Canada is a major net exporter of cannabis, producing three million kilograms equal to $22B annual revenue for the underground market. So what’s the big short?
Trimming the underground market
Legislation and regulation of cannabis will reduce commodity prices, generate tax revenues, and disrupt the underground cannabis industry. Reports by B.C.’s RCMP estimated the value of the underground cannabis industry at $6B (similar in Ontario and Quebec). Legalization will not shut down the underground market completely, drivers will be dependent on prices and profits. In reaction to market entrance of legitimate operators, illegal large grow ops are predicted to lower prices and boost production.
Cannabis marketing lights up
A panel discussion on ‘Understanding the Global Cannabis Economy‘, hosted by the Growth Op at Postmedia Place in Toronto, shared insights from industry on how cannabis corporations are launching recreational products to market. “It’s much easier to get into the business from a production and retail standpoint… innovation and marketing is very sophisticated towards a commercial market,” says president of Supreme Pharmaceuticals, Navdeep Dhaliwal.
Canada’s underground cannabis operating revenue roughly equals a quarter of the agriculture, forestry and fishing industry revenues combined—adding $8B, or 0.5% to the GDP level.
Doobie-ous economic impact
Predicted outcomes of legalization include benefits for most taxpayers and government, increased costs of drug and rehabilitation programs, and reduced law enforcement costs.
BC’s notorious housing market, which is influenced by cannabis currency trade for illegal guns and drugs, is predicted to experience a slowed economic activity and decreased property values. For the broader economy, a decreased demand for luxury goods, foreign automotives, and expensive housing reflect similar economic impacts.
A modest economic benefit is predicted for legalization Fall 2018. In exchange, Canada takes a hit on its already established net exporter status.
Over the next three months, we will be sharing some evidence-based information with you about cannabis as it relates to health and wellness, the economy and consumer safety.