With cannabis legalization set for October 17, Ontarians over the age of 19 will soon be able to purchase cannabis online for recreational use through the Ontario Cannabis Store (OCS). However, you’ll want to submit your order early, because industry leaders and researchers alike are predicting that a product shortage will occur within the first year following legalization.
Health Canada’s most recent estimations place demand for recreational cannabis at upward of 900,000 kilograms, but according to a recent report co-authored by the University of Waterloo and the CD Howe Institute, supply will only total 210,000 kilograms — 23 per cent of demand.
Based on the total annual production capacity of the 13 cannabis cultivator companies listed on the Canadian Marijuana Index, that amount is closer to 230,000 kilograms, and that’s assuming each company will yield their maximum estimated outputs. The discrepancy between these output projections is negligible, and, regardless, comes far short of the predicted demand. However, each company has considerable expansion plans that should greatly increase its production capacities over the next couple of years, and the government expects supply to eventually overtake demand.
To remedy the expected shortage, the average consumer is then expected to continue procuring recreational cannabis on the black market, meaning that the government will have objectively failed its mission of snuffing out illegal producers and distributors with legalization. However, there are a few ways in which the province could curtail the severity of the shortage.
In order to help meet the demand, industry leaders argue that Health Canada should streamline the process of licensing producers. The current application process is complicated and arduous — over half of all applications for medical cannabis licences have been returned as incomplete — and its slow rate of licensing producers has been identified as the main culprit behind the supply shortage.
Health Canada should also approve the sale and regulation of edibles and cannabis derivatives. The province has heretofore stalled the regulation of these forms of cannabis post-legalization, citing a lack of data regarding how cannabis impacts human health when ingested. Critics including MP Don Davies have said that no more meaningful data is expected to arise in the next year, and it’s commonly understood that edibles likely have less of a negative health impact than cannabis smoke. Expediting the approval of edibles and derivatives would effectively help fill the demand, as they are estimated to account for 50 per cent of the total dollar value of pot sales once legalized.
Another option is amending the Cannabis Act, which bans the import of cannabis for recreational purposes, but not for medicinal purposes. Theoretically, to circumvent a shortage, the sector could devote all domestic cannabis production to recreational products, while exclusively importing all cannabis products and derivatives that are intended for medicinal purposes. This would require a massive systemic shift that may not be feasible on short notice.
Alternatively, the province could move forward with implementing a private retail model and allow the import of cannabis products that are produced by Canadian companies in other countries. While importing recreational cannabis products is banned under the Cannabis Act, licensed Canadian producers could argue that they are simply outsourcing the production of cannabis, as opposed to engaging in trade with international companies.
However, this raises the question of how a larger industry trend toward outsourcing may affect the economic integrity of smaller domestic producers, and whether or not it defeats the purpose of the domestic production clause.
The news of a forthcoming legal cannabis shortage may not be too concerning for the average Torontonian toker, as the prevalence of privately-owned dispensaries has made recreational cannabis relatively accessible. Last month, legislation was tabled to move forward with a private retail model by April 1, 2019, but what will happen to your friendly local dispensary in the meantime? Toronto has a robust community of cannabis dispensaries, most of which presumably intend to continue operating business-as-usual post-legalization, so the average Toronto consumer won’t immediately feel the effects of a legal shortage.
Legalization definitively signifies the illegality of existing dispensaries, which have thus far arguably operated within a legal grey area. With the Toronto Police Department’s documented vendetta against local cannabis dispensaries, legalization may herald the beginning of a string of police raids, reminiscent of Project Claudia in the wake of Prime Minister Trudeau’s election.
We won’t know how the market will play out for another year. Until then, consumers shouldn’t concern themselves over a potential pot-pocalypse and can continue to support small cannabis businesses while the government sorts itself out.
