Canada's Cannabis Problem Continues To Grow

The Canadian cannabis market is flooded with cannabis consumers don't want

Welcome to Four PM — a daily newsletter that provides cannabis industry news & interviews with cannabis industry leaders.


In Today’s Issue 💬

→ Canada’s Cannabis Problem

→ America's Effort To Legalize Cannabis

→ An Update On Cannabis In India

Who Wants Cannabis?

The Canadian cannabis market is struggling to find a home for the thousands of KG’s of cannabis being produced

In the months after Canada became the first G7 nation to legalize cannabis, there was a significant shortage of cannabis products.

At the time many Canadian cannabis producers were just bringing their operations online which left a number of cannabis stores without the product they were seeking to sell — cannabis.

Stores were forced to close in certain provinces as a result of this shortage, however, fast forward and Canada now faces this problem in reverse.

With too much cannabis — Canadian cannabis producers are being left with no choice but to destroy some 500,000 KG’s of unpackaged cannabis in the last two years alone, as was first reported by Matt Lamers.

To make matters worse, the total amount of cannabis being destroyed is significantly higher as this figure doesn’t account for the packaged cannabis products Canadian producers destroyed alongside this unpackaged flower.

According to Health Canada the following units of cannabis were destroyed:

→ 943 packages of topicals.

→ 714,491 packages of edibles.

→ 1,500,396 packages of extracts.

→ 3,783,397 packages of dried cannabis.

More Problems Ahead?

In Q4 2020, over 1,000,000 KG’s of cannabis were sitting in the vaults of producers, provincial wholesalers, and retailers — and with Canadian consumers currently purchasing a fraction of this, it seems almost certain that the quantity of cannabis destroyed in 2020 will continue to increase.

Our Take

The unfortunate reality of cannabis in Canada is that there’s simply too much cannabis being produced and too few consumers willing to purchase it.

With cannabis remaining illegal in 98% of nations around the world there isn’t exactly anyone looking to purchase Canada’s surplus of cannabis such that the only way this issue can be resolved is for a number of producers to shut down.

Federal Cannabis Reform Coming Soon?

Democratic leaders are uniting to end the war on drugs, starting with cannabis under the Cannabis Administration and Opportunity Act

The forces are finally stacking against the war on drugs as Democratic leaders are working together to legalize cannabis at a federal level.

Cannabis is one of the very “issues” in America where a majority of people want to see changes made, with some 68% of Americans now in favor of the federal legalization of cannabis.

What’s next?

Senate Majority Leader Chuck Schumer, Senate Finance Committee Chairman Ron Wyden, and Sen. Cory Booker released their draft bill to federally legalize cannabis called the “Cannabis Administration and Opportunity Act.”

The Key Issues 👇

Should this bill pass, the attorney general would remove cannabis from the Controlled Substances Act within 60 days of the bill’s enactment.

The bill specifically preserves the right of each state to maintain the prohibition of cannabis and shipping cannabis into a state where cannabis is illegal at a state level would remain federally illegal.

Interstate Commerce

Should this bill pass, one of the biggest issues U.S cannabis companies face would be resolved as states who have legalized cannabis wouldn’t have the means to stop businesses from transporting cannabis products across their borders from other states where cannabis has been legalized.

Regulating Cannabis…

The Food and Drug Administration (FDA) would be “recognized as the primary federal regulatory authority with respect to the manufacture and marketing of cannabis products, including requirements related to minimum national good manufacturing practice, product standards, registration and listing, and labeling information related to ingredients and directions for use,” as per the summary of the bill which is publically available.

Social Equity?

This bill has a focus on social equity to right the wrongs of the past by providing for the communities that were the targets of the war on drugs.

This would take place in three ways:

→ Mandating each federal district to expunge arrests and convictions for non-violent cannabis offenses within one year.

→ Funding non-profits who provide services to individuals adversely impacted by the War on Drugs, from job training to legal aid.

→ Provide funding to eligible states and localities to make loans to assist small businesses owned by socially and economically disadvantaged individuals.

Taxes

Unsurprisingly, the U.S government will be seeking to take its slice of the pie that is cannabis with a gradual federal tax rate on cannabis sales.

Taxes would start at 10% for the first year, and they would be increased annually rising from 15% to 20% to 25%

In the fifth year, the tax would be a “per-ounce or per-milligram of THC amount determined by the Secretary of the Treasury equal to 25 percent of the prevailing price of cannabis sold in the United States in the prior year.”

To help small cannabis enterprises, the legislation states “small cannabis producers with less than $20 million in sales annually would be eligible for a 50 percent reduction in their tax rate, via a tax credit.” — which is huge.

Our Take

There is a good chance this specific bill won’t pass.

The good news, however, is that cannabis has become one of the key talking points in capitol hill, and with a majority of Americans in favor of this change — it won’t be long until we see some form of federal reform for cannabis.

Cannabis Update From India

Keeping a close eye on one of the most exciting emerging cannabis markets in the world.

At the current rate of progress, it seems reasonable that there will be a global cannabis market within the next 10 years.

Although one could argue there already is a global cannabis market — the reality is that the largest cannabis market in the world (America) isn’t accepting imports, and the second largest (Canada) has too much cannabis.

This dynamic will change in time as Canadian companies continue to increase the quantity of cannabis they are exporting, and as a result, bilateral agreements will follow which will seed the global supply chain for cannabis.

With this, we are keeping a close eye on a number of markets outside of North America, with India being near the top of this list.

A Rich History

India has a long history with cannabis, and although cannabis remains illegal at a federal level in India — there are some very exciting companies working on medical cannabis in the region.

Hemstreet is one such company that recently became the very first cannabis company to receive one of India’s most prestigious awards — the Biotechnology Ignition Grant.

In the time since we spoke with Abhishek who is the CEO of Hempstreet, they have increased the number of clinics they are supplying by 100% — going from 1,000 to 2,000 in just over two months!

Our Take

India will be one of the biggest cannabis markets in the world once their regulations are reformed and with Canada, Mexico and soon to be the U.S.A having legalized cannabis — it seems likely that more & more nations will follow suit.

Given India’s rich history with cannabis, I am watching this emerging market particularly closely when it comes to cannabis.

Have a great day, and I’ll talk to everyone tomorrow.

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