What is the Perfect Price for Legal Weed in Canada?

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What is the perfect price for legal weed? A hypothetical cost analysis for undercutting the black market

Let’s just say that, hypothetically speaking, the current black market in Canada is based on three models of cultivation. The first model is the seasonal outdoor grower, the second is the hobby indoor grower and the third is the commercial indoor grower. Model one harvests every fall and sells his/her crop based on market prices which vary greatly from province to province, in the vicinity of 900-2500 dollars per pound. The second model harvests casually and sells privately and in small amounts ranging from 125-250 an ounce. The third group harvests every 3 weeks to 90 days and sells based on market prices ranging anywhere from $1400 to $3000.

According to a recent article in Lift, the average price of a gram of cannabis in a dispensary is $10, which equates to $4535 per pound. This price is based on a perverted/distorted marketplace and should not be taken into consideration when trying to set acceptable tax structure. Unfortunately, this is what is being done, and it is a critical mistake.

Examining the profit margins

If the average profit margin on 100 pounds of cannabis, based on an annual harvest for models one and two, is 90-250K and 2-10K respectively, cannabis cultivation would appear to remain profitable and worthwhile. For model three, an annual yield can bring in millions of dollars depending on the size of the operation. Model three also happens to be the most expensive cultivation method and the easiest to trace.

The only way the mandate to defund organized crime will be fulfilled is to effectively remove profit incentive. The fact that only 5% of the cannabis trade is affiliated with “organized crime” should make this goal attainable, but this does not mean that the black market is going anywhere at all. In the wild and wacky world of weed, the average cultivator, farmer and consumer are not gun-wielding gangsters, but ordinary folks who either enjoy farming and the additional income or are just growing a bit extra to subsidize their own consumption.

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