Health Canada is expected to announce new regulations this week that will permit large-scale outdoor growing facilities, according to an article in the Globe and Mail (paywall).

Prior to this announcement, licensed producers were required to grow marijuana in covered greenhouses or indoors.

Allowing outdoor cultivation is yet another sign the government is trying to make it easier for new producers to enter the recreational market come October 17th.

Though too late in the season for the changes to influence legal grows this year, the regulation change could have a big impact on where marijuana destined for the recreational market is grown in 2019.

 

Massive Greenhouses no Longer the Low-cost Way to Grow Bud

Licensed producers have committed millions to building greenhouse facilities under the assumption they were the cheapest allowable way to grow marijuana.

Think $0.25/gram is low? Studies have found that costs in North America can fall as low as $0.05/gram with large-scale outdoor cultivation.

This announcement by Ottawa now opens the playing field to smaller craft growers and provides more options to licensed producers outside of constructing large-scale greenhouses.

According to licensed producer Canntrust Holdings Inc, growing marijuana indoors costs about $2.00 per gram compared to greenhouse costs of $1.00 per gram and expected outdoor growing costs of only $0.25 per gram.

Building a massive greenhouse, to take advantage of economies of scale, is no longer the only way to produce marijuana competitively.

Growing costs of $0.25 per gram may seem low, but studies have found that costs in North America can fall as low as $0.05 per gram with large-scale outdoor cultivation.

 

Security and Health Standards Will be Maintained

According to Deepak Anand, vice president of a leading cannabis compliance firm, the government’s security requirement will likely remain the same as for indoor cultivation.

Also thought to remain unchanged will be the government prohibition of many common pesticides used for growing in the black market.

Licensed producers can now depend on lower growing costs, but will still have to maintain robust security to protect from theft and must adhere to Health Canada growing standards.

 

Democratizing Marijuana Supply

Approval of outdoor cultivation is yet another signal that Ottawa is looking to decrease the cost of entry for anyone looking to grow marijuana under the new legal framework.

Making sure there’s a robust legal supply chain serves the purpose of ensuring the legal market can push out the black market — a major policy goal.

Outdoor cultivation is also the most environmentally sustainable way to grow marijuana and could become a selling point to customers who value sustainability.

As a result of these new regulations, the cost of entry into this fast growing industry just got a little lower.