Time will tell, but if cannabis is like the hundreds of worldwide industries before it, U.S. weed may be outsourced.
While the U.S. cannabis industry anxiously waits for federal legalization, presumably the beginning of a new age of marijuana, the final chapter has already been written, taken from a book we have read many time before.
Wait, what? I thought the U.S. marijuana industry was just starting, how can it be over? So soon?
The U.S. cannabis industry has a “U.S.” problem. The high cost of labor, water, electricity, possibly tariffs, and taxation on exports could make the cannabis industry look a lot like the auto industry and manufacturing. It is just too darn expensive to grow marijuana in America compared to the rest of the world.
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One interesting fact from the recent Benzinga Cannabis Capital Conference was that the price of growing cannabis is constantly coming down as people look to improve margins and efficiency. The lights get better, the soil gets better, the drying systems get better, but in the end the costs associated with doing business in America present a daunting task to the U.S. cannabis industry.
One new up-and-coming in the international cannabis scene is Colombia. South American countries create a nice “sweet spot” for growing cannabis due to their moist climate, lack of Winters, and cheap labor forces. The stunning numbers I saw during Luis Merchan’s presentation at Benzinga’s conference last week showed that his company, Flora, can grow a gram of cannabis for $0.60. That is before Colombia gets a few years under their belt in experience, better lights, seeds, soil, and techniques. The cost to grow a gram of marijuana in North America is between $1.50 and $2.35. Public reports show Canadian company Aprhia spends $1.85 to grow one gram of marijuana, while Tilray spends $2.36 a gram of produced flower.
What happens when Colombia, let alone Brazil, Costa Rica, Uruguay, etc., gets good at this stuff in two years? Will they bring costs down to $0.03 a gram?
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