American hemp market analysts warn of serious problems in Canada amid surplus of raw materials
The number of licensed outdoor growing sites in Canada more than doubled from October 2019 to October 2020. Those. there is a clear trend in the market for growing therapeutically active cannabis outdoors.
On the pages of the specialized electronic edition of Ukrainian cannabis growers, the attention of our dear readers and listeners has already been focused on the fact that “ Stocks of medical cannabis in Canada have exceeded 1 million kilograms”. Despite the fact that Canadian companies specializing in the cultivation / processing / sale of medical hemp devote huge resources to creating markets for the sale of their products in other countries (including Ukraine), a huge overproduction cannot but affect the flower market plants in the "Land of the Maple Leaf". That is why the warnings of American and Canadian analysts, warning of a series of bankruptcies, takeovers, sales of illiquid or non-core assets, as well as the consolidation of assets that are coming in the near future on the extremely "overheated" market of therapeutically active cannabis in Canada, are interesting.
In particular, according to analysts at the independent investment firm Jefferies, the Canadian cannabis industry should prepare for the closure of emerging or marginal businesses, bankruptcies and consolidation amid a deteriorating oversupply of leaves and flowers of plants with significant therapeutic effects. The main driver of the market has already become the harvest of 2020, mostly grown in the open field, which entailed the possibility of a significant reduction in the price of the grown products, as well as its derivatives (extracts, extracts, etc.).
It is necessary to take into account the fact that about 95% of the grown crop belongs to holders of federal licenses, who are forced to pay for its storage and, in the end, write off significant financial resources due to the fact that over time, the quality and, accordingly, the cost of grown flowers decreases. Accordingly, in the near future, agricultural producers will be forced to dump on the market, offering buyers various discounts, bonuses, promotions, and in the end all this will lead to the fact that there will remain those enterprises that, with minimal production costs, will be able to supply the buyer with a quality product.
Commentary of experts of the Association "Ukrainian technical hemp"
Problems with the largest Canadian medical cannabis producers could be predicted already starting in 2017, when for the first time the volume of production of therapeutically active cannabis flowers exceeded market needs. Despite this, they continued to build production facilities (greenhouses or special premises for growing) to absorb competitors, for which they spent huge borrowed resources or investor finances. All this led to the fact that at the end of 2019, the above companies, which relied on the cultivation of hemp plants in greenhouses and premises, had to write off huge losses, since the sales volumes were clearly incomparable with the amount of products prepared for sale. The appearance on the market of crops in 2019 and especially in 2020 from open ground significantly aggravated the problems of those cannabis growers who could no longer cope with the credit load on the previously received funds, directed by them to the construction of production greenhouses and premises.
In the course of making adjustments to the draft laws planned for consideration in the specialized committees of the Supreme Council of Ukraine concerning the creation of conditions for the development of modern cannabis growing in our country, it should be borne in mind that the number of licensed areas for outdoor cultivation in Canada has more than doubled from October 2019 to October 2020. Those. there is a clear trend in the market for growing therapeutically active cannabis outdoors.