We haven’t done a lot of cannabis coverage here at Farmtario, despite the massive public and investor interest in the sector.
I’ve thought a lot about it and I expect the impact of cannabis production on mainstream agriculture will be peripheral at best – other than where it has sucked production facilities (especially greenhouses) away from food and into drugs.
Medical use of cannabis is important for many in our society, but the big jackpot will be from recreational users and that’s driven a frenzy of investment.
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There’s been a massive rush of investors into cannabis, resulting in suddenly very well capitalized, large companies with money to throw at production systems. That’s meant deals too good to refuse for some owners of greenhouse facilities that have grown tomatoes, peppers or cucumbers.
That’s not surprising in a newly legal sector that has been lucrative for illegal growers for generations. It’s a wild west of companies clamouring for market share, buying each other out at every turn.
Other mainstream media organizations have dived into covering cannabis from a business and investor side, with some rolling out their own publications dedicated to the business of cannabis.
This all adds up to a classic financial bubble, with eager investors over capitalizing companies that have yet to sell a product at a profit. There will be profits for those who survive the coming cannabis company collapse, but the sector will likely look significantly different – and even more concentrated in the hands of large companies and investors than it is now.
That means there will be little chance for individual farm businesses that we cover in Farmtario to get their hands on much of that profit. In fact, I’d stay far away if you’re not strategically invested in the greenhouse sector (where most of the cannabis will be grown) and willing to hang on for the wild ride.
I have to question just how much capacity is being created to grow cannabis. Those who have wanted to use cannabis have had access to it on the black market for years. Many have grown a few plants here and there and the new regulations now make that legal. Some recent surveys show that those who claim to have used cannabis has grown about 10 per cent in the past year. That’s not surprising, as people will try something that’s now legal, but some of that is also people willing to admit they use cannabis as it is no longer a crime to do so. I don’t think there’s vast growth potential and the cannabis that people have used was already grown somewhere. It’s not all going to flow into legal channels.
Most of the cannabis will be grown in warehouses and greenhouses. It is now legal to grow it outdoors and 48North Cannabis Corp. recently received approval to create what it says is one of the largest, if not the largest outdoor cannabis farm in the world – in Brant County. It will only cover 100 acres.. That will be a lucrative 100 acres for sure, but with the efficiency of indoor growers, the need for outdoor cannabis production will likely be limited.
Another limiting factor for farmers is that government regulations require that a producer have all of their facilities completed, secured and ready to grow before they receive a licence. That means there needs to be backers with serious funds and serious nerve behind anyone wishing to grow it.
That’s prompted a pitch I got in my email box recently with concerns that these sorts of regulations will make any niche or local or boutique cannabis production financially impossible. They are likely right, for now. Look at how many decades of slow regulation decline in alcohol it took before it got to a place where a craft beer industry became possible.
The growth of the cannabis sector will have some effects for mainstream agriculture.
The regular finding of cannabis plants interspersed in backroad corn fields that prompted many a rumour and story in rural communities will likely slow to a trickle. The devastating consequences of rural rental houses filled up with cannabis plants as grow-ops should stop.
And where there’s a large rush of money into a new economic sector, some of that money goes into a mad rush to gain competitive advantage. In cannabis much of that investment is going into research and development of new companies with new growing techniques. I see this happening in lighting and propagation already and these benefits will eventually trickle down to food production.
We’ve talked about farmers producing food and fibre. With cannabis production it could be food, fibre and fun – but I don’t think that many average farmers will get any piece of the profits of the new ‘fun’ sector.
