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This may very well go down in history as the most pivotal year for the legal cannabis industry. While numerous legalizations have been heralded before, we’ve never seen an industrialized country legalize recreational weed prior to Canada doing so. When sales officially kick off on Oct. 17, 2018, big money is expected to flow into the industry, with some analysts projecting in excess of $5 billion in sales being added once the industry is fully ramped up.
Initially, there’s expected to be a supply shortage. The reason for that is twofold. First, growers had to wait until there was little doubt that the Cannabis Act would pass before spending hundreds of millions of dollars on capacity expansion. This means that most projects weren’t commissioned until earlier this year and will therefore take some time to come online.
But once the industry is operating at peak capacity, annual production totals could soar. Previously, I’ve opined that annual production could hit anywhere from 2.3 million kilograms to perhaps as high as 2.5 million kilograms. Well, given that capacity expansion has remained fluid, I’m revising my own prediction, once again. Now it looks as if Canadian marijuana production has a real chance to hit 3 million kilograms by the end of 2020.
And then there are the smaller and/or private companies. Remember, Health Canada has issued 114 cultivation licenses through the end of July. The companies mentioned above account for only a small percentage of those licenses, even though they’re the largest producers. Expecting another 500,000 kg of production from perhaps 70 smaller and private growers, as an aggregate, isn’t out of the question. If anything, it might be conservative.
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A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and investment planning. You’ll often find him writing about Obamacare, marijuana, drug and device development, Social Security, taxes, retirement issues and general macroeconomic topics of interest.
Though it may appear lofty, this detailed look at more than a dozen cannabis players suggests that 3 million kilograms of output is very doable.