chex1111
Well-Known Member
Growing cannabis under the free rays of the sun costs a fraction of indoor or greenhouse cultivation. But outdoor producers have yet to sell millions worth of last year’s harvest, and at least one has slashed its expected selling price amid an oversupplied market.
Indoor and greenhouse-grown pot make up the vast majority of legal cannabis in Canada, since it can be grown year round under far more controlled conditions. But more producers are turning to the great outdoors to push cultivation costs down to pennies per gram. Industry observers warn this year’s harvest will be up to four times bigger than last year’s. A “Croptober” flood of bud this fall could trigger a wave of writedowns as supply surges past demand.
According to Health Canada, nearly 700 acres were licenced for outdoor cannabis as of April, up more than 20 per cent from October 2019. Meanwhile, pot companies are sitting on record stockpiles. As of April, Canadian cultivators and processors had amassed 620,144 kilograms of unpackaged dried flower inventory. That comes despite record retail sales of $185.9 million in May.
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Source: Health Canada
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WeedMD (WMD.V) finished planting more than 18,000 cannabis plants in a 27-acre field in Strathroy, Ont. in June. Last year, the company grew nearly 9,000 kilograms of saleable flower at a cash cost of $0.11 cents per gram. In the company’s greenhouse, grams cost $0.84 to grow.
“You can’t beat the cost. It’s fantastic,” Angelo Tsebelis, the company’s CEO, told Yahoo Finance Canada in an interview. “You can never substitute what Mother Nature provides. All you can do is try to replicate things like sunlight, heat, cool nights, and the rest of the conditions that are ideal for growing.”
Knocking on wood, Tsebelis expects about the same yield from his second outdoor harvest. This year, the company will use one-third the labour and spend less on startup costs, since the field required only minor upgrades. He said the farm is “well advanced” from where it was at this time a year ago, and predicts a significant cost-per-gram reduction.
In Brant County, Ont., 48North Cannabis (NRTH.V) is also in its second season of outdoor cultivation. Last year’s crop brought in 12,000 kilograms at a total cash cost per gram of $0.25 on its 100-acre farm. Like Tsebelis, 48North’s new CEO Charles Vennat told Yahoo Finance Canada he expects a bigger, cheaper crop this time, but declined to disclose numbers while the plants are still in the ground.
Aleafia Health (AH.TO) said it produced 12,747 kilograms of outdoor dried flower at an all-in cash cost to harvest of $0.10 per gram last year. The company’s CEO, Geoffrey Benic, recently referenced growing outdoors for as little as $0.04 per gram. He said the company could potentially grow 100,000 kilograms of low-cost outdoor cannabis in 2020.
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Aleafia Health's 2019 outdoor crop in Port Perry, Ont. (aleafiahealth.com)
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“When someone's coming and offering you $2.50 a gram for your outdoor grow, or even $2 grams, it's hard not to want to take some of that, because it’s profitable for you as you build your business,” he told a virtual investor conference on June 24. “But make no mistake folks. I want to be very clear on this. We're not wholesalers. We are building consumer experiences.”
Aleafia reported $13.7 million in net sales in the quarter ended March 31, $11.7 million of which came from bulk wholesale cannabis. WeedMD booked net revenue of $12.2 million during the same quarter, $5 million of which was from bulk sales to other licenced producers. 48North brought in $2.8 million through sales to other licenced producers and provincial regulators in its most recent quarter.
48North and WeedMD told Yahoo Finance Canada they do not have confirmed contracts to sell their 2020 harvests. Both intend to sell outdoor cannabis through retail channels as flower and extract products like vapes. WeedMD said it is having ongoing discussions with multiple groups looking to buy a portion of the crop. Aleafia did not respond to an emailed question about plans for its 2020 harvest.
Indoor and greenhouse-grown pot make up the vast majority of legal cannabis in Canada, since it can be grown year round under far more controlled conditions. But more producers are turning to the great outdoors to push cultivation costs down to pennies per gram. Industry observers warn this year’s harvest will be up to four times bigger than last year’s. A “Croptober” flood of bud this fall could trigger a wave of writedowns as supply surges past demand.
According to Health Canada, nearly 700 acres were licenced for outdoor cannabis as of April, up more than 20 per cent from October 2019. Meanwhile, pot companies are sitting on record stockpiles. As of April, Canadian cultivators and processors had amassed 620,144 kilograms of unpackaged dried flower inventory. That comes despite record retail sales of $185.9 million in May.
View photos
Source: Health Canada
More
WeedMD (WMD.V) finished planting more than 18,000 cannabis plants in a 27-acre field in Strathroy, Ont. in June. Last year, the company grew nearly 9,000 kilograms of saleable flower at a cash cost of $0.11 cents per gram. In the company’s greenhouse, grams cost $0.84 to grow.
“You can’t beat the cost. It’s fantastic,” Angelo Tsebelis, the company’s CEO, told Yahoo Finance Canada in an interview. “You can never substitute what Mother Nature provides. All you can do is try to replicate things like sunlight, heat, cool nights, and the rest of the conditions that are ideal for growing.”
Knocking on wood, Tsebelis expects about the same yield from his second outdoor harvest. This year, the company will use one-third the labour and spend less on startup costs, since the field required only minor upgrades. He said the farm is “well advanced” from where it was at this time a year ago, and predicts a significant cost-per-gram reduction.
In Brant County, Ont., 48North Cannabis (NRTH.V) is also in its second season of outdoor cultivation. Last year’s crop brought in 12,000 kilograms at a total cash cost per gram of $0.25 on its 100-acre farm. Like Tsebelis, 48North’s new CEO Charles Vennat told Yahoo Finance Canada he expects a bigger, cheaper crop this time, but declined to disclose numbers while the plants are still in the ground.
Aleafia Health (AH.TO) said it produced 12,747 kilograms of outdoor dried flower at an all-in cash cost to harvest of $0.10 per gram last year. The company’s CEO, Geoffrey Benic, recently referenced growing outdoors for as little as $0.04 per gram. He said the company could potentially grow 100,000 kilograms of low-cost outdoor cannabis in 2020.
View photos
Aleafia Health's 2019 outdoor crop in Port Perry, Ont. (aleafiahealth.com)
More
“When someone's coming and offering you $2.50 a gram for your outdoor grow, or even $2 grams, it's hard not to want to take some of that, because it’s profitable for you as you build your business,” he told a virtual investor conference on June 24. “But make no mistake folks. I want to be very clear on this. We're not wholesalers. We are building consumer experiences.”
Aleafia reported $13.7 million in net sales in the quarter ended March 31, $11.7 million of which came from bulk wholesale cannabis. WeedMD booked net revenue of $12.2 million during the same quarter, $5 million of which was from bulk sales to other licenced producers. 48North brought in $2.8 million through sales to other licenced producers and provincial regulators in its most recent quarter.
48North and WeedMD told Yahoo Finance Canada they do not have confirmed contracts to sell their 2020 harvests. Both intend to sell outdoor cannabis through retail channels as flower and extract products like vapes. WeedMD said it is having ongoing discussions with multiple groups looking to buy a portion of the crop. Aleafia did not respond to an emailed question about plans for its 2020 harvest.
