The Late Bird Gets the Worm – the Sweet Spot for LP Applicants

Article by Lift

The latest recommendations released by the Task Force brought up a few interesting proposed moves that in general, the public has been asking for. So far, those working inside of the ACMPR (prev MMPR) complain about the strict regulatory and security standards. Those working outside of it complain about corporate take-over; both sides complain about the costs. Finding something everyone can agree on in any situation can prove a challenging task.

Health Canada’s focus on public health and safety is woven throughout the task force report, which is no surprise. Bearing in mind that the latest report is full of recommendations (and not actual policy), what stood out from an applicant and LP’s perspective is that outdoor field production and lower security costs could be near on the horizon. Could it finally  be that cannabis is being accepted as an agricultural product? Agricultural products grow the best in their natural environment.

Allowing people to grow outside in Canada means that those feeling restricted by the costs of building a pharmaceutical grade facility might now be able to participate in production if they couldn’t before. Investing less than $5M to build operate a cannabis facility to date has been rare.

That being said, if outgrown production is allowed and security regulations are loosened , operating a cannabis farm could come out to be about the same cost as a small winery or organic vegetable farm. These operations still need money to produce a product with yields reliable enough for a consumer market. Farmland across Canada that isn’t in the dire dry lands of the prairies can be found at upwards of 100k per acre, rising on average 10% per year.  Pricey farmland is a problem that food producers face too. The high acreage price coupled with a short growing season makes farming hard in Canada, which is why we find more than half of our produce imported from places like Miami, Mexico, and California. Greenhouses came into play for a reason, and to make a greenhouse that will withstand Canada’s winters is no small feat. Does the suggestion of field grown acceptance suggest that cannabis could now be imported from these tropical locations eventually, too?  If imported by those with licenses to distribute so that prices are controlled and the Canadian market stays strong – quite possibly.

Perhaps the ones most impacted by a recommendation to lower security requirements and accept field grown production will be those existing applicant LPs that have already footed bills in the millions to satisfy existing security controls as part of their applications and current operations. There are some applicants that have already built facilities costing $5-$7M to build and maintain before even having a license.  This might sound like a lot, but fancy HVAC systems can cost over $1M alone, and a security vault to spec around the same. If these specs are no longer required, the best these applicants will have is a first-to-market advantage when licenses start to amalgamate.

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