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Canadian cannabis glut heading for crisis

Canada is now sitting on an estimated legal cannabis surplus of 900 metric tons and is heading for a crisis. Canadian producers are sitting on large stockpiles of unsold inventory and the expected increase in outdoor production next year, might tip the legal market over an edge.

“The Canadian cannabis industry is experiencing an oversupply crisis,” said Lisa Campbell, CEO of Mercari Agency, a Toronto-based cannabis consultancy. She told MJBiz that there was a growing imbalance between supply and demand and this could lead to a complete write-off of inventory  “as the cost of destruction is often more economical than the cost of sale for bigger licensed producers.”

 

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Canadian cannabis: oh dear, where’s this all going to go

 

The Canadian industry is also awash in packaged product, defined as cannabis held in stock by a cultivator, processor, distributor or retailer that is packaged for sale to consumers.

MJBiz reports that in August 2020, producers, wholesalers and retailers held almost 10 million packaged units of cannabis edibles in stock, including beverages, while sales of those products were only 1.4 million units that month.

 

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The glut that won’t go: Canadian stockpile vs sales

 

No international rescue

Experts warn the extra slack won’t be picked up internationally in the medical market any time soon. Michaela Freedman, an international cannabis business consultant and founder of Toronto-based MF Cannabis Consulting, said producers with appropriate certifications will not find a market for the vast majority of their excess medical cannabis.

Canada’s exports have experienced steady growth, but the overall volumes remain insignificant, with only 5 000 litres of cannabinadoil exported in 2019. Although the global market for CBD products is opening up, only a few markets appear viable right now.

Canada’s cannabis stockpile has risen dramaticaly over the past 12 months. Last November it was sitting on 200 tons. Now that figure is 900 tons. Next year, 2021, may be the year of reckoning!

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