Weed Shortage is Expected Following Legalization in Canada
On October 17th, Canadians will be able to use recreational marijuana legally. This means residents of legal drinking age may visit a physical store to buy pot. Consumers can purchase dried cannabis, seeds, and oils, along with other accessories such as rolling papers, pipes, and bongs.
The legalization is long overdue for marijuana enthusiasts and pot stock investors. But with just a few days to go until recreational pot becomes legal in Canada, reports seem to point at a looming supply problem.
Experts say that the country might not be prepared to meet consumer demand for recreational marijuana during the initial year of legal sales. But addressing the shortage in, for example, indica strains online may be up to the black and grey market — they could, after all, hold the keys to augmenting the supply and keeping pot affordable and accessible for Canadians.
Demand for Pot Higher than Anticipated
Researchers from the University of Waterloo and C.D. Howe Institute report that the supply of legal cannabis in Canada will only meet 30 percent of the 60 percent demand following legalization: the supply of marijuana will reach about 210,000 kilograms, with the demand at 610,000 kilos.
Health Canada estimates that the annual demand for cannabis in the country is at about 926,000 kilos for both recreational and medical use — a whopping 41 percent higher than the 655,000 kilo estimate by the Parliamentary Budget Officer in 2016.
Strict Regulations Limit Pot Consumption and Sales
Pot producers are scrambling to ramp up supply despite the sluggish rollout of regulations in provincial governments. While these restrictions aim to coordinate retail sales after the legalization of pot, Canadians are not as keen about giving up grey and black market dealers, especially since online buying is easier.
Hedge Fund GTV Capital shares that recreational pot users will have little incentive to switch to legal weed because legalization will result in stricter regulations on sales. Furthermore, the policies could potentially restrict access to cannabis.
CTV News Canada has reported that while legal and licensed producers of medical cannabis have already signed up to supply weed, there just isn’t enough pot to go around. That means the black and grey markets aren’t going anywhere.
Grey and Black Markets to Address Cannabis Shortage
The country may want to take inspiration from Colorado, where four years of legal pot led to a dramatic increase in black market grey and operations. Following recreational pot legalization in 2014, the state also made a majority of cannabis distributors hit panic mode.
Then-agent in charge of the U.S. Drug and Enforcement Administration, Glenn Gaasche, shares that legal weed led to sky-high seizures of Colorado marijuana; the black market in the state increased twenty-fold.
In Canada, the lack in supply could give the black and grey markets enough room to operate profitably. With only 31 licensed producers and 1 government store in BC, for instance, there is a significant possibility that regulated businesses will fail to meet consumer demands. The underground market can increase the supply by making pot more accessible and affordable.
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