With legalization of marijuana in Canada less than two months away, concerns are rising about overproduction and oversupply of the recreational drug (see ‘The Marijuana Export Mirage‘ report for more).
Driven to capture as much of the market share as possible out of the gate, marijuana producers throughout Canada have been using investor money to expand their facilities and ramp up production. But that push is causing rising concerns that the marijuana and cannabis industries will produce far more product than is needed to meet initial demand.
Industry estimates forecast that 10 of the largest marijuana producers in Canada are capable of churning out 1.8 million kilograms of marijuana annually. But the Parliamentary Budget Office estimates that demand will only be as high as 734,000 kilograms of the drug product per year — leaving a potentially massive oversupply. This oversupply could harm larger marijuana producers such as Canopy Growth, and drive smaller producers out of the market completely, say observers.
It’s worth noting that oversupply has become an issue in US states where marijuana and cannabis have been legalized. A report published in August by the Oregon-Idaho High Intensity Drug Trafficking Area program found that “a glut of cannabis stockpiles stemming from overproduction has caused a 50% annual price drop since 2016.”
According to the report, two years after legalizing marijuana, 69% of it remains unconsumed in stockpiles. Annually, Oregon cannabis growers produce around 911,000 kilograms of cannabis, which is “far outpacing annual state consumption demands,” which estimates place at around 169,000 kilograms a year.
This raises the question of what to do with excess marijuana and cannabis? Industry analysts expect that a large chunk of it will go towards edibles, topicals, and oil-based products, which are expected to begin a year after legalization starts in Canada this October. Many edible and oil-based marijuana products require larger volumes of the drug to be properly manufactured.
Another potential use for excess marijuana supplies is the international export market. In 2017, more than 400 kilograms of cannabis oil from Canada was shipped overseas. But shipping marijuana to foreign countries remains highly regulated and complex — even illegal in many jurisdictions.