Canada Has a Very Odd Marijuana Problem, and This Is Exacerbating It

Article by Sean Williams, The Motley Fool

Canada Has a Very Odd Marijuana Problem, and This Is Exacerbating It With recreational weed legalization on the table, this issue is almost inconceivable.

The marijuana industry is growing like a proverbial weed, and marijuana stock investors have certainly taken notice. According to cannabis research firm ArcView, North American legal pot sales totaled $6.9 billion last year alone. However, by 2021, they could be pushing to north of $22 billion. Considering that more than $46 billion in weed sales was conducted under the table in 2016, there’s a multiyear, and perhaps even multidecade, opportunity for legal marijuana businesses to convert consumers from black market channels to legal customers.

The recent legalization of medical cannabis in Mexico, along with ongoing state-level approvals in the U.S., are expected to be a boon to the industry. But it’s the near-term promise of our neighbors to the north that could offer the biggest catalyst.

Will Canada’s maple leaf turn green for marijuana?

Recently, Prime Minister Justin Trudeau of Canada introduced legislation that would legalize recreational marijuana throughout the country by as soon as July 1, 2018. Trudeau’s bill would allow for adults ages 21 and up to legally purchase marijuana, and it would let households grow up to four cannabis plants.

Per the Canadian government, approving recreational marijuana would add up to $5 billion to $7 billion in annual revenue, which is why the Canadian quartet of large growers — Canopy Growth Corp. (NASDAQOTH:TWMJF), Aphria (NASDAQOTH:APHQF), Aurora Cannabis(NASDAQOTH:ACBFF), and MedReleaf (NASDAQOTH:MEDFF)(TSX:LEAF) — are in the midst of rapidly boosting their grow capacity.

Canopy Growth has been expanding inorganically, having recently acquired Mettrum Health and 472,000 square feet of land surrounding its headquarters. The acquisition of Mettrum gave Canopy Growth access to roughly half of Canada’s medical marijuana patients (which have been growing by about 10% a month according to Health Canada).

Meanwhile, Aphria, Aurora Cannabis, and MedReleaf are looking at organic growth to boost production. Aphria’s $100 million capital project, known as Phase IV, should yield 75,000 kilograms of cannabis annually, while Aurora Cannabis claims that its 800,000 square foot facility known as Aurora Sky will be state-of-the-art in terms of automation. Finally, MedReleaf, which recently went public in the largest North American marijuana stock IPO of all time, is planning to use some of its proceeds to increase its grow capacity fourfold at its Bradford, Ontario, facility.

Canada’s recreational marijuana bill has two traditional problems

However, Canada’s recreational marijuana bill isn’t a guarantee to be implemented into law, even though Trudeau has personally backed such a measure, and public opinion toward cannabis has greatly improved over the years. Conservative members of Canada’s parliament could provide quite the roadblock.

For starters, conservatives are worried about the home-grow provision built into Canada’s recreational weed bill. It would only seem logical that legalizing pot would allow households to grow cannabis on their own. Conservative lawmakers, however, argue that it would give minors easy access to pot. Removing the home-grow option is one solution, but it probably wouldn’t sit well with bill proponents.

Read full article here.

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