The Financial Impact of Cannabis on Canadian Agriculture

Bill C-45 will see the legalization of cannabis for recreational use all over Canada. This bill is set to become law by the 1st July 2018 and will likely have an important impact on the agriculture and the agri-food industry. Because of the clandestine nature of the current market, it is difficult to assess the impact Bill C-45 will have on Canada’s agricultural sector. The importance of this event cannot be overlooked. If we consider a somewhat similar situation with the prohibition of alcohol in the 1920’s, if it was allowed to continue indefinitely the Canadian market would be short an estimated 42 billion in 2016 not to mention missing out on years of potential revenue (Agriculture and Agri-Food Canada, 2013). This article will attempt to illustrate the financial impact cannabis legalization may have in the agriculture sector in Canada and its industry participants.

In 2001, the sale of cannabis for medical use was made legal in Canada. By 2017, 58 companies registered with Health Canada for medical cannabis production and sale (Statistics Canada, 2017). The latest data provided by Health Canada has 5,836 kg of dried cannabis sold in the 1st quarter of 2017 and these numbers continue to climb each month (Health Canada. 2018). The medical website Weed MD (www.weedmd.com) is a licensed producer by Health Canada and provides an estimate of about $10 per gram on average for dried cannabis (Weedmd, 2018). That would give us a total yearly average sale of $233,440,000 in medicinal cannabis in 2017 (This does not include the sale of cannabis oil).

However, the legal medicinal cannabis market in Canada gives only a faint indication as to the size of the overall market. The underground market has been established for much longer and is bolstered by the large number of Canadians that use cannabis recreationally. Statistics Canada estimated that in 2015, the underground market size of cannabis was 5 to 6.2 billion dollars (Statistics Canada, 2018). Deloitte in 2016, put out a detailed report estimating the effect of legalized cannabis on the Canadian economy. The results indicated a base market worth of cannabis at 4.9 to 8.6 billion. When factoring its effect in ancillary markets, they estimated the total worth of the legal cannabis industry at $22.6 billion. Much of the study from Deloitte was influenced by the success in Colorado which represents about 1/7th of the Canadian market (Deloitte, 2016). To put that in perspective, canola is currently Canada’s most valuable crop and as of 2017, it’s total contribution to the economy is estimated at 26.7 billion dollars (Canola Council of Canada, 2017).

In the current proposed system relating to Bill C-45, it is the Federal government who will oversee cannabis production. The distribution, sale, and enforcement of federals laws will be administered by the provincial governments. The production of cannabis will most likely be decentralized representing only a minimal barrier to entry for agricultural producers. Although much talk has been around centralizing the sale of cannabis in a similar system to that of hard alcohol in most Canadian provinces (Quebec Government, 2017). Though nothing is set in stone and there is still much to be ironed out in terms of how the cannabis market will function. Regardless of these uncertainties, I think it’s safe to say that cannabis is likely to be a boon for the agricultural industry and the Canadian economy as a whole. This type of event is quite unique and I for one will look with great interest as to how the market evolves.

References:

Agriculture and Agri-Food Canada. 2013. Consumer trends wine, beer and spirits in Canada. Available at http://www.agr.gc.ca/eng/industry-markets-and-trade/international-agri-food-market-intelligence/canada/consumer-trends-wine-beer-and-spirits-in-canada/?id=1422297046469 (accessed 10 Feb. 2018). Agriculture and Agri-Food Canada, Ottawa ON.

Canola Council of Canada. 2017. Industry overview. Available at https://www.canolacouncil.org/markets-stats/industry-overview/ (accessed 10 Feb. 2018). Canola Council of Canada, Winnipeg, MB.

Deloitte. 2016. Recreational Marijuana Insights and opportunities. https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/Analytics/ca-en-analytics-DELOITTE%20Recreational%20Marijuana%20POV%20-%20ENGLISH%20FINAL_AODA.pdf (accessed 10 Feb. 2018). Deloitte, Toronto, ON.

Health Canada. 2018. Market Data. Available at https://www.canada.ca/en/health-canada/services/drugs-health-products/medical-use-marijuana/licensed-producers/market-data.html (accessed 10 Feb. 2018). Health Canada, Ottawa ON.

Quebec Government. 2017. Encadrement du cannabis au Québec. Available at http://publications.msss.gouv.qc.ca/msss/fichiers/2017/17-236-20W.pdf (accessed 10 Feb. 2018). Quebec Government, Quebec, QC.

Statistics Canada. 2018. Experimental estimates of cannabis consumption in Canada, 1960 to 2015. Available at http://www.statcan.gc.ca/pub/11-626-x/11-626-x2017077-eng.htm (accessed 10 Feb. 2018). Statistics Canada, Ottawa ON.

Statistics Canada. 2017. Preparing the statistical system for the legalization of cannabis. Available at http://www.statcan.gc.ca/pub/13-605-x/2017001/article/14840-eng.pdf (accessed 10 Feb. 2018). Statistics Canada, Ottawa ON.

Weedmd. 2018.Weedmd products. Available at https://www.weedmd.com/about-weedmd/ (accessed 10 Feb. 2018). Weedmd, Aylemer, ON.

 

2 responses to “The Financial Impact of Cannabis on Canadian Agriculture”

  1. Olivia Belisle says:

    The title of this article could be clearer; it could include that it is about the legalization of Cannabis, not simply it’s presence. However, it is easy to read and includes key words related to the discussed topic. The take home message of the article is that the legalization of cannabis in Canada will result in a ‘wealthier’ agricultural sector nationwide. The strongest aspect of this article is the estimated values of cannabis markets present now (underground) and to come. However, the accompanying graph doesn’t really contribute to the understanding of the article and is redundant. Perhaps all the information in the text that was numerical could have been consolidated into a table/graph/diagram instead of just the two values.

    The most compelling point is the use of statistical analysis based on North-American regions where cannabis is legalized. While I believe that there could be more information regarding the marketing involved for future producers, the conclusion discusses some future uncertainties. Some of the vocabulary in the conclusion is a bit confusing, and some elaboration on marketing (as opposed to the statistical data) could have been more interesting from a producer’s point of view. Overall, a very interesting article with good data; I wish there was more to read!

  2. jeancarlmoubarak says:

    The article title is vague and slightly unoriginal. The post itself, however, describes with remarkable pertinence, and using eye-opening statistics, the opportunity recreational cannabis legalization would represent for Canada and its economy. If anything should be remembered from this article, it is without a doubt the fact that cannabis production and sales would represent an non-negligible portion of agricultural crop revenues in Canada. This aspect is also backed by accurate data as well as insightful numbers and researches, which constitute one of the main strengths of the text. Unfortunately, it doesn’t provide sufficient detail on the financial repartition of the impacts. In fact, while the main idea is well explained, there is no precise information as to the spheres in which the mentioned sums would be generated: would the $22.6 billions come exclusively from sales? Could it also be a result of job creation? Perhaps additional details could be provided by adding information on those matters, and a deeper dive into relevant topics, such as, for instance, the future of the agricultural profession (could cannabis growth push a younger generation to find their vocation in agriculture?) and the economic repercussion this could have regarding agriculture, could be an improvement on the current version of the article. Nevertheless, the arguments and examples presented remain strong, with Deloitte’s research showing that cannabis could reach the revenue range of canola being a highlight of this post.

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