Canada: first licenses granted for outdoor cultivation, others pending

Until now, cannabis production in Canada has been based on the medical cannabis model. Production was carried out indoors, in accordance with medical cannabis production standards. After about six months of legalization, Health Canada has just granted the first outdoor cultivation licenses.

The first licenses

The first license was granted to the family business Good Buds Company. Based on Salt Spring Island, In British Columbia, their production facilities cover an outdoor area of 750,000m², according to a press release. They will be planting around 100,000 plants from June onwards, for a harvest of between 5,000 and 10,000 kilos at the end of the summer. Production will be entirely organic. The site has been chosen to limit contamination by other crops.

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The second outdoor cultivation license has been awarded to 48North, a company which already has two indoor production facilities. This new license will enable the company to significantly increase its production capacity. In fact, their facilities in Brant County, Ontario, cover 40.5 hectares with a production capacity of 250,000 plants. According to the Canadian press, It's the largest cultivation site in the country. According to Jeannette Vandermarel, co-CEO and director of the company, the site could well be «the largest legal cannabis farm in the world».

Other companies are waiting for a license and hope to start production this summer. This is the case for’Alefia Health, whose 10.5-hectare outdoor cultivation site is ready for operation, from Weed®, which announced that it had applied to amend its production licence to grow 10 hectares of outdoor crops and CannTrust which is awaiting Health Canada licensing approval to start cultivating 33 hectares with an annual production capacity of 75,000kg.

What are the effects on the Canadian market?

The start of outdoor production is bound to have a disruptive effect on the Canadian cannabis market. Indoor cultivation is obviously more energy-hungry and therefore more expensive: around 2$ per gram of product. In the greenhouse, this cost is reduced to 1$; outdoors, to around 25 cents. By extension, lower production costs mean larger cultivation areas: more produce for less money. One of the consequences will be lower market prices.

«This is a turning point for the cannabis industry and I think that outdoor cultivation will become the norm »says Jeannette VanderMarel. Indeed, there's every chance that outdoor cultivation will become increasingly important, simply because it's more profitable. However, this does not mean that indoor cultivation will disappear. For quality control reasons, medical cannabis will always be produced indoors, for example. The two production methods will probably coexist. What's more, outdoor growers are often already producing indoors.

Will the start of outdoor production put an end to cannabis shortages? This production could indeed help limit them, but we must also bear in mind that edibles and concentrates will be legalized next October and their production will require a lot of raw materials. At 48North for example, only 10% of outdoor production will be devoted to direct sales, the rest will be used for extractions used in the manufacture of products such as topicals or edibles.

The «second wave of legalization» will therefore cushion the capacity of outdoor cultivation to offset stock shortages. Opinions differ: some believe that overproduction is no longer such a distant threat, others that shortages will last for years to come. Everything seems to depend on the number of licenses Health Canada will grant. At present, 191 applications including outdoor production are awaiting validation by the agency.