New Cannabis Licence Rules Could Make Canada’s Supply Shortage Even Worse

Article by Financial Post.

New cannabis licence rules could make Canada's supply shortage even worse

One expert says the rules will likely discourage new entrants.

Canada’s changes to its cannabis licensing requirements may make the country’s persistent pot shortage worse, not better, according to some in the industry.

The Canadian government said last week that it will now require applicants for cannabis cultivation, processing or sales licenses to have a fully built site before they apply. The goal is to alleviate the huge backlog that’s built up since Canada legalized recreational pot in October. About 614 applications were waiting in the queue as of March 31, according to a Health Canada spokeswoman.

Meanwhile Canada is dealing with a nationwide shortage of pot that has led some provinces like Ontario to restrict store openings.

“I think the fact that you now have to fully build out your site before you even apply means that people are going to build very small initial phases to try to mitigate risk and minimize the amount of money that has to be spent,” cannabis lawyer Trina Fraser, partner at Brazeau Seller Law, said in a phone interview.

Once an initial site is licensed, producers can then expand it by applying for amendments to their license. This could simply push the backlog from the licensing queue to the amendment queue, she said.

Raising Capital

“That could actually exacerbate the supply problem because it’s going to be difficult for those producers to expand and grow fast enough to meet demand,” Ottawa-based Fraser said.

In response, Health Canada says it approves new licenses almost every week, bringing the total to 175 licensed sites across Canada, up from 132 when pot became legal last year. There are now more than 600,000 square meters of space under active cultivation, enough to produce about 1 million kilograms of cannabis per year, matching the quantity of cannabis consumed in Canada.

“The regulatory approach to cannabis has been designed specifically to encourage a diverse range of large and small participants from across the country, including through the creation of new micro- and nursery-class licenses,” said Eric Morrissette, a spokesman for Health Canada, in an emailed statement.

Read the full article here.

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