Why Canada’s Cannabis Shortage Could Get Worse Before It Gets Better
May 14th, 2019
Canada announced new requirements for aspiring licensed producers earlier this month that could worsen the cannabis shortage by constricting supply over the coming years.
The new regulations require applicants for cannabis cultivation, processing, or sales licenses to fully build out their site before they apply. With more than 600 applications in its queue, the new rules are designed to alleviate the backlog and weed out serious companies from the rest.
More than 70% of applicants that passed Health Canada’s initial paper review over the past three years have not completed a facility that meets regulatory requirements, according to Bloomberg. This suggests that a lot of resources have been wasted vetting companies with no potential.
How will these dynamics impact the market?
Many experts believe that the move will result in much smaller applications. Once an initial site is licensed, these producers may then move to expand their production. The move could also discourage some producers from applying at all. These dynamics could exacerbate the current supply shortage.
Raising capital could also be more challenging since there’s a higher capital expenditure required before any approval is received. Many investors are already hesitant to take on these risks amid concerns that the industry could eventually see commodification as more licensed producers come online.
The biggest winners from the new regulations are existing licensed products that have established operations. These companies could face fewer hurdles expanding their production capacity, while the constricted supply could translate to higher per gram prices in the interim.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
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