Growers Wanted: Demand Will Far Outstrip Supply For Legal Canadian Cannabis

Canada's 26 licensed medical marijuana growers are in for a busy 2016 if predictions in a recent report by Investor Intel prove accurate.

Dr. Luc Duchesne - in a column spotlighting Calgary grower Aurora Cannabis Inc.'s approval from Health Canada to sell to licensed medical patients - predicts a "significant market explosion" in the field of legal marijuana.

"The newly elected Liberal government has recently reinforced its commitment to legalize recreational marijuana, and I speculate the government will use Health Canada's licensed growers as a path to broadening access to marijuana," writes Duschene.

In the first quarter of 2015, Health Canada reported that more than 2,200 kg of medical marijuana was produced in Canada. Sales were just over 1,300 kg/quarter, with the average person consuming 1.1 gram per day. Assuming 10 percent of Canadians continue to consume that amount of pot, the demand would skyrocket - to 356,400 kg/quarter, or 1,425,600 kg per year.

A legal recreational market is a huge opportunity for new growers

The current production rate can only meet 0.6 percent the potential demand, writes Dr. Duchesne, suggesting room for plenty of additional growers to seek approval to grow for Canada's medical market.

It's important to point out, however, that his projected rate of consumption, which is based on data from medical patients, is probably a little high. Most recreational cannabis users wouldn't be sparking up a 1 gram joint every single day (although if you're into that, more power to you).

Still, according to Duchesne's estimates, if cannabis is sold at $5 per gram, the market could be worth more than $7-billion per year with direct tax benefits of $499-million per year to the federal government alone.

And that's projected impact of sales in Canada. If stronger national systems of cannabis regulation and quality control continue to develop, Dr. Duchesne believes the potential for additional revenue streams exists in an international market for Canadian cannabis.

h/t Investor Intel

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