The Canadian federal government is determined to steamroll ahead with pot legalization, in order to meet its target date of July 1, 2018. As the day of legal cannabis inches closer, leaders from provinces and local municipalities are voicing concerns about their region’s ability to fund and establish proper regulations in time.
Another significant item of concern for the legal cannabis marketplace next July is likely to be the lack of supply.
Industry experts in finance, as well as licensed producers themselves, have indicated that the amount of cannabis available once legalization is here will fall drastically short of expected public demand.
Currently, Canada has approximately 170,000 medical cannabis patients and producers regularly run out of product, said Aaron Salz to the Ottawa Citizen. Salz was the first investment analyst on Bay Street to specialize in the cannabis industry. He is now a consultant for some larger cannabis producers.
“The industry won’t be able to expand quickly enough to immediately supply all the Canadians who might want to buy recreational marijuana,” he said. “We are going to have a supply shortage. I’m highly confident of that.”
A marijuana shortage will mean that Canada will not be able to immediately achieve its goals of stamping out the black market. Canadians will continue to turn to the unlicensed community if there is no legal supply available.
Bruce Linton, the CEO of Canopy Growth, acknowledged this problem but explained that legalization is a process. “There won’t be 14,000 stores on day one. For some period of time, expect there will be more people who will want to buy cannabis than can access cannabis.”
Health Canada has been aware of the issue, last month they announced improvements to the application process for companies looking to become licensed producers (LPs). The government agency has streamlined the procedure for existing LPs to expand while simultaneously speeding up the process for applicants to become cultivators.
Although the changes to enhance supply are promising, the numbers to keep up with demand are mindblowing. A report from the Parliamentary Budget Office stated that by the time pot is legal, Canadians will be consuming approximately 655,000 kilograms of adult-use cannabis per year. Aaron Salz said that he estimates medical growers currently produce 80,000 kilograms per year.
Based on these numbers, it’s clear that cannabis consumers may see some empty shelves once prohibition is finally dead in the Great White North. Having said that, this shortage does not mean the feds will fall short of achieving their goal of stamping out the black market. The Prime Minister has stated that ending illegal pot sales is the priority, however, Trudeau never promised it would be done by opening day.
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