Canada Ponders an Unusual Drug Problem: a Shortage of Marijuana

Article by Josh Wingrove & Jen Skerritt, Bloomberg

Canada Ponders an Unusual Drug Problem: a Shortage of Marijuana

 

The biggest challenge for Justin Trudeau’s forthcoming legal recreational marijuana market is a shortage of pot, the finance minister of Canada’s most-populous province says.

Ontario’s Charles Sousa said a supply crunch was discussed during a meeting with provincial and federal counterparts this week. Canada is aiming to legalize recreational pot in the next 12 months, the first major economy to do so. One analyst said he’s concerned the government could use a supply shortage as an excuse to delay rolling out the program.

“Ultimately the biggest problem that appears after today’s discussion is one of supply,” Sousa said in an interview this week. Finance ministers were told demand is “quite high” for marijuana already in Canada, he said. “So we want to make certain that, when we do proceed, there is sufficient supply to accommodate the activity because what we’re trying to do is curb the illicit use and organized crime that now exists around it.”

Trudeau’s framework for legalization, unveiled in April, will rely on Canada’s provinces to set up sale and distribution regimes, while at minimum selling recreational pot by mail beginning some time before July 2018. Key details including taxation remain up in the air. Federal Finance Minister Bill Morneau has said he favors a tax rate that will starve out the black market, one of the government’s key objectives. “That as a conclusion would lead us to say taxation rates have to be low,” Morneau told reporters after the June 19 meeting, where he said they discussed the need for a “coordinated” approach.

Initial Shortage

Canada’s burgeoning marijuana industry has ballooned in value amid optimism over Trudeau’s plan for recreational sales, which Canaccord Genuity Group Inc. said in November could reach C$6 billion ($4.5 billion) annually by 2021. Combined demand for recreational and medical marijuana may reach 575,000 kilograms by 2021, according to the report.

The government says a key aim is to shrink or altogether kill the black market, and any shortage of legal weed would hinder that effort. Trudeau’s plans also allow people to grow up to four plants in a home.

Companies are still in the midst of trying to build and expand their facilities and everything would have to go “perfectly” in order to have enough supply, PI Financial analyst Jason Zandberg said. Initial sales will probably be online and by mail as it wouldn’t be possible for the market to stock enough inventory in government dispensaries across the country.

Expanding patient lists are creating a shortage in Canada’s medical marijuana market as some producers stop taking new clients or sell out of certain strains, Zandberg said.

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