry is facing a glut of “standard” product and falling prices. That shift ultimately could help shrink some of the Canadian cannabis industry’s current supply glut, given that micro-class licensees operate smaller cultivation facilities. At the end of 2022, Canada’s total indoor growing area was 28% lower than the all-time high reached in 2020. Consumers appear to be weighing price sensitivity with a desire for the highest-quality products they can afford at a particular price point.

Canadian cannabis wholesale prices tumbled more than 40% last year as companies continued to work through stubborn supply gluts and struggling cultivators chose to sell off their unsold marijuana instead of destroying it. Looking at the latter part of 2023, some industry experts see the oversupply of wholesale cannabis easing somewhat as more licensed producers leave the market and the remaining cultivators adjust growing volumes to match demand. “Oversupply and excess capacity have resulted in high-quality flower being widely available and sold well below the marginal cost of production,” Zach George, the CEO of cannabis producer SNDL, said in a news release this week.

Salaries paid out by cannabis associations will have to be approved by the regulator to ensure they are in line with market rates, ARUC boss Leonid McKay has said. The Authority for the Responsible Use of Cannabis CEO said that the measure would be included in a legal framework that not-for-profit associations would need to adhere to and was intended to dissuade applicants seeking to turn their associations into money-making ventures. ARUC will be assessing salaries against comparable ones within the voluntary sector and any association that tries to game the system by paying out ridiculous salaries will have its licence revoked, he said. (See also: Smoking ban at cannabis clubs should be lifted, new authority head Leonid McKay urges)

The cannabis bankruptcy filings are starting to roll in. Already plagued by a tough regulatory environment, disappointing sales and capital markets that had closed to all but the strongest companies, the industry is now facing a pandemic-related collapse in stock markets and ever-shrinking financing options. Pot companies completed two capital raises worth just US$5.6 million the week ended March 27, according to data from Viridian Capital Advisors. That’s the lowest level of activity this year and compares to 17 capital raises worth $169 million for the same period in 2019. (See also: Global stock meltdown is a disaster for cannabis industry already on the brink | 'Extinction-level event' looms for some cannabis companies as cash dwindles)

Did dagga growers influence MPs? The withdrawal of the Opium and Habit-Forming Drugs (Amendment) Bill No.06 of 2020 in the House of Assembly, has raised more questions than answers. Dagga grower Jama said he would continue advocating that dagga should not be legalised and that members of the Royal Eswatini Police Services (REPS) should continue destroying it but not all of it. “By destroying the dagga, the police control the price of dagga from dropping further,” said Jama. Another dagga grower, Musa, also said he was pleased that the Bill had been withdrawn. He said this was good because it meant that the value of the dagga would continue to be high.

Cannabis companies have spent the early days of the legal recreational cannabis era building massive growing facilities, but the chief executive of 48North Cannabis Corp. has been focusing on a plot of land in Brantford, Ont. That’s where her company hopes to launch one of the country’s first major outdoor cannabis operations, a 100-acre site that will, at capacity, be able to yield 40,000 kilograms of cannabis flower. Gordon is banking on getting approval from Health Canada to begin outdoor growing in time for the spring planting season, five months before the legalization of cannabis edibles, expected in October. "Cannabis is meant to be grown outdoors. It went indoors because of Prohibition." (See also: To apply for a licence to grow cannabis in Canada, you now have to have a fully built site ready to go)

The cannabis industry’s moral challenge is to ensure the groups who have suffered the most under the drug war can participate in the green rush and enjoy the spoils of legalization. Marijuana insiders often refer to the “cannabis space” – a term broad enough to include a social justice movement and unapologetic capitalism – and recognize no contradiction between them. For growers who operated in California’s gray and illegal markets and now want to transition into the legal market, the economics can be brutal. In the illegal market, an Emerald Triangle farmer might have sold a pound for $3,000 tax-free. Now the price is more like $600, before taxes and compliance related costs. (See also: High stakes: cannabis capitalists seek funds to drive drug trade)

Some of the biggest cannabis players when legalization took effect 20 months ago have successfully held on to their dominant positions, despite a year of bankruptcies, downsizings, revoked licences, executive firings, mass layoffs and a long market selloff. Licensed producers such as Aphria Inc. and Aurora Cannabis Inc., have increased their market share during the past few quarters due partly to strong sales of dried flower and cannabis 2.0 products such as edibles and vape pens, while Canopy Growth Corp.’s share has substantially eroded from its peak 18 months ago. Just a handful of companies or so hold more than 95 per cent of the legal Canadian market, according to company filings, interviews with cannabis analysts and data from cannabis intelligence firm Headset. 

What a difference a year makes. Around this time in 2019, the cannabis sector was booming. Investors wanted in and stock prices were skyrocketing. Today, share prices have tumbled and analysts are forecasting "many" bankruptcies by the end of the year. Just last month, two Canadian companies, AgMedica and Wayland, were granted creditor protection. Some producers are looking for an exit, even if it means being bought by their competitors. Others looking to beef up their cash reserves are offering to sell off equipment and greenhouses — at a discount. "But in most cases, those are assets you don't want to take on. They're not efficient," said Greg Engel, CEO of cannabis producer Organigram. (See also: Cannabis industry facing a credit crunch as scrutiny, skepticism mount)

Cannabis companies are selling off growing facilities, stores and warehouses as they try to better align their offerings with demand. Industry observers say demand for cannabis is high, but there are so many assets available for sale right now because companies have misjudged what consumers want. They say companies are looking to off-load properties as they cut products and pivot toward items more likely to fly off the shelves. Many have realized their business plans are not sound and that demand for particular products is well below their expectations, leaving them with a glut of pot to sell. Others are struggling to stand out as the number of pot products for sale in the country swells, craft cannabis' share of the market grows and illicit sales remain strong.

Imagine that you run a perfectly legal business but are unable to open a simple checking account at a national bank. Believe it or not, that’s the case right now for anyone licensed to sell cannabis in the US. Given the size of the cannabis industry, it’s pretty shocking. But it may be about to change. In the US, 38 states have legalized marijuana for medical use and 23 of them have legalized it for recreational purposes, including three territories and the District of Columbia. An additional eight states have decriminalized its use. Both red and blue states with legalized marijuana laws have collected $15bn in tax revenue between 2014 and 2022, with $3.77bn in tax revenue attributed to 2022 alone.

The rally at the state capitol on April 20, the unofficial holiday for pot aficionados, brought out green-wigged supporters ringed in wisps of smoke. These days, they are far from the only people advocating for the legalization of marijuana. Black Lives Matter activists, who are seeking business opportunities for minority communities and say they have been hit hard by drug laws, joined the Hartford rally, as did labor organizers who want to see the industry unionized. More broadly, cannabis companies, banks and new marijuana trade organizations are deploying platoons of lobbyists to state capitals and Washington, D.C., to help shape the ground rules for the industry as more states legalize use, and as Congress weighs measures that could further legitimize the market.

Before Canada legalized recreational cannabis in October 2018, there was considerable debate about its potential effects. Some predicted it would trigger an economic “goldrush,” while others worried it would lead to public health “tragedies.” As it turns out, certain trends were already underway before legalization and continued afterward. On the flip side, some changes did not happen as anticipated. The percentage of adults using cannabis had already been increasing prior to 2018. Unsurprisingly, it continued to rise after legalization. There was a boost after legalization beyond the ongoing trend. But part of that might have been from people becoming more open about cannabis use. On the other hand, teenagers’ cannabis use hardly budged after 2018.

According to cannabis industry analytics firm Headset, pot sales in the United States spiked in mid-March, with sales growth peaking at 64% in the week ended March 16 — the highest growth rate since at least the beginning of 2019. But after people had apparently replenished their stockpiles for fear dispensaries might be closed amid virus shutdowns, sales decelerated during the last two weeks of the month to the "mid- to high-single-digit range," the Headset analysts said. In the course of April, most US federal states surprisingly declared cannabis an "essential good" like groceries, allowing pot dispensaries to offer curbside delivery. In Germany efforts to ensure a high-quality domestic supply, means the country is now aiming for the first local cannabis harvest by the end of this year.

Thailand made headlines all over the world last December when it became the first country in Southeast Asia to legalize cannabis for medical use and research purposes, sparking a race to cash in on what could someday become the country's main cash crop. Full legalization was a core policy of the Bhumjaithai party's campaign in the March 24 election, which helped it win the fifth most seats in Thailand's new parliament. The government has also made the development of the industrial potential of the drug one of its priorities, saying its study and development "should be sped up for the medical industry to create economic opportunity and income for the people."

For the first time in history, the U.S. House of Representatives passed legislation to both validate and protect the burgeoning cannabis industry by giving it access to banks, credit unions and insurance companies. The SAFE Banking Act, which easily cleared the House with a 301-123 vote but still has to clear the U.S. Senate before passing into law, would allow financial institutions to work with cannabis companies without fearing retribution. It’s still currently possible under federal law to prosecute banks for doing so; punishments can even include stripping them of deposit insurance. (See also:  How the U.S. cannabis banking bill could hurt Canadian exchanges)